<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 10, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
NBH, INC.
AND
BERKSHIRE HATHAWAY INC.
(SEE EXPLANATORY NOTE IMMEDIATELY FOLLOWING THIS FACING PAGE)
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
--------------
<TABLE>
<S> <C> <C>
DELAWARE 6719 04-2254452
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
1440 KIEWIT PLAZA OMAHA, NEBRASKA 68131 (402) 346-1400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
--------------
MARC D. HAMBURG
BERKSHIRE HATHAWAY INC. 1440 KIEWIT PLAZA OMAHA, NEBRASKA 68131 (402) 346-1400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
--------------
COPIES TO:
<TABLE>
<S> <C>
R. GREGORY MORGAN, ESQ. EDWARD D. HERLIHY, ESQ.
JUDITH T. KITANO, ESQ. HOWARD MERGELKAMP, ESQ.
MUNGER, TOLLES & OLSON LLP WACHTELL, ROSEN, LIPTON & KATZ
355 SOUTH GRAND AVENUE LOS ANGELES, CALIFORNIA 90071 51 WEST 52ND STREET NEW YORK, NY 10019
(213) 683-9100 (212) 403-1000
</TABLE>
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and the
effective time of the proposed mergers described in the enclosed Joint Proxy
Statement/Prospectus.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box: [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM
TITLE OF EACH AMOUNT TO BE OFFERING PRICE PER PROPOSED MAXIMUM AMOUNT OF
CLASS OF SECURITIES TO BE REGISTERED REGISTERED(1) UNIT AGGREGATE OFFERING PRICE REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock, par value
$5.00 per share....................... -- Not Applicable $103,972,850,439(2) $26,759,103.88(3)
Class B Common Stock, par value $.1667
per share.............................
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Consistent with Rule 457(o), this information is not included.
(2) Estimated solely for the purpose of calculating the registration fee
required under Section 6(b) of the Securities Act of 1933, as amended (the
"Securities Act"), and calculated pursuant to Rules 457(f)(1) and 457(c)
under the Securities Act based upon (i) the average of the high and low
prices for a share of General Re Common Stock on the New York Stock
Exchange ("NYSE") on August 6, 1998 multiplied by , the maximum number of
shares of General Re Common Stock which may be converted into shares of
Class A Common Stock or Class B Common Stock in the Mergers, (ii) the
average of the high and low prices for a share of Berkshire Class A Common
Stock on the NYSE on August 6, 1998 multiplied by 1,188,054, the number of
shares outstanding and to be converted into shares of Class A Common Stock
of NBH, Inc. in the Mergers and (iii) the average of the high and low
prices for a share of Berkshire Class B Common Stock on the NYSE on August
6, 1998 multiplied by 1,747,632, the number of shares outstanding and to
be converted into shares of Class B Common Stock of NBH, Inc. in the
Mergers.
(3) Pursuant to Rule 457(b) under the Securities Act, the registration fee has
been reduced by $3,912,887 which was paid on July 17, 1998 in connection
with the filing by Berkshire and General Re of preliminary proxy
materials.
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
The securities registered by this Registration Statement will be securities
of either NBH, Inc. or Berkshire Hathaway Inc. See Explanatory Note.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement on Form S-4 (the "Registration Statement")
relates to a business combination to be effected pursuant to an Agreement and
Plan of Mergers dated June 19, 1998 between Berkshire and General Re (the
"Merger Agreement"). The Merger Agreement provides for a form of combination
in which Berkshire and General Re will each become a wholly owned subsidiary
of NBH, Inc., a new holding company. NBH, Inc. will then take the name
"Berkshire Hathaway Inc." (referred to in this Registration Statement as "New
Berkshire"). The Merger Agreement also provides that, under certain
conditions, the business combination may be restructured (the "Alternative
Transaction"). In the Alternative Transaction, General Re will merge with, and
become, a wholly owned subsidiary of a subsidiary of Berkshire itself, rather
than of New Berkshire, and Berkshire itself will remain the ultimate parent
company. Therefore, this Registration Statement constitutes the Registration
Statement of New Berkshire or, if the Alternative Transaction occurs, of
Berkshire. Berkshire and New Berkshire are both referred to as the
"Registrants."
<PAGE>
BERKSHIRE HATHAWAY INC. GENERAL RE CORPORATION
August 13, 1998
Dear Fellow Stockholders:
The Boards of Directors of Berkshire Hathaway Inc. and General Re
Corporation have both unanimously approved the merger of Berkshire and General
Re. If the combination had been completed on June 30, 1998, the combined
company would have had a GAAP net worth of approximately $58 billion, the
highest of any company in the United States. We expect this combination to
enhance the value of both Berkshire and General Re. This proxy statement
explains why. We encourage you to read it all, carefully. We also urge you to
attend your stockholders' meeting, at which your chairman will answer any
questions you have about the transaction.
In the combination, General Re stockholders will receive shares of Class A
Common Stock or Class B Common Stock that are identical to the existing Class
A and Class B Common Stock of Berkshire. On August 12, 1998, the last trading
day for which information was available before this proxy statement was first
mailed, the last sale prices of Berkshire's Class A and Class B Common Stock
on the New York Stock Exchange were $ and $ , respectively.
We are planning to accomplish the combination through concurrent tax-free
mergers of Berkshire and General Re into separate subsidiaries of a new
holding company, now named NBH, Inc., which will take Berkshire's name after
the closing and is called "New Berkshire" in this proxy statement. General Re
stockholders will receive for each share they own either 0.0035 of a share of
New Berkshire Class A Common Stock or 0.105 of a share of New Berkshire Class
B Common Stock, at their election. Berkshire stockholders will receive one
share of New Berkshire Class A or Class B Common Stock for each respective
share of Berkshire Class A or Class B Common Stock they own.
We expect to receive Internal Revenue Service rulings supporting our
conclusion that both of the mergers will be tax-free to the companies and
their stockholders (except as to the small amount of cash that General Re
stockholders may receive in lieu of receiving fractional shares of New
Berkshire stock), although we cannot assure you we will receive such rulings.
If, contrary to our expectation, we do not receive the rulings, we have agreed
that Berkshire will have the right to restructure the combination to
accomplish it in a different fashion. There will be no need to create New
Berkshire or to merge Berkshire with a subsidiary of New Berkshire, and the
combination will be accomplished solely by General Re merging with an indirect
subsidiary of Berkshire itself (rather than New Berkshire). In that event,
General Re stockholders will receive the same value in consideration for their
shares as the exchange ratio stated above, but Berkshire will pay three percent
of that consideration in cash rather than shares, and the gain realized by
General Re stockholders on exchanging their shares will be taxable to them.
Berkshire's stockholders in that event will continue to own their existing
shares in Berkshire, which will become the corporate parent of General Re.
The combination cannot be completed unless the stockholders of both
companies approve the merger agreement and we have each scheduled special
meetings for our stockholders to vote on the merger agreement. The Boards of
Directors of Berkshire and General Re have unanimously determined that the
combination and the merger of their respective companies are in the best
interest of their stockholders, and each Board unanimously recommends that you
vote FOR approval of the merger agreement. YOUR VOTE IS VERY IMPORTANT.
Berkshire stockholders are also being asked to vote on a proposal to
increase the number of authorized shares of Berkshire Common Stock.
Whether or not you plan to attend a meeting, please vote by completing the
enclosed proxy card and mailing it to us. If you sign, date, and mail your
proxy card without indicating how you want to vote, your proxy will be counted
as a vote in favor of the proposals submitted at your meeting. If your shares
are held in "street name," you must instruct your broker in order to vote. If
you fail to return your proxy card or fail to instruct your broker, you will
in effect vote against the merger agreement.
The date, times, and places of the special meetings are as follows:
<TABLE>
<S> <C>
For Berkshire stockholders: For General Re stockholders:
Wednesday, September 16, 1998 Friday, September 18, 1998
9:30 a.m. 10:00 a.m.
Orpheum Theater Financial Centre
409 South 16th Street 695 East Main Street
Omaha, Nebraska Stamford, Connecticut
</TABLE>
Stockholders of either company are welcome to attend the meeting of the other.
This Joint Proxy Statement/Prospectus provides you with detailed information
about the proposed mergers. Again, we encourage you to read it carefully and
understand it before you vote. You may obtain information about our companies
from documents that we have filed with the Securities and Exchange Commission.
<TABLE>
<S> <C>
/s/ Warren E. Buffett /s/ Ronald E. Ferguson
Warren E. Buffett Ronald E. Ferguson
Chairman and Chief Executive Officer Chairman and Chief Executive Officer
Berkshire Hathaway Inc. General Re Corporation
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES REGULATORS HAVE APPROVED THE SECURITIES TO BE ISSUED IN
THIS TRANSACTION OR DETERMINED THAT THIS JOINT PROXY
STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
This Joint Proxy Statement/Prospectus is dated August 13, 1998 and is first
being sent or given to stockholders on or about August 17, 1998.
<PAGE>
BERKSHIRE HATHAWAY INC.
1440 KIEWIT PLAZA
OMAHA, NEBRASKA 68131
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
AUGUST 13, 1998
TO THE STOCKHOLDERS:
Notice is hereby given that a Special Meeting of the Stockholders of
Berkshire Hathaway Inc. ("Berkshire") will be held at the Orpheum Theater, 409
South 16th Street, Omaha, Nebraska, on Wednesday, September 16, 1998 at 9:30
a.m. for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Mergers dated as of June 19, 1998 (the "Merger
Agreement") between Berkshire and General Re Corporation ("General Re") and
the transactions contemplated therein (the "Transactions"). The Merger
Agreement provides for the merger of Berkshire with a subsidiary of NBH,
Inc. ("New Berkshire"), a newly formed Delaware corporation (the "Berkshire
Merger"), and the concurrent merger of General Re with a separate
subsidiary of New Berkshire (the "General Re Merger" and, together with the
Berkshire Merger, the "Mergers"). Pursuant to the Mergers, both Berkshire
and General Re will become wholly owned subsidiaries of New Berkshire. At
the effective time of the Mergers, each outstanding share of Berkshire
Class A Common Stock, par value $5.00 per share ("Berkshire Class A Common
Stock"), other than shares owned by Berkshire or its subsidiaries, will be
deemed to be converted into one share of New Berkshire Class A Common
Stock, par value $5.00 per share, and each outstanding share of Berkshire
Class B Common Stock, par value $0.1667 per share ("Berkshire Class B
Common Stock"), other than shares owned by Berkshire or its subsidiaries,
will be deemed to be converted into one share of New Berkshire Class B
Common Stock, par value $0.1667 per share. Alternatively, if Berkshire and
General Re cannot obtain certain rulings requested from the United States
Internal Revenue Service (the "IRS"), the Merger Agreement provides for the
merger solely of General Re with an indirect subsidiary of Berkshire (the
"Alternative General Re Merger"). If the Alternative General Re Merger
occurs, General Re will become a wholly owned subsidiary of Berkshire
(rather than New Berkshire), New Berkshire will not be organized as a new
holding company, the Berkshire Merger will not need to occur (and will not
occur), and the outstanding shares of Berkshire Class A and Class B Common
Stock will remain outstanding and be unchanged.
2. To consider and vote upon a proposal to amend the Restated Certificate
of Incorporation of Berkshire to increase to 1,650,000 (from 1,500,000) the
number of shares of Berkshire Class A Common Stock, and to increase to
55,000,000 (from 50,000,000) the number of shares of Berkshire Class B
Common Stock, authorized for issuance (the "Berkshire Charter Amendment").
The Berkshire Charter Amendment will be made only if the Alternative
General Re Merger occurs.
3. To consider and act upon any other matters that may properly come
before the meeting or any adjournment thereof.
The Berkshire Board of Directors has fixed the close of business on August
10, 1998 as the record date for determining the stockholders having the right
to vote at the meeting or any adjournment thereof. A list of such stockholders
will be available for examination by a stockholder for any purpose germane to
the meeting during ordinary business hours at the offices of the Corporation
at 1440 Kiewit Plaza, Omaha, Nebraska during the ten days prior to the
meeting.
The affirmative vote of a majority of the voting power of the outstanding
shares of Berkshire Class A Common Stock and Berkshire Class B Common Stock
entitled to vote thereon, voting together as a single class, is required to
approve and adopt the Merger Agreement and the Transactions, or to approve the
Berkshire Charter Amendment.
<PAGE>
THE VOTE OF ALL HOLDERS OF BERKSHIRE COMMON STOCK IS IMPORTANT. WHETHER OR
NOT YOU ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE
ACCOMPANYING PROXY CARD IN THE POSTAGE PREPAID ENVELOPE AS SOON AS POSSIBLE.
IF YOU ATTEND THE SPECIAL MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR
SHARES OF BERKSHIRE COMMON STOCK IN PERSON.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF BERKSHIRE
COMMON STOCK VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
TRANSACTIONS AND TO APPROVE THE BERKSHIRE CHARTER AMENDMENT AT THE SPECIAL
MEETING.
By Order of the Board of Directors
FORREST N. KRUTTER, Secretary
Omaha, Nebraska
August 13, 1998
HOLDERS OF BERKSHIRE COMMON STOCK SHOULD NOT SEND IN THEIR STOCK
CERTIFICATES.
2
<PAGE>
GENERAL RE CORPORATION
695 EAST MAIN STREET
STAMFORD, CONNECTICUT 06904
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
AUGUST 13, 1998
TO THE STOCKHOLDERS:
Notice is hereby given that a Special Meeting of the Stockholders of General
Re Corporation ("General Re") will be held at Financial Centre, 695 East Main
Street, Stamford, Connecticut, on September 18, 1998 at 10:00 a.m. for the
following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Mergers dated as of June 19, 1998 (the "Merger
Agreement") between General Re and Berkshire Hathaway Inc. ("Berkshire")
and the transactions contemplated therein (the "Transactions"). The Merger
Agreement provides for the merger of General Re with a subsidiary of NBH,
Inc. ("New Berkshire"), a newly formed Delaware corporation (the "General
Re Merger"), and the concurrent merger of Berkshire with a separate
subsidiary of New Berkshire (the "Berkshire Merger" and, together with the
General Re Merger, the "Mergers"). Pursuant to the Mergers, both General Re
and Berkshire will become wholly owned subsidiaries of New Berkshire. At
the effective time of the Mergers, each outstanding share of General Re
Common Stock, par value $0.50 per share ("General Re Common Stock"), other
than shares owned by General Re, Berkshire or their respective
subsidiaries, will be converted into the right to receive, at the option of
the holder, (A) 0.0035 of a share of New Berkshire Class A Common Stock,
par value $5.00 per share ("New Berkshire Class A Common Stock") or (B)
0.105 of a share of New Berkshire Class B Common Stock, par value $0.1667
per share ("New Berkshire Class B Common Stock"). Alternatively, if
Berkshire and General Re cannot obtain certain rulings requested from the
United States Internal Revenue Service (the "IRS"), the Merger Agreement
provides for the merger solely of General Re with an indirect subsidiary of
Berkshire (the "Alternative General Re Merger"). If the Alternative General
Re Merger occurs, General Re will become a wholly owned subsidiary of
Berkshire (rather than New Berkshire), New Berkshire will not be organized
as a new holding company, and the Berkshire Merger will not need to occur
(and will not occur). In that event, at the effective time of the
Alternative General Re Merger, each outstanding share of General Re Common
Stock, other than shares owned by General Re, Berkshire, or their
respective subsidiaries, will be converted into the right to receive, at
the option of the holder, (A) 0.003395 of a share of Berkshire Class A
Common Stock, par value $5.00 per share ("Berkshire Class A Common Stock"),
plus an amount in cash equal to the product of 0.000105 and the Average
Trading Price of one share of Berkshire Class A Common Stock or (B) 0.10185
of a share of Berkshire Class B Common Stock, par value $0.1667 per share
("Berkshire Class B Common Stock"), plus an amount in cash equal to the
product of 0.00315 and the Average Trading Price of one share of Berkshire
Class B Common Stock. The "Average Trading Price" is the average of the
high and low trading prices of Berkshire Class A Common Stock or Berkshire
Class B Common Stock, as the case may be, as reported on the New York Stock
Exchange Composite Tape for each of the five consecutive trading days
ending on the last full trading day immediately prior to the date on which
the effective time of the merger occurs.
2. To consider and act upon any other matters that may properly come
before the meeting or any adjournment thereof.
The General Re Board of Directors has fixed the close of business on August
10, 1998 as the record date for determining the stockholders having the right
to vote at the meeting or any adjournment thereof. A list of such stockholders
will be available for examination by a stockholder for any purpose germane to
the meeting during ordinary business hours at the offices of the Corporation
at 695 East Main Street, Stamford, Connecticut, during the ten days prior to
the meeting.
<PAGE>
The affirmative vote of a majority of the voting power of the outstanding
shares of General Re Common Stock and General Re Series A ESOP Convertible
Preferred Stock entitled to vote thereon, voting together as a single class,
is required to approve and adopt the Merger Agreement and the Transactions.
THE VOTE OF ALL HOLDERS OF GENERAL RE COMMON STOCK IS IMPORTANT. WHETHER OR
NOT YOU ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE
ACCOMPANYING PROXY CARD IN THE POSTAGE PREPAID ENVELOPE AS SOON AS POSSIBLE.
IF YOU ATTEND THE SPECIAL MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR
SHARES OF GENERAL RE COMMON STOCK IN PERSON.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF GENERAL RE
COMMON STOCK VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
TRANSACTIONS AT THE SPECIAL MEETING.
By Order of the Board of Directors
CHARLES F. BARR, Secretary
Stamford, Connecticut
August 13, 1998
HOLDERS OF GENERAL RE COMMON STOCK SHOULD NOT SEND STOCK CERTIFICATES WITH
THEIR PROXY CARD. RECORD HOLDERS OF GENERAL RE COMMON STOCK AT THE EFFECTIVE
TIME WILL RECEIVE A LETTER OF TRANSMITTAL WITH WHICH TO MAKE AN ELECTION TO
RECEIVE CLASS A COMMON STOCK OR CLASS B COMMON STOCK.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SUMMARY................................................................... 1
Questions and Answers................................................... 1
The Companies........................................................... 5
The Special Meetings.................................................... 6
Record Date; Voting Power;
Voting Agreements...................................................... 6
Stock Exchange Listing of New Berkshire Common Stock.................... 7
Share Ownership of Management and Certain Stockholders.................. 7
Conflicts of Interest................................................... 7
Board of Directors Following the Transactions........................... 7
Comparative Per Share Market Price Information.......................... 7
Approvals............................................................... 7
Conditions to the Transactions.......................................... 8
Termination of the Merger Agreement..................................... 8
Termination Fee......................................................... 8
Stock Option Agreement.................................................. 8
Appraisal Rights........................................................ 9
Opinion of General Re's Financial Advisor............................... 9
Forward-Looking Statements May Prove Inaccurate......................... 9
Comparative Historical and Pro Forma Per Share Data..................... 10
Berkshire Selected Consolidated Financial Data.......................... 11
General Re Selected Consolidated Financial Data......................... 13
Berkshire and General Re Selected Unaudited Pro Forma Combined Condensed
Financial Data......................................................... 14
CERTAIN RISK FACTORS AND INVESTMENT CONSIDERATIONS........................ 15
THE TRANSACTIONS.......................................................... 17
General................................................................. 17
Background of the Transactions.......................................... 18
Reasons for the Transactions; Recommendations of the Boards of
Directors.............................................................. 20
Form of the Mergers..................................................... 22
The Alternative Transaction............................................. 22
Merger Consideration.................................................... 24
Opinion of General Re's Financial Advisor............................... 25
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Procedures for Election of Merger Consideration and Surrender of General
Re Common Stock Certificates; Fractional Shares........................ 31
Stock Option Agreement.................................................. 32
Other Agreements and Transactions....................................... 35
Effective Time.......................................................... 36
Effect on General Re Stock Plans........................................ 36
Effect on Berkshire Stock Plan.......................................... 36
Federal Income Tax Considerations....................................... 36
Conflicts of Interest................................................... 39
Certain Employee Benefit Matters........................................ 42
Accounting Treatment.................................................... 42
Approvals and Consents.................................................. 42
Stock Exchange Listing.................................................. 43
Delisting and Deregistration of General Re Common Stock................. 43
Resales of Common Stock................................................. 44
Appraisal Rights........................................................ 44
Cautionary Statements Concerning Forward-Looking Statements............. 45
THE SPECIAL MEETINGS...................................................... 47
Purpose, Time and Place................................................. 47
Record Date; Voting Power............................................... 47
Votes Required.......................................................... 48
Share Ownership of Management and Certain Stockholders.................. 48
Voting of Proxies....................................................... 48
Revocability of Proxies................................................. 49
Solicitation of Proxies................................................. 49
CERTAIN PROVISIONS OF THE MERGER AGREEMENT................................ 50
Conditions to Consummation of the Transactions.......................... 50
Conduct of Business Pending the Effective Time.......................... 51
No Solicitation......................................................... 52
Termination............................................................. 53
Termination Fee......................................................... 54
Certain Representations and
Warranties............................................................. 54
Indemnification......................................................... 55
Fees and Expenses....................................................... 56
Amendment and Waiver.................................................... 56
COMPARATIVE MARKET PRICES AND DIVIDEND INFORMATION........................ 57
Comparative Market Price Data........................................... 57
Historical Market Prices and Dividends.................................. 57
</TABLE>
i
<PAGE>
TABLE OF CONTENTS--(CONTINUED)
<TABLE>
<CAPTION>
PAGE
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<S> <C>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS............... 59
DIRECTORS AND OFFICERS OF NEW BERKSHIRE FOLLOWING THE MERGERS............. 64
Directors............................................................... 64
Compensation of Directors and Committees of the Board of
Directors.............................................................. 65
Executive Officers...................................................... 65
Compensation of Executive Officers...................................... 66
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF NEW
BERKSHIRE................................................................ 67
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF
BERKSHIRE................................................................ 69
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF GENERAL
RE....................................................................... 71
THE BERKSHIRE CHARTER AMENDMENT........................................... 73
BUSINESS RELATIONSHIPS BETWEEN BERKSHIRE AND GENERAL RE................... 74
DESCRIPTION OF NEW BERKSHIRE CAPITAL STOCK................................ 74
COMPARISON OF RIGHTS OF STOCKHOLDERS...................................... 76
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Comparison of Stockholders' Rights With Respect to New Berkshire and
Berkshire............................................................ 76
Comparison of Stockholders' Rights With Respect to New Berkshire and
General Re........................................................... 76
EXPERTS................................................................. 78
LEGAL MATTERS........................................................... 78
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS.............................. 78
WHERE YOU CAN FIND MORE INFORMATION..................................... 78
ANNEXES
Annex I--Agreement and Plan of Merger................................. I-1
Annex II--Stock Option Agreement...................................... II-1
Annex III--Form of Voting Agreement................................... III-1
Annex IV--Opinion of Goldman, Sachs & Co. ............................ IV-1
Annex V--Plan of Berkshire Merger..................................... V-1
Annex VI--Plan of General Re Merger................................... VI-1
Annex VII--Plan of General Re Merger (Alternative Transaction)........ VII-1
Annex VIII--Certificate of Amendment of Restated Certificate of
Incorporation of Berkshire Hathaway, Inc............................. VIII-1
Annex IX--Section 262 of the Delaware General Corporation Law......... IX-1
</TABLE>
ii
<PAGE>
SUMMARY
The transactions described in this document are complex, in part because the
way in which Berkshire and General Re are combined will differ depending upon
whether the IRS issues the rulings requested by the companies. This summary
highlights selected information from this document but may not contain all the
information that is important to you. For a more complete understanding of the
Transactions and for a more complete description of the legal terms of the
mergers, you should read this entire document carefully, as well as the
additional documents we refer you to. See "Where You Can Find More Information"
(page 78).
QUESTIONS AND ANSWERS
Q: WHY ARE THE TWO COMPANIES PROPOSING TO MERGE?
A: Berkshire and General Re believe that their combination will create value
for both companies' stockholders. The transaction will allow General Re to
better serve its clients by accepting attractive reinsurance opportunities
that it has declined or been unable to write in the past, due to constraints
on its earnings volatility. Removing the constraints will enhance long-term
profitability. The combination will allow General Re to retain, rather than
to cede to other reinsurers, more of the business it writes, which will
increase funds available for investment. Berkshire will allow General Re to
grow its international business as quickly as it desires and will provide
General Re with abundant capital. Also, combining General Re with
Berkshire's other income-generating businesses will increase General Re's
flexibility in managing its insurance investments, and the combination will
increase Berkshire's existing invested insurance assets by approximately $25
billion.
Q: HOW DOES NEW BERKSHIRE DIFFER FROM BERKSHIRE?
A: Once the mergers occur, New Berkshire will be the holding company owning
both Berkshire and General Re, but its corporate characteristics will not
differ in any material respect from Berkshire's. The New Berkshire Class A
and Class B Common Stock will be identical to Berkshire's existing Class A
and Class B Common Stock. The New Berkshire Board of Directors and executive
officers will be identical to the existing Berkshire's, except that Ronald
E. Ferguson, Chairman and Chief Executive Officer of General Re, will join
the New Berkshire Board.
Q: WHAT WILL I RECEIVE FOR MY GENERAL RE STOCK?
A: As we expect the combination to be accomplished, General Re stockholders
will receive, at their election, either 0.0035 of a share of New Berkshire
Class A Common Stock or 0.105 of a share of New Berkshire Class B Common
Stock for each share of General Re common stock they own at the time of the
mergers.
However, if the IRS does not issue the rulings we expect, the combination
will be accomplished differently (referred to in this document as the
"Alternative Transaction"). General Re stockholders will receive the same
value in consideration for their shares as the exchange ratio stated in the
prior paragraph, but will receive shares of Berkshire, rather than of New
Berkshire, and will receive three percent of the consideration in cash,
rather than stock. Accordingly, in that event General Re stockholders will
receive, at their election, either (A) 0.003395 (i.e., 97% of 0.0035) of a
share of Berkshire Class A Common Stock and an amount of cash equal to
0.000105 (i.e., 3% of 0.0035) times the average trading price of a share of
Berkshire Class A Common Stock on the NYSE over a five-day period before
the merger, or (B) 0.10185 (i.e., 97% of 0.105) of a share of Berkshire
Class B Common Stock and an amount of cash equal to 0.00315 (i.e., 3% of
0.105) times the average trading price of a share of Berkshire Class B
Common Stock on the NYSE over a five-day period before the merger occurs.
1
<PAGE>
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGERS?
A: We expect to receive IRS rulings supporting our conclusion that both the
General Re Merger and the Berkshire Merger will be tax-free to General Re
stockholders (except as to the small amount of cash that General Re
stockholders may receive instead of receiving fractional shares of New
Berkshire Class B Common Stock) and to the Berkshire stockholders, although
we cannot assure you that we will receive such rulings. If we do not receive
the rulings and Berkshire elects to restructure the transaction, the
transaction will not be taxable to Berkshire or its stockholders, but will
be taxable to General Re stockholders.
TAX MATTERS ARE VERY COMPLICATED AND THE TAX CONSEQUENCES OF THE
TRANSACTIONS WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD
CONSULT YOUR TAX ADVISORS FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES
OF THE TRANSACTIONS TO YOU.
Q: HOW DO I ELECT BETWEEN RECEIVING CLASS A COMMON STOCK AND CLASS B COMMON
STOCK?
A: You will make your election when you send in your General Re stock
certificate with a transmittal letter that New Berkshire will send to you
shortly after the General Re merger occurs. Unless you elect to receive
Class A Common Stock, you will receive Class B Common Stock.
Q: WITH BERKSHIRE'S (AND NEW BERKSHIRE'S) PER SHARE STOCK PRICE SO HIGH, HOW
WILL FRACTIONAL SHARES BE HANDLED?
A: New Berkshire will not issue fractional shares. Instead, General Re
stockholders who elect to receive New Berkshire Class A Common Stock will
receive, in lieu of any fractional share of New Berkshire Class A Common
Stock owed to them, as many whole shares of New Berkshire Class B Common
Stock as possible, and all General Re stockholders will receive cash in lieu
of any fractional share of New Berkshire Class B Common Stock owed to them.
To determine the number of New Berkshire Class B shares to be received in
lieu of a fractional New Berkshire Class A share, the fraction will be
multiplied by 30, because New Berkshire Class B shares will have 1/30th of
the economic rights of New Berkshire Class A shares. The amount of cash will
be based on the average trading price of Berkshire Class B Common Stock over
a five trading-day period before the mergers occur. Fractional shares will
be handled in exactly the same way if General Re stockholders receive
Berkshire shares rather than New Berkshire shares. Of course, Berkshire
stockholders will not receive any fractional shares of New Berkshire, as the
exchange ratio is one-for-one.
2
<PAGE>
The following tables illustrates the Merger Consideration to General Re
stockholders. In these tables, the "value of a Class A or Class B share" means
the average trading price of such a share on the NYSE over a five-day period
before the merger.
<TABLE>
<CAPTION>
IF YOU OWN THIS NUMBER OF
GENERAL RE SHARES
-------------------------
MERGER CONSIDERATION 1,000 1,500
-------------------- ----------- -----------
<C> <S> <C> <C>
IF YOU MAKE THE CLASS A ELECTION
Number of shares of Class A Common..... 0.0035 times the number of your 3 5
General Re
shares, minus any fraction of a
Class A share.
Number of shares of Class B Common..... Any fraction of a Class A share 15 7
times 30, minus
any fraction of a Class B share.
Cash................................... Any fraction of a Class B share $ 0 0.5 times
times the value the
of a Class B share. value of a
Class B
share.
IF YOU DO NOT MAKE THE CLASS A ELECTION
Number of shares of Class A Common..... None. 0 0
Number of shares of Class B Common..... 0.105 times the number of your 105 157
General Re
shares, minus any fraction of a
Class B share.
Cash................................... Any fraction of a Class B share $ 0 0.5 times
times the value the
of a Class B share. value of a
Class B
share.
Or, in the event of the Alternative Transaction, you will receive:
<CAPTION>
IF YOU OWN THIS NUMBER OF
GENERAL RE SHARES
-------------------------
MERGER CONSIDERATION 1,000 1,500
-------------------- ----------- -----------
<C> <S> <C> <C>
IF YOU MAKE THE CLASS A ELECTION
Number of shares of Class A Common..... 0.003395 times the number of your 3 5
General Re shares, minus any
fraction of a Class A share.
Number of shares of Class B Common..... Any fractional of a Class A share 11 2
times 30, minus any fraction of a
Class B share.
Cash................................... (1) 0.000105 times the number of (1) 0.105 (1) 0.1575
your General Re shares, times the times the times the
value of a Class A share, plus value of a value of a
(2) any fraction of a Class B Class A Class A
share times the value of a Class B share, plus share, plus
share. (2) 0.85 (2) 0.775
times the times the
value of a value of a
Class B Class B
share. share.
IF YOU DO NOT MAKE THE CLASS A ELECTION
Number of shares of Class A Common..... None. 0 0
Number of shares of Class B Common..... 0.10185 times the number of your 101 152
General Re shares, minus any
fraction of a Class B share.
Cash................................... (1) 0.00315 times the number of (1) 3.15 (1) 4.725
your General Re shares, times the times the times the
value of a Class B share, plus value of a value of a
(2) any fraction of a Class B Class B Class B
share times the value of a Class B share, plus share, plus
share. (2) in lieu (2) in lieu
of a of a
fractional fractional
share, 0.85 share,
times the 0.775 times
value of a the value
Class B of a
share. Class B
share.
</TABLE>
3
<PAGE>
Q: SHOULD I SEND IN MY GENERAL RE OR BERKSHIRE STOCK CERTIFICATE NOW?
A: No. After the mergers are completed, we will send General Re stockholders
written instructions for exchanging their stock certificates. Berkshire
stockholders will keep their existing stock certificates, which will
automatically represent shares in New Berkshire if the Berkshire Merger
occurs.
Q: WHAT DO I NEED TO DO NOW?
A: Please mail your signed proxy card in the enclosed postage prepaid return
envelope as soon as possible, so that your shares may be represented and
voted at the appropriate stockholders' meeting. YOUR VOTE IS VERY
IMPORTANT.
If you sign and send in your proxy and do not indicate how you want to
vote, your proxy will be counted as a vote in favor of the proposals. If
you do not vote or you abstain, it will have the effect of a vote against
the proposals. You may withdraw your proxy up to and on the day of your
stockholders' meeting by following the directions on page .
Berkshire's special meeting will take place on Wednesday, September 16,
1998 at 9:30 a.m. and General Re's special meeting will take place on
Friday, September 18, 1998 at 10:00 a.m. You should sign and mail your
proxy card even if you are planning to attend your meeting as you can still
withdraw your proxy, change your vote or attend your meeting and vote in
person.
Q: WHAT AM I BEING ASKED TO VOTE UPON?
A: General Re stockholders: You are being asked to approve the merger
agreement which provides that General Re will become, through merger, a
wholly owned subsidiary of either New Berkshire or Berkshire. We expect
General Re to become a subsidiary of New Berkshire, in which event the
transaction will be tax-free to General Re stockholders (except as to the
small amount of cash that General Re stockholders may receive in lieu of
receiving fractional shares of New Berkshire stock). However, we cannot be
certain that the IRS will issue the rulings we have requested. If the IRS
does not, Berkshire has the right to elect the Alternative Transaction.
Under the Alternative Transaction, the gain realized by General Re
stockholders on exchanging their shares will be taxable to them. You are
being asked to approve both alternatives. The taxable alternative will
occur only if the IRS will not issue the rulings that we have requested.
Berkshire stockholders: You are being asked to approve the merger
agreement, including the merger of Berkshire into a subsidiary of
New Berkshire. New Berkshire will be organized with authorized capital of
1,650,000 shares of Class A Common Stock and 55,000,000 shares of Class B
Common Stock. If General Re merges with a subsidiary of Berkshire, rather
than New Berkshire (because the IRS would not issue the rulings we have
requested), then Berkshire will have issued a substantial portion of its
available authorized shares. Accordingly, you are also being asked to
approve an increase in the number of authorized shares of Berkshire's
common stock from 1,500,000 to 1,650,000 shares of Berkshire Class A Common
Stock and from 50,000,000 to 55,000,000 shares of Berkshire Class B Common
Stock. This increase in Berkshire's authorized shares will occur only if
the Alternative Transaction occurs (so that General Re merges with a
subsidiary of Berkshire, rather than New Berkshire), but this increase is
not required, and is not a condition, for the combination to be
accomplished in that alternative fashion.
Q: WHAT VOTE IS REQUIRED FOR APPROVAL?
A: The mergers must be approved:
. by holders of a majority of the votes entitled to be cast by holders of
the outstanding shares of General Re Common Stock and General Re's Series
A ESOP Convertible Preferred Stock, who vote together as a single class,
and
. by holders of a majority of the votes entitled to be cast by holders of
the outstanding shares of Berkshire Class A Common Stock and Berkshire
Class B Common Stock, who vote together as a single class.
4
<PAGE>
The increase in Berkshire's authorized common stock must be approved by a
majority of the votes entitled to be cast by holders of the outstanding
shares of Berkshire Class A Common Stock and Berkshire Class B Common
Stock, who vote together as a single class.
Holders of Berkshire Class A Common Stock are entitled to one vote per
share, and holders of Berkshire Class B Common Stock are entitled to 1/200
of a vote per share, on the matters to be considered at the Berkshire
Meeting.
Q: WHAT DO THE BERKSHIRE AND GENERAL RE BOARDS OF DIRECTORS RECOMMEND?
A: Each Board of Directors unanimously approved the merger agreement and
recommends that their company's stockholders vote FOR the proposal to
approve the merger agreement and the transactions contemplated thereby,
including the alternative merger. The Berkshire Board also recommends that
Berkshire stockholders vote FOR the proposal to increase Berkshire's
authorized common stock.
Q: WHAT RISKS SHOULD I CONSIDER?
A: General Re stockholders should recognize that the exchange ratios of 0.0035
of a New Berkshire Class A share or 0.105 of a New Berkshire Class B share
(or 97% thereof if the alternative General Re merger occurs) are fixed.
These exchange ratios will not change even if the market price of Berkshire
stock decreases before the General Re merger occurs. Accordingly, the
market value of the New Berkshire (or Berkshire) stock you receive when the
merger occurs may be lower than the current market value of Berkshire's
stock.
General Re stockholders should also recognize that the alternative taxable
General Re merger will occur if the IRS will not issue the rulings we have
requested. In that event, the excess of the market value of both the shares
and the cash received by General Re stockholders over such holders' tax
basis in General Re stock will be a taxable gain.
Both companies' stockholders should review "Certain Risk Factors and Other
Investment Considerations" on pages 15 through 16, as well as the
countervailing factors considered by each company's Board of Directors
described under "The Transactions--Reasons for the Transactions;
Recommendations of the Boards of Directors."
Q: WHEN ARE THE MERGERS EXPECTED TO OCCUR?
A: We are working to complete the mergers during the fourth quarter of 1998.
Q: WHAT WILL NEW BERKSHIRE'S DIVIDEND POLICY BE?
A: New Berkshire will continue Berkshire's dividend policy. Berkshire has not
declared a cash dividend since 1967 and has no present intention to pay a
dividend on either its Class A or Class B Common Stock in the future.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions on how
to vote; except that brokers who hold shares of Berkshire stock as nominees
will have discretionary authority to vote such shares for the increase in
Berkshire's authorized common stock. Other than as described above, without
instructions, your shares will not be voted. Shares that are not voted will
have the effect of votes against the proposals.
THE COMPANIES
Berkshire
Berkshire is a holding company owning subsidiaries engaged in a number of
diverse business activities. The most important of these is the property and
casualty insurance business conducted on both a direct and reinsurance basis
through a number of subsidiaries, including GEICO Corporation, the seventh
largest auto insurer in the United States. Investments of Berkshire insurance
subsidiaries include meaningful equity ownership percentages of other publicly
traded companies. Investments in excess of 5% of the investee's outstanding
capital stock include American Express Company, The Coca-Cola Company, Federal
Home Loan Mortgage Corporation, The Gillette Company, The Washington Post
Company and Wells Fargo & Company.
5
<PAGE>
Additionally, Berkshire publishes the Buffalo News, a daily and Sunday
newspaper in upstate New York. Other significant business activities conducted
by non-insurance subsidiaries include manufacture and marketing of home
cleaning systems and related accessories (sold principally under the Kirby
name), manufacture and sale of boxed chocolates and other confectionery
products (See's Candies), retailing of home furnishings (Nebraska Furniture
Mart, R.C. Willey Home Furnishings and Star Furniture Company), manufacture,
import and distribution of footwear (H.H. Brown Shoe Company, Lowell Shoe,
Inc. and Dexter Shoe Company), retailing of fine jewelry (Borsheim's Jewelry
Company and Helzberg's Diamond Shops), providing training to operators of
aircraft and ships throughout the world (Flight Safety International) and
licensing and servicing a system of approximately 5,800 Dairy Queen Stores
(Dairy Queen). Berkshire also owns a number of other businesses engaged in a
variety of activities.
Operating decisions for the various insurance and non-insurance businesses
of Berkshire are made by the managers of the business units. Investment
decisions and all other capital allocation decisions are made for Berkshire
and its subsidiaries by Warren E. Buffett, Berkshire's Chairman, in
consultation with Charles T. Munger, its Vice-Chairman.
General Re
General Re Corporation was established in 1980 to serve as the holding
company of General Reinsurance Corporation ("GRC"), incorporated in 1921, and
its affiliates. General Re and its subsidiaries have global reinsurance and
financial service operations in 61 cities in 31 countries on 6 continents and
provide reinsurance coverage in over 150 countries. General Re operates four
principal businesses: North American property/ casualty reinsurance,
international property/casualty reinsurance, global life/health reinsurance
and financial services. General Re's principal reinsurance operations are
based in North America and Germany, with other major operations in Asia,
Australia, Europe and South America. General Re's principal financial service
operations are located in the United States, the United Kingdom, Japan, Hong
Kong and Canada. GRC is the largest North American professional
property/casualty reinsurer, and General Re is among the three largest
reinsurers in the world based on net premiums written and capital. General Re
employed 3,869 associates at December 31, 1997, of which 2,482 were employed
in North America and 1,387 in operations outside of North America.
THE SPECIAL MEETINGS (PAGE 47)
The Berkshire Meeting will be held at the Orpheum Theater, 409 South 16th
Street, Omaha, Nebraska, on September 16, 1998 at 9:30 a.m. At the meeting,
Berkshire stockholders will be asked to approve the Merger Agreement and the
transactions contemplated thereby. Berkshire stockholders will also be asked
to approve an increase in Berkshire's authorized Common Stock to 1,650,000
shares of Class A Common Stock and 55,000,000 shares of Class B Common Stock.
The General Re Meeting will be held at Financial Centre, 695 East Main
Street, Stamford, Connecticut, on September 18, 1998 at 10:00 a.m. At the
meeting, General Re stockholders will be asked to approve the Merger Agreement
and the transactions contemplated thereby.
RECORD DATE; VOTING POWER (PAGE 47); VOTING AGREEMENTS (PAGE 35)
You are entitled to vote at your stockholders' meeting if you owned shares
as of the close of business (5:00 p.m., New York City time) on August 10,
1998, the Record Date.
On the Record Date there were shares of General Re Common Stock and
shares of General Re Preferred Stock entitled to vote at the General Re
Meeting. Holders of General Re Common Stock and Preferred Stock are entitled
to one vote at the General Re Meeting for each share of General Re Common
Stock held of record on the Record Date or underlying such preferred stock.
On the Record Date there were shares of Berkshire Class A Common
Stock and shares of Class B Common Stock entitled to vote at the
Berkshire Meeting. Holders of Class A Common Stock are entitled to one vote,
and holders of shares of Class B Common Stock are entitled to 1/200 of a vote,
for each share of stock held of record on the Record Date.
6
<PAGE>
Warren E. Buffett and Charles T. Munger, the beneficial owners of 40% and
1.5%, respectively, of the voting power of Berkshire common stock, have agreed
to vote their shares in favor of the adoption of the merger agreement and the
approval of the transactions contemplated thereby.
STOCK EXCHANGE LISTING OF NEW BERKSHIRE COMMON STOCK (PAGE 43)
New Berkshire has applied to list the New Berkshire common stock to be issued
in connection with the Transactions on the New York Stock Exchange.
SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN STOCKHOLDERS (PAGE 69)
On the Record Date, directors and executive officers of Berkshire owned and
will be entitled to vote 546,770 shares of Berkshire Class A Common Stock and
92 shares of Berkshire Class B Common Stock, or approximately 45.7% of the
voting power of the Berkshire Common Stock outstanding on the Record Date.
On the Record Date, directors and executive officers of General Re owned and
will be entitled to vote 271,454 shares of General Re common stock, or
approximately % of the voting power of General Re voting stock outstanding on
the Record Date.
CONFLICTS OF INTEREST (PAGE 39)
Directors and executive officers of General Re and Berkshire have interests
in the transactions as employees and/or directors that are different from, or
in addition to, yours as a stockholder, including potential change in control
payments, employment agreements, stock options and other benefit plans.
The Boards of Directors of Berkshire and General Re recognized these
conflicts of interest and determined that they did not affect the benefits of
the transactions to Berkshire and General Re, respectively, and their
respective stockholders.
BOARD OF DIRECTORS FOLLOWING THE TRANSACTIONS (PAGE 64)
The Board of New Berkshire will be comprised of Berkshire's current Board and
Ronald E. Ferguson, chairman and chief executive officer of General Re.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (PAGE 57)
Shares of Berkshire and General Re common stock are each listed on the New
York Stock Exchange. On June 19, 1998 and August 12, 1998, the last full
trading day on the New York Stock Exchange prior to the public announcement of
the Transactions and prior to the date of first mailing of this Joint Proxy
Statement/Prospectus, respectively, General Re common stock closed at $220 1/4
and $ per share, Berkshire Class A Common Stock closed at $80,900 and $ per
share and Berkshire Class B Common Stock closed at $2,705 and $ per share. At
the exchange ratio of 0.0035 shares of Berkshire Class A Common Stock per share
of General Re Common Stock, the equivalent price of a share of General Re
Common Stock on June 19, 1998 was $283.15 and on August 12, 1998 was $ .
APPROVALS (PAGE 42)
We are prohibited by U.S. antitrust laws from completing the transactions
until after we have furnished certain information and materials to the
Antitrust Division of the Department of Justice and the Federal Trade
Commission and a required waiting period has ended. We each filed the required
forms, and the waiting period ended on August 9, 1998. However, the Department
of Justice and the Federal Trade Commission continue to have the authority to
challenge the transactions on antitrust grounds before or after the mergers are
completed.
We are each required to make filings with or to obtain approvals from certain
domestic and international regulatory authorities in connection with the
transactions. These consents and approvals include the approval of the
insurance commissioners of the states of Connecticut, Delaware, Ohio and North
Dakota, governmental entities in Australia, South Africa, Hong Kong and the
United Kingdom, and the European Commission.
We cannot predict whether we will obtain all required approvals before we
complete the transactions, or whether any approvals will include conditions
that would be detrimental to New Berkshire. It is a condition to our completing
7
<PAGE>
the transactions that we obtain all approvals that are material to either of us
or which, if not received, would materially dilute the aggregate benefits to
the parties of the Transactions.
CONDITIONS TO THE TRANSACTIONS (PAGE 50)
We will complete the Transactions only if we satisfy several conditions,
including the following:
. a majority of the voting power of the General Re Voting Stock and
Berkshire Common Stock vote to adopt the Merger Agreement and the
Transactions;
. no legal restraints or prohibitions prevent the consummation of the
Transactions;
. the IRS issues certain rulings we have requested or Berkshire elects the
Alternative Transaction;
. all approvals and authorizations have been received, except for those
which are not material or would not materially dilute the aggregate
benefits to the parties of the Transactions;
. our lawyers render certain tax opinions.
Unless prohibited by law, either General Re or Berkshire could elect to waive
a condition that has not been satisfied and complete the Transactions anyway.
TERMINATION OF THE MERGER AGREEMENT (PAGE 53)
We can jointly agree to call off the transactions at any time before
completing them. Either of us can call off the transactions if:
. the General Re or Berkshire stockholders fail to approve the
Transactions;
. the Transactions have not been consummated by June 1, 1999;
. any government or court issues an order or takes another action enjoining
or prohibiting one or both of the Mergers or the Transactions, and such
action has become final and non-appealable; or
. the other party fails to perform its material obligations under the
Merger Agreement, and such failure is not cured.
In addition, Berkshire may call off the transactions if:
. the General Re Board withdraws or adversely modifies its approval or
recommendation of the Merger Agreement or the Transactions;
. the General Re Board recommends a transaction other than the Transactions
with Berkshire; or
. General Re holds extended discussions or provides information to a third
party for a transaction that the General Re Board has determined is
superior to the Transactions or a third party proposes or commences a
transaction and General Re does not timely reject such proposal.
General Re may call off the transactions in order to concurrently enter into
an agreement with a third party for a proposal, made before stockholders'
approval of the merger, that the General Re Board determines is superior to the
Transactions.
TERMINATION FEE (PAGE 54)
If General Re terminates the merger agreement to enter into an agreement with
another party, or if the General Re Board takes any action to make the General
Re Rights Plan inapplicable to another party, then General Re must pay
Berkshire a termination fee of $400 million and must reimburse Berkshire's
expenses. The Merger Agreement requires General Re to pay to Berkshire, in
certain circumstances, a termination fee of $400 million and reimbursement of
Berkshire's expenses if Berkshire terminates the Merger Agreement.
STOCK OPTION AGREEMENT (PAGE 32)
We have entered into a Stock Option Agreement that permits Berkshire under
certain circumstances to purchase 15,000,000 shares of General Re Common Stock,
approximately 19.8% of the outstanding General Re Common Stock, at a price of
$283.71 per share. Berkshire's total profit from the termination fee under the
Merger Agreement and its profit under the Stock Option Agreement may not exceed
$600 million.
8
<PAGE>
APPRAISAL RIGHTS (PAGE 44)
Both of our companies are organized under Delaware law. Under Delaware law,
Berkshire and General Re stockholders have no right to an appraisal of the
value of their shares in connection with the Transactions. However, in the
event of the Alternative Transaction, General Re stockholders who follow the
procedures required by Delaware law and who have not voted in favor of the
Transactions will be entitled to have their shares of General Re Common Stock
appraised by a Delaware court and to receive "fair value" for such shares.
OPINION OF GENERAL RE'S FINANCIAL ADVISOR (PAGE 25)
In deciding to approve the Transactions, the General Re Board considered an
opinion from its financial advisor, Goldman, Sachs & Co. ("Goldman Sachs"), as
to the fairness of the Merger Consideration to be received by the holders of
General Re Common Stock in the Transactions from a financial point of view.
This opinion is attached as Annex IV to this Joint Proxy Statement/Prospectus.
We encourage you to read and consider this opinion carefully, as well as the
information under "The Transactions--Opinion of General Re's Financial
Advisor."
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE (PAGE 45)
We have each made forward-looking statements in this document (and in
documents that are incorporated by reference) that are subject to risks and
uncertainties. Forward-looking statements include the information concerning
possible or assumed future results of operations of Berkshire, General Re or
the combined companies. Also, when we use words such as "believes," "expects,"
"anticipates," "intends," "plans," "estimates" or similar expressions, we are
making forward-looking statements. Stockholders should note that actual events
and results may differ materially from those expressed in forward-looking
statements due to a number of factors including, changes in market prices of
Berkshire's significant investees, the occurrence of one or more catastrophic
events that causes losses insured by General Re or the Berkshire insurance
group, changes in insurance laws or regulations, changes in Federal income tax
laws and general economic and market factors.
9
<PAGE>
COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA
The table below sets forth historical earnings per share, cash dividends per
share and book value per share data of Berkshire and General Re for the six
months ended June 30, 1998 and the year ended December 31, 1997, and unaudited
pro forma combined per share data of Berkshire and unaudited pro forma
equivalent per share data of General Re for the six months ended June 30, 1998
and for the year ended December 31, 1997. The data should be read in
conjunction with the historical financial statements and notes thereto
incorporated by reference in this Joint Proxy Statement/Prospectus and the
selected historical financial data elsewhere in this Joint Proxy
Statement/Prospectus. See "Where You Can Find More Information." The data
should also be read in conjunction with the Unaudited Pro Forma Combined
Condensed Financial Statements included elsewhere in this Joint Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
BERKSHIRE GENERAL RE
----------------------- -----------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998(1) 1997(1) 1998 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
HISTORICAL:
Earnings per share............. $ 1,529 $ 1,542 $ 6.81 $ 12.04
Cash dividends paid per
share(2)...................... -- -- 1.18 2.20
Book value per share........... 29,743 25,488 112.08 105.40
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
---------- ------------
<S> <C> <C>
PRO FORMA COMBINED:
Earnings per share(1)................................... $ 1,461 $ 1,620
Cash dividends per share(2)............................. -- --
Book value per share(1)................................. 38,390 34,941
GENERAL RE PRO FORMA EQUIVALENTS(3):
Earnings per share...................................... $ 5.11 $ 5.67
Cash dividends per share(2)............................. -- --
Book value per share.................................... 134.37 122.29
</TABLE>
- --------
(1) Berkshire Class B Common Stock has economic rights equal to one thirtieth
(1/30) of the economic rights of Class A Common Stock. Earnings per share
and book value per share are reflected on an equivalent Class A Common
Stock basis. The equivalent Class B Common Stock amounts are equal to one-
thirtieth of such amounts.
(2) Berkshire has not paid a cash dividend on its common stock since 1967 and
has no present intention of paying a dividend on either the Berkshire Class
A or Class B Common Stock in the future.
(3) General Re pro forma equivalent data represent the unaudited pro forma
combined earnings per share and book value per share each multiplied by
0.0035.
10
<PAGE>
BERKSHIRE SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data which follows should be read in
conjunction with the audited consolidated financial statements and accompanying
notes and the unaudited condensed consolidated financial statements and
accompanying notes of Berkshire in the documents which are incorporated by
reference in this Joint Proxy Statement/Prospectus. The condensed consolidated
financial statements of Berkshire as of June 30, 1998 and 1997 and for the
periods then ended are unaudited; however, in Berkshire's opinion, they reflect
all adjustments, consisting only of normal recurring items, necessary for a
fair presentation of the financial position and results of operations for such
periods. See "Where You Can Find More Information."
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------------- ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Insurance premiums
earned................. $ 2,616 $ 2,243 $ 4,761 $ 4,118 $ 957 $ 923 $ 651
Sales and service
revenues............... 2,016 1,638 3,578 3,061 2,756 2,352 1,963
Interest, dividend and
other investment
income................. 532 449 953 812 629 519 521
Income from finance
businesses............. 23 15 32 25 27 25 22
Realized investment
gain(1)................ 2,074 68 1,106 (2) 2,484 (3) 194 91 546
------- ------- ------- ------- ------- ------- -------
Total revenues......... $ 7,261 $ 4,413 $10,430 $10,500 $ 4,563 $ 3,910 $ 3,703
======= ======= ======= ======= ======= ======= =======
EARNINGS:
Before realized
investment gain and
cumulative effect of
accounting change...... $ 564 $ 518 $ 1,198 $ 884 $ 670 $ 492 (4) $ 520 (5)
Realized investment
gain(1)................ 1,334 44 703 (2) 1,605 (3) 125 61 357
Cumulative effect of
change in accounting
for income taxes....... -- -- -- -- -- -- (33)
------- ------- ------- ------- ------- ------- -------
Net earnings............ $ 1,898 $ 562 $ 1,901 $ 2,489 $ 795 $ 553 $ 844
======= ======= ======= ======= ======= ======= =======
SOURCES OF NET EARNINGS:
Property and casualty
insurance.............. $ 434 $ 418 $ 952 $ 690 $ 497 $ 488 $ 436
Non-insurance
businesses............. 150 121 298 227 191 202 167
Realized investment
gain(1)................ 1,334 44 703 (2) 1,605 (3) 125 61 357
Interest expense........ (32) (33) (66) (56) (35) (37) (36)
Other................... 12 12 14 23 17 12 7
------- ------- ------- ------- ------- ------- -------
Earnings before non-
recurring charges and
effect of accounting
change................. $ 1,898 $ 562 $ 1,901 $ 2,489 $ 795 $ 726 $ 931
Non-recurring charges
and effect of
accounting change...... -- -- -- -- -- (173)(4) (87)(6)
------- ------- ------- ------- ------- ------- -------
Net earnings............ $ 1,898 $ 562 $ 1,901 $ 2,489 $ 795 $ 553 $ 844
======= ======= ======= ======= ======= ======= =======
Net earnings per
share(7)............... $ 1,529 $ 456 $ 1,542 $ 2,065 $ 670 $ 470 $ 730
======= ======= ======= ======= ======= ======= =======
Average shares
outstanding, in
thousands(7)........... 1,241 1,232 1,233 1,205 1,187 1,178 1,156
BALANCE SHEET DATA:
Total assets............ $63,947 $50,554 $56,111 $43,409 $28,711 $20,610 $18,698
Borrowings under
investment agreements
and other debt(8)...... 2,192 1,884 2,267 1,944 1,062 811 972
Shareholders' equity.... 36,917 28,012 31,455 23,427 16,739 11,651 10,140
Shareholders' equity per
outstanding Class A
equivalent share....... 29,743 22,732 25,488 19,011 14,025 9,893 8,610
</TABLE>
11
<PAGE>
- --------
(1) The amount of realized investment gain for any given period has no
predictive value, and variations in amount from period to period have no
practical analytical value, particularly in view of the unrealized
appreciation now existing in Berkshire's consolidated investment portfolio.
(2) In November 1997, Travelers Group Inc. completed its acquisition of Salomon
Inc. A pre-tax realized gain of $678 million ($427 million after-tax) is
included in 1997's results.
(3) In March 1996, The Walt Disney Company completed its acquisition of Capital
Cities/ABC, Inc. A pre-tax realized gain related to this transaction of
$2.2 billion ($1.4 billion after-tax) is included in 1996's results.
(4) Includes a charge of $173 million representing an other-than-temporary
decline in value of investment in USAirways Group, Inc. preferred stock.
(5) Includes a charge of $54 million representing the effect of the change in
U.S. federal income tax rates on deferred taxes applicable to unrealized
appreciation.
(6) Includes a charge of $33 million related to change in accounting for income
taxes and $54 million as described in (5) above.
(7) On May 8, 1996, Berkshire issued 517,500 shares of Berkshire Class B Common
Stock in the initial public offering of that class of stock. Each share of
Berkshire Class B Common Stock has economic rights equal to one-thirtieth
(1/30) of a share of Class A Common Stock. Average shares outstanding for
1996, 1997 and the 1998 periods include average Berkshire Class A Common
shares and average Berkshire Class B Common shares determined on an
equivalent Berkshire Class A Common Stock basis. Net earnings per share
shown above represents net earnings per equivalent share of Berkshire Class
A Common Stock. Net earnings per share of Berkshire Class B Common Stock is
equal to one-thirtieth (1/30) of such amount.
(8) Excludes borrowings of finance businesses.
12
<PAGE>
GENERAL RE SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data which follows should be read in
conjunction with the audited consolidated financial statements and accompanying
notes and the unaudited condensed consolidated financial statements and
accompanying notes of General Re in the documents which are incorporated by
reference in this Joint Proxy Statement/Prospectus. The condensed consolidated
financial statements of General Re as of June 30, 1998 and 1997 and for the
periods then ended are unaudited; however, in General Re's opinion, they
reflect all adjustments, consisting of normal recurring items, necessary for a
fair presentation of the financial position and results of operations for such
periods. See "Where You Can Find More Information."
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------- ---------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME
STATEMENT INFORMATION:
Total revenues.......... $ 3,829 $ 4,146 $ 8,251 $ 8,296 $ 7,210 $ 3,837 $ 3,560
Net premiums written.... 3,105 3,396 6,545 6,661 6,102 3,001 2,524
Net income.............. 526 477 968 894 825 665 711
Per basic share....... 6.81 5.85 12.04 11.00 9.92 7.97 8.28
Per diluted share..... 6.62 5.72 11.76 10.78 9.74 7.86 8.16
After-tax income,
excluding realized
gains/losses(1)(2)..... 503 477 965 877 788 621 604
Per basic share....... 6.51 5.86 12.00 10.79 9.47 7.43 7.01
Per diluted share..... 6.32 5.73 11.72 10.57 9.30 7.33 6.91
Investment income before
tax.................... 645 634 1,288 1,205 1,017 749 755
Investment income after
tax.................... 484 479 969 909 787 622 619
CONSOLIDATED BALANCE
SHEET INFORMATION:
Insurance investments... 24,756 23,660 24,576 23,168 21,016 17,237 12,012
Total assets............ 43,262 39,367 41,459 40,161 34,263 28,116 19,419
Long-term debt(3)....... 284 288 285 286 150 150 184
Common shareowners'
equity................. 8,479 7,732 8,161 7,326 6,587 4,859 4,761
COMMON SHAREOWNERS'
INFORMATION
Average common shares
outstanding--basic..... 76.5 80.6 79.5 80.3 82.1 82.1 84.5
--diluted.......... 79.2 83.0 81.9 82.5 84.2 84.0 86.6
Dividend per common
share.................. $ 1.18 $ 1.10 $ 2.20 $ 2.04 $ 1.96 $ 1.92 $ 1.88
Total common dividends.. 90 88 174 163 161 157 159
Cost of common share
repurchases............ 454 377 864 735 35 207 134
Common shareowners'
equity per share....... 112.08 97.12 105.40 89.82 80.22 59.35 56.92
</TABLE>
- --------
Only continuing operations are presented. Balance sheet data are as of the end
of the relevant period. The 1996 amounts include the balance sheet of National
Re Corporation as of December 31, 1996 and income statement amounts since the
October 3, 1996 acquisition. On December 28, 1994, General Re acquired a
controlling interest in Cologne Re. Cologne Re's balance sheet is included in
General Re's financial statements beginning at December 31, 1994 and in its
income statement beginning in 1995.
(1) Excludes cumulative effect of accounting changes.
(2) After deducting minority interest.
(3) Excludes financial services.
13
<PAGE>
BERKSHIRE AND GENERAL RE UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
INFORMATION
The summary unaudited pro forma combined condensed financial information has
been derived from, or prepared on a basis consistent with, the unaudited pro
forma combined condensed financial statements included elsewhere in this Joint
Proxy Statement/Prospectus. This data is presented for illustrative purposes
only and is not necessarily indicative of the combined results of operations or
financial position that would have occurred if the Mergers had occurred at the
beginning of each period presented or on the dates indicated, nor is it
necessarily indicative of future operating results or financial position of the
combined companies.
<TABLE>
<CAPTION>
YEAR ENDED
SIX MONTHS DECEMBER 31,
ENDED JUNE 30, 1997 OR AS
1998 OR AS OF OF
JUNE 30, DECEMBER 31,
1998(1) 1997(1)
-------------- ------------
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
INCOME STATEMENT DATA:
Revenues........................................... $ 11,106 $ 18,628
Net earnings....................................... 2,208 2,437
Earnings per share(2).............................. 1,461 1,620
BALANCE SHEET DATA:
Total assets....................................... $120,200 $110,536
Borrowings under investment agreements and other
debt.............................................. 2,567 2,593
Shareholders' equity............................... 58,043 52,581
Book value per share(2)............................ 38,390 34,941
</TABLE>
- --------
(1) This information has been developed under the assumption that the
Alternative Transaction will not be consumated. Therefore, upon
consummation of the General Re merger, each outstanding share of General Re
Common Stock will be converted into the right to receive either 0.0035
Class A shares or 0.105 Class B shares of New Berkshire Common Stock. The
pro forma combined condensed financial statements assume that all General
Re shares were converted into Class A shares at the fixed exchange ratio of
0.0035.
(2) Class B Common Stock has economic rights equal to one thirtieth ( 1/30) of
the economic rights of Class A Common Stock. Earnings per share and book
value per share are reflected on the equivalent Class A Common Stock basis.
The equivalent Class B amounts are equal to one thirtieth of such amounts.
14
<PAGE>
CERTAIN RISK FACTORS AND INVESTMENT CONSIDERATIONS
In considering whether to approve and adopt the Merger Agreement, and in
making an election between Class A Common Stock and Class B Common Stock as
the Merger Consideration, the stockholders of General Re should consider the
following:
FIXED MERGER CONSIDERATION DESPITE POTENTIAL CHANGE IN RELATIVE STOCK
PRICES. Upon completion of the General Re Merger, each share of General Re
Common stock will be converted into the right to receive 0.0035 of a share of
New Berkshire Class A Common Stock or 0.105 of a share of New Berkshire Class
B Common Stock (plus cash for fractional shares) or, if the Alternative
General Re Merger occurs, into 0.003395 of a share of Berkshire Class A Common
Stock or 0.10185 of a share of Berkshire Class B Common Stock (plus cash).
These exchange ratios will not be adjusted despite any increase or decrease in
the price of either Berkshire or General Re Common Stock. The prices of
Berkshire and General Re Common Stock when the Mergers occur may vary from
their prices at the date of this Joint Proxy Statement/Prospectus and at the
date of the Special Meetings. For example, during the twelve month period
ending on August 12, 1998 (the most recent practicable date prior to the first
mailing of this Joint Proxy Statement/ Prospectus), the closing price of
Berkshire Class A Common Stock varied from a low of $ to a high of
$ and ended that period at $ , and the closing price of General Re
Common Stock varied from a low of $ to a high of $ and ended that
period at $ (see "Comparative Market Prices and Dividend Information"
for further information). Such variations may be the result of changes in the
business or operations of Berkshire or General Re or the prospects of their
businesses, separately or combined, changes in market assessments of Berkshire
or General Re's business, operations, or prospects, or in market assessments
of the likelihood that the Mergers will be consummated, the tax effects of the
Mergers, and the timing thereof, as well as general market and economic
conditions and other factors. At the time of the Special Meetings, the holders
of General Re shares will not know the exact value of the shares that they
will receive when the General Re Merger is completed. Also, because Berkshire
Common Stock is not included in the S&P 500 and General Re Common Stock will
cease to be included in the S&P 500 index due to the Transactions, index funds
and other institutional investors whose portfolios track that index may sell
New Berkshire (or Berkshire) Common Stock that they receive in the Merger and
may sell General Re Common Stock that they own prior to the Merger. Such
selling may cause downward pressure on the stock market prices of New
Berkshire (or Berkshire) Common Stock and General Re Common Stock.
Both Berkshire and General Re stockholders are urged to obtain current
market quotations for Berkshire and General Re Common Stock.
POTENTIAL FOR TAXATION OF MERGER CONSIDERATION TO STOCKHOLDERS OF GENERAL
RE. Berkshire and General Re are seeking certain tax rulings from the IRS. If
the requested rulings are denied or are not obtained prior to February 19,
1999, Berkshire has the right to elect to proceed with the Alternative
Transaction, in which event the excess of the market value of the Merger
Consideration received by a stockholder over the tax basis in such
stockholder's shares of General Re Common Stock will be a taxable gain to such
holder. However, the Merger Consideration will not be increased in such event,
even though holders of General Re Common Stock may be required to pay
additional Federal income taxes as a result of the Alternative Transaction.
See "The Transactions--The Alternative Transaction" and "The Transactions--
Federal Income Tax Considerations."
NONCONVERTIBILITY, MARKET PRICE AND LESSER VOTE OF NEW BERKSHIRE CLASS B
COMMON STOCK. Each share of New Berkshire Class A Common Stock is convertible
into 30 shares of New Berkshire Class B Common Stock, but shares of New
Berkshire Class B Common Stock are not convertible into shares of New
Berkshire Class A Common Stock or any other security. Although a share of New
Berkshire Class B Common Stock may sell below one-thirtieth of the market
price for New Berkshire Class A Common Stock, it is unlikely that a share of
New Berkshire Class B Common Stock will sell more than fractionally above one-
thirtieth of the market price for New Berkshire Class A Common Stock because
higher prices than that would cause arbitrage activity to ensue. Also, holders
of shares of New Berkshire Class A Common Stock will be entitled to one vote,
but holders of shares of New Berkshire Class B Common Stock will be entitled
to only one two-hundredth ( 1/200th) of a vote, for each share on matters
submitted to a vote of New Berkshire stockholders. See "Description of New
Berkshire Capital Stock." The foregoing applies equally to Berkshire's Class A
and Class B Common Stock.
15
<PAGE>
PAST GROWTH RATE IN BERKSHIRE'S BOOK VALUE PER SHARE IS NOT AN INDICATION OF
FUTURE RESULTS. In the years since Berkshire's present management acquired
control of Berkshire, its book value per share has grown at a highly
satisfactory rate. Because of the large size of Berkshire's capital base
(approximately $36.9 billion as of June 30, 1998, and New Berkshire's pro
forma stockholder's equity at that date would have been $58.0 billion),
Berkshire's book value per share cannot increase in the future at a rate even
close to its past rate.
DEPENDENCE ON KEY MANAGEMENT. Investment decisions and all other capital
allocation decisions are made for Berkshire's businesses by Mr. Buffett, its
Chairman, age 67, in consultation with Mr. Munger, its Vice Chairman, age 74.
If for any reason the services of Berkshire's key management personnel,
particularly Mr. Buffett, were to become unavailable, there could be a
material adverse effect both on New Berkshire and on the market price of New
Berkshire Common Stock.
SUPER-CAT INSURANCE. Berkshire believes that in recent years it has been the
largest writer in the world of "super-cat" insurance, whereby reinsurers (such
as Berkshire) assume a risk of large losses from mega-catastrophes such as
hurricanes or earthquakes. This business has produced pre-tax underwriting
gains of approximately $283 million, $167 million and $152 million in 1997,
1996 and 1995, respectively, but is virtually certain to produce huge losses
in some years in the future. Berkshire's present underwriting standards (which
are subject to change) seek to limit Berkshire's exposure to a loss from a
single event to $1 billion in excess of the premium earned. Prices have fallen
in the super-cat business and Berkshire's volume in this line of business may
significantly decline.
CONCENTRATION OF INVESTMENTS. Compared to other insurers, Berkshire's
insurance subsidiaries keep an unusually high percentage of their assets in
common stocks and diversify their portfolios far less than is conventional. A
significant decline in the general stock market would produce a large decrease
in Berkshire's book value, one far greater than likely to be experienced by
most other property-casualty insurance companies. Such a decrease could have a
material adverse effect on the share price for Berkshire Common Stock, but
would not be a basis for termination of the Merger Agreement by General Re.
ABSENCE OF STOCKHOLDER-DESIGNATED CONTRIBUTIONS PROGRAM FOR NEW BERKSHIRE
CLASS B STOCK. For some years Berkshire has let its stockholders of record of
Berkshire Class A Stock designate charitable contributions to be made by
Berkshire. In 1997, stockholders of record as of August 31, 1997 were entitled
to designate $16 per share, an amount that is expected to increase in the
future. New Berkshire will continue this program for stockholders of record of
New Berkshire Class A Stock. However, shares of Berkshire Class B Common Stock
are not eligible to participate in the program. Accordingly, General Re
stockholders who receive shares of New Berkshire Class B Common Stock will not
participate in the program with respect to their shares of New Berkshire Class
B Common Stock.
ACCOUNTING CHARGE FOR COMPENSATION. General Re's reported expenses (but not
its true economic expenses) will increase after the merger due to changes in
its compensation plans. As part of its current compensation plans, General Re
grants options on its shares to many of its employees. As discussed elsewhere
in this Joint Proxy Statement/Prospectus, such options will be replaced with a
new long-term incentive compensation plan having a cash value equal to General
Re's option plan. Under current accounting rules, General Re excludes the
economic costs related to the granting of stock options from reported
earnings. The costs of the new long-term incentive compensation plan, however,
will be charged as an expense against the combined companies' consolidated
earnings.
DECLINE IN PREMIUM VOLUME. General Re has recently been experiencing a
decline in written premiums from its North American property/casualty
operations. The decline in premium volume reflects the current competitive
market and General Re's adherence to underwriting discipline. Over time,
should this trend of declining premiums continue, General Re will experience a
reduction in float which will create a decrease in invested assets and related
investment income.
16
<PAGE>
THE TRANSACTIONS
GENERAL
Berkshire Hathaway Inc., a Delaware corporation ("Berkshire") and General Re
Corporation, a Delaware corporation ("General Re"), are furnishing this Joint
Proxy Statement/Prospectus to holders of shares of (i) General Re common
stock, par value $0.50 per share ("General Re Common Stock"), (ii) General Re
Series A ESOP Convertible Preferred Stock, no par value ("General Re Preferred
Stock" and, together with the General Re Common Stock, "General Re Voting
Stock"), in connection with the solicitation of proxies by the Board of
Directors of General Re (the "General Re Board") for use at the special
meeting of stockholders of General Re to be held on September 18, 1998, or any
adjournment or postponement thereof (the "General Re Meeting"), and to holders
of shares of (a) Berkshire Class A Common Stock, par value $5.00 per share
("Berkshire Class A Common Stock") and (b) Berkshire Class B Common Stock, par
value $0.1667 per share ("Berkshire Class B Common Stock" and, together with
the Berkshire Class A Common Stock, "Berkshire Common Stock") in connection
with the solicitation of proxies by the Board of Directors of Berkshire (the
"Berkshire Board") for use at the special meeting of stockholders of Berkshire
to be held on September 16, 1998, or any adjournment or postponement thereof
(the "Berkshire Meeting") and together with the General Re Meeting, the
"Special Meetings").
At the Special Meetings, holders of Berkshire Common Stock and General Re
Voting Stock will be asked to vote upon a proposal to approve and adopt (i)
the Agreement and Plan of Mergers, dated as of June 19, 1998, between
Berkshire and General Re (the "Merger Agreement"), which provides, among other
things, that Berkshire and General Re will each merge with separate
subsidiaries of NBH, Inc., a Delaware corporation ("New Berkshire") to be
renamed "Berkshire Hathaway Inc." following the consummation of the Mergers
(as defined) and which gives Berkshire the right to elect the Alternative
Transaction under certain circumstances, (ii) in the case of the Berkshire
Meeting, the Merger Agreement ("Berkshire Merger Agreement"), among Berkshire,
New Berkshire and Wyllis Merger Sub Inc., a Delaware corporation and a wholly
owned subsidiary of New Berkshire ("Merger Sub A"), which provides for the
merger of Merger Sub A with and into Berkshire (the "Berkshire Merger"), and a
proposal to amend the Restated Certificate of Incorporation of Berkshire to
increase to 1,650,000 (from 1,500,000) the number of shares of Berkshire Class
A Common Stock, and to increase to 55,000,000 (from 50,000,000) the number of
shares of Berkshire Class B Common Stock, authorized for issuance (the
"Charter Amendment"), which will be effected in the event of the Alternative
Transaction, and (iii) in the case of the General Re Meeting, the Merger
Agreement (the "General Re Merger Agreement," and together with the Berkshire
Merger Agreement, the "Subsidiary Merger Agreements"), among General Re, New
Berkshire and Steven Merger Sub Inc., a Delaware corporation and a wholly
owned subsidiary of New Berkshire ("Merger Sub B"), which provides for the
merger of Merger Sub B with and into General Re (the "General Re Merger" and,
together with the Berkshire Merger, the "Mergers") and, in the alternative, a
Merger Agreement (the "Alternative General Re Merger Agreement") among General
Re, Berkshire, Merger Sub B and one or more subsidiaries of Berkshire, which
provides for the merger of Merger Sub B with and into General Re (the
"Alternative General Re Merger"). The transactions contemplated by the Merger
Agreement, the Subsidiary Merger Agreements, and the Alternative General Re
Merger Agreement, including the Alternative Transaction (see "The
Transactions--The Alternative Transaction"), are referred to herein as the
"Transactions." As a result of the Mergers, each of Berkshire and General Re
will become a wholly owned subsidiary of New Berkshire.
This Joint Proxy Statement/Prospectus also serves as (a) a prospectus of New
Berkshire with respect to the shares of Class A Common Stock, par value $5.00
per share, of New Berkshire ("New Berkshire Class A Common Stock") and Class B
Common Stock, par value $0.1667 per share, of New Berkshire ("New Berkshire
Class B Common Stock" and, together with New Berkshire Class A Common Stock,
"New Berkshire Common Stock") that will be issued to (i) holders of
outstanding shares of Berkshire Common Stock upon consummation of the
Berkshire Merger and (ii) holders of outstanding shares of General Re Common
Stock upon consummation of the General Re Merger or (b) in the event of the
Alternative Transaction, a prospectus of Berkshire with respect to shares of
Berkshire Class A Common Stock and Berkshire Class B Common Stock that will be
issued
17
<PAGE>
to holders of outstanding shares of General Re Common Stock upon consummation
of the Alternative General Re Merger. See "The Transactions--Merger
Consideration" and "The Transactions--The Alternative Transaction." "Berkshire
Class A Common Stock" and "New Berkshire Class A Common Stock" are sometimes
together referred to herein as "Class A Common Stock," and "Berkshire Class B
Common Stock" and "New Berkshire Class B Common Stock" are sometimes together
referred to herein as "Class B Common Stock."
The terms, designations, preferences, limitations, privileges and rights of
the respective classes of New Berkshire Common Stock will be identical to
those of the existing corresponding classes of Berkshire Common Stock.
BACKGROUND OF THE TRANSACTIONS
For many years, the Berkshire Hathaway Insurance Group and General Re have
engaged in reinsurance transactions with each other. In September 1996, Ajit
Jain, a senior officer of the Berkshire Hathaway Insurance Group, and Joseph
P. Brandon, Chief Financial Officer of General Re, whose offices are both in
Stamford, Connecticut, met there to discuss the possibilities for a strategic
alliance or other arrangement enabling the Berkshire Hathaway Insurance Group
and General Re to pursue reinsurance opportunities together. Mr. Jain
discussed this topic with Warren E. Buffett, Chairman and Chief Executive
Officer of Berkshire, who knew General Re's business well and was
professionally acquainted with Ronald E. Ferguson, Chairman and Chief
Executive Officer of General Re. Mr. Buffett told Mr. Jain, who conveyed to
Mr. Brandon, that he was willing to consider a merger of General Re with
Berkshire, but no merger discussions ensued at that time.
Almost a year later, in July of 1997, Mr. Jain and Mr. Brandon reinitiated
their discussions. Later in July 1997, Mr. Buffett and Mr. Ferguson met. At
that meeting and during subsequent meetings and telephone conversations in
August and September 1997, they discussed their respective reinsurance
businesses and the strategic implications to Berkshire and General Re of a
possible business combination. Mr. Buffett and Mr. Ferguson shared the view
that a combination of Berkshire and General Re would benefit both companies
for the reasons described below under "The Transactions--Reasons for the
Transactions; Recommendations of the Boards of Directors." In addition, Mr.
Buffett concluded that he would be delighted to work closely with Mr. Ferguson
and would welcome his participation as a member of Berkshire's Board of
Directors. Mr. Buffett also said that any tax-free merger would depend upon
Berkshire being fully satisfied that the transaction would also not result in
any taxes upon Berkshire or its stockholders. In connection with these
preliminary discussions, General Re engaged Goldman Sachs as its financial
advisor and consulted with Wachtell, Lipton, Rosen & Katz, its legal counsel.
During this period, the relationship between the market prices of Berkshire's
Common Stock and General Re's Common Stock was such that Mr. Buffett was not
willing to consider a transaction that would provide any premium to the
General Re stockholders. Accordingly, neither Mr. Buffett nor Mr. Ferguson
proposed a share exchange ratio, and these discussions were not pursued beyond
these preliminary matters.
In December of 1997 and April of 1998, Messrs. Jain and Brandon engaged in
further discussions, by telephone and in person, regarding the possibility of
a business combination between Berkshire and General Re. Thereafter, on May 6,
1998, Messrs. Buffett and Ferguson met in New York City at Mr. Buffett's
invitation to discuss further the possibility of a business combination
between the two companies, including the potential financial and other terms
of such a combination. Mr. Buffett had studied General Re's most recent annual
report and continued to believe that a merger would enhance the value of both
companies. Since the prior meetings, the value of Berkshire's stock had
increased in relationship to the value of General Re's Common Stock. As a
result, at the May 6, 1998 meeting, Mr. Buffett proposed an exchange ratio of
0.105 of a share of Berkshire Class B Common Stock for each share of General
Re Common Stock, subject to negotiation of other definitive terms of a
combination and to review and approval by their respective companies' boards
of directors.
Mr. Buffett and Mr. Ferguson met again on May 27, 1998 and also discussed
the subject during a June 5, 1998 phone conversation. During these
discussions, Mr. Buffett and Mr. Ferguson continued to discuss the terms of a
potential business combination, including the exchange ratio. As a part of
these discussions, Mr. Ferguson
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also explained to Mr. Buffett the various employee benefit and incentive plans
in place at General Re and the need to restructure certain of those plans if a
combination occurred. They also discussed transaction structure, and Mr.
Buffett said that he would agree to vote his shares in Berkshire in favor of
the Merger Agreement. As a result of these discussions, Mr. Buffett and Mr.
Ferguson reached an agreement between them, subject to board review and
approval, on a proposal to combine their companies at the proposed share
exchange ratio, using the desired new holding company structure if the IRS
would issue the requested tax rulings. Mr. Buffett and Mr. Ferguson continued
to discuss various terms of the business combination until the General Re
Board meeting.
On June 10, 1998, the General Re Board of Directors met and discussed the
proposed business combination. General Re's legal advisors were present at the
meeting and participated in the discussions. Following the discussions, the
General Re Board authorized management to continue discussions with Berkshire
regarding a possible business combination, including negotiation of definitive
terms.
At the conclusion of the General Re Board of Directors meeting, Mr. Ferguson
telephoned Mr. Buffett to inform him that the General Re Board was favorably
inclined toward the merger proposal and, based upon such favorable
inclination, had asked Goldman Sachs to undertake an analysis of the financial
implications of a possible business combination between Berkshire and General
Re and the impact thereof on the shareholders of General Re.
Between June 10 and June 18, 1998, Messrs. Ferguson and Brandon, with the
assistance of General Re's outside financial and legal advisors, negotiated
the terms of the Merger Agreement, Stock Option Agreement and Voting
Agreements with representatives of Berkshire and its legal counsel. During the
course of those negotiations, General Re requested, and Berkshire agreed, that
the Merger Agreement allow General Re stockholders the election to receive
either New Berkshire Class A Common Stock or New Berkshire Class B Common
Stock. The exchange ratio of 0.0035 of a share of New Berkshire Class A Common
Stock reflects the fact that New Berkshire Class B Common Stock will have one-
thirtieth of the economic rights of one share of New Berkshire Class A Common
Stock (which is the relationship between the current Berkshire Class A and
Class B Common Stock). Berkshire, General Re and their respective legal
counsel also negotiated the terms of the Alternative Transaction in the event
that the IRS will not issue the requested rulings. General Re requested that
Charles T. Munger, Vice-Chairman of Berkshire, also agree to vote his shares
in Berkshire in favor of the Merger Agreement, and Mr. Munger agreed to do so.
During this time, the parties and their legal counsel jointly began drafting
the private letter ruling request to be submitted to the IRS. During this
period, representatives of General Re also conducted a due diligence review of
Berkshire.
The General Re Board of Directors met again on June 18 and 19, 1998, at
which meetings Mr. Ferguson, together with Mr. Brandon, discussed the process
leading to the proposed business combination being presented to the General Re
Board for approval, presented management's analysis of the financial and other
terms of the proposed business combination with Berkshire and reviewed the
results of General Re's due diligence review. Goldman Sachs made a
presentation as to the financial aspects of the proposed transaction and
General Re's legal counsel reviewed for the General Re Board its fiduciary
obligations and made a presentation as to the terms of the Merger Agreement,
Stock Option Agreement and other documents relating to the transaction. At the
Board's invitation, Mr. Buffett and Mr. Munger attended a portion of the June
19, 1998 meeting. Mr. Buffett and Mr. Munger discussed management succession
at Berkshire, Berkshire's operational philosophy and opportunities for General
Re as a part of Berkshire. Also during that meeting, Goldman Sachs delivered
its oral opinion to the effect that, as of June 19, 1998 and based upon the
qualifications and assumptions made and matters considered by Goldman Sachs
described in its written opinion dated June 19, 1998, the Merger Consideration
to be received in the Transactions by holders of General Re Common Stock is
fair from a financial point of view to such holders. At the conclusion of the
meeting, the General Re Board of Directors determined that the Merger
Agreement and the transactions contemplated thereby, including the Stock
Option Agreement and the transactions contemplated in it, are fair to and in
the best interests of General Re and its stockholders. Accordingly, the
General Re Board of Directors approved the Merger Agreement and the Stock
Option Agreement and resolved to recommend that the General Re stockholders
approve the Merger Agreement, the General Re Merger, and the other
contemplated transactions.
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The Berkshire Board of Directors met later on June 19, 1998 and determined
that the Merger Agreement and the transactions contemplated thereby, including
the Stock Option Agreement and the transactions contemplated in it, are fair
to and in the best interests of Berkshire and its stockholders. Accordingly,
the Berkshire Board of Directors approved the Merger Agreement and the Stock
Option Agreement and resolved to recommend that the Berkshire stockholders
approve the Merger Agreement, the Berkshire Merger, and the other contemplated
transactions.
The Merger Agreement, Stock Option Agreement, and Voting Agreements were
signed and a joint press release was issued shortly after the close of trading
on the New York Stock Exchange (the "NYSE") on June 19, 1998.
REASONS FOR THE TRANSACTIONS; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
Berkshire and General Re believe that their combination will create value
for both companies' stockholders by providing opportunities to achieve
substantial benefits that would not be available to either company alone.
Specifically, the combination allows for substantial synergy in four
identified areas.
First, the combination will remove constraints on earnings volatility that
have caused General Re in the past to decline certain attractive reinsurance
business and to retrocede to other reinsurers substantial amounts of the
business that General Re has written. General Re has been unable to operate in
a manner that could produce large swings in its reported earnings, due both to
its status as a publicly traded company and its desire to maintain its triple-
A credit rating. On occasion, that constraint has required General Re to
forego opportunities to write large, complex, but attractive, reinsurance
business. As part of Berkshire, that constraint will disappear. Berkshire is
willing to accept reinsurance business that can produce extreme volatility in
reported periodic results. Accounting consequences do not influence decisions
of Berkshire's management with respect to this or any other Berkshire
business. This fact, along with Berkshire's extraordinary financial strength,
are believed to be the primary reasons why the Berkshire Hathaway Insurance
Group has become a major provider of large and complex reinsurance coverages.
Although General Re will operate independently of Berkshire's other insurance
and reinsurance operations, it will similarly operate free of constraints on
earnings volatility.
Two benefits are expected from removing those constraints. One, General Re's
long-term profitability should be enhanced because it can accept attractive
business it previously declined. Two, General Re will be free to reduce its
reliance on the retrocessional market (i.e. reinsurance of reinsurance) over
time. Reduced retrocessions will increase General Re's investable funds
("float").
Second, General Re has substantial opportunities to develop its global
reinsurance franchise. After the combination, General Re will be able to make
investments to grow its international business as quickly as it sees fit.
Berkshire seeks growth in the long-term intrinsic value of its businesses, and
is willing to incur short-term costs in doing so, without regard to periodic
reported earnings.
Third, General Re will gain tax flexibility from the combination. In
managing insurance investments, it is a distinct advantage to know that large
amounts of taxable income will consistently recur. Most insurance companies
are unable to assume the consistent recurrence of significant taxable income.
Berkshire insurance companies can make this assumption confidently, due to the
large and diverse streams of taxable income flowing from Berkshire's numerous
noninsurance subsidiaries. Accordingly, General Re after the combination can
fashion its investment strategy without concern as to the presence of taxable
income.
Finally, Berkshire's insurance companies, including General Re after the
combination, are backed by abundant capital. The Berkshire Hathaway Insurance
Group maintains capital strength at high levels, significantly higher than
normal in the industry. This capital strength differentiates Berkshire
insurance companies from their competitors. Berkshire's capital strength will
allow General Re to follow whatever asset strategy makes the most sense,
unconstrained by the effects on its capital of a sharp market decline.
Periodically, this flexibility has proven of enormous advantage to Berkshire's
insurance companies, and should lead over the long term to increased returns
generated on General Re's invested assets over what they otherwise would be.
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In addition to these synergies, the combination will add approximately $25
billion to Berkshire's invested insurance assets.
The Boards of Directors of each company also considered various other
factors that contributed to their approval and recommendation of the Merger
Agreement and the Transactions. Those factors include: (i) the terms and
conditions of the Merger Agreement, including an exchange ratio that provides
certainty about the number of shares to be issued and received in the Mergers;
(ii) the expected, although not certain, treatment of the Mergers as tax-free
exchanges of stock; and (iii) the certainty of consummation of the combination
even if the IRS does not issue the private letter rulings that the companies
have requested.
The Berkshire Board also considered the advantages of adding Mr. Ferguson as
a director and the certainty provided by the Merger Agreement that Berkshire
will not be obligated to consummate the Berkshire Merger unless Berkshire is
fully satisfied that the transaction will not result in any taxes upon
Berkshire or its stockholders.
The General Re Board also considered a number of other items and factors,
including, without limitation, the following:
(i) the financial presentation of Goldman Sachs to the General Re Board
and the oral opinion of Goldman Sachs to the effect that, as of June 19,
1998 and based upon the qualifications and assumptions made and matters
considered by Goldman Sachs described in its written opinion dated June 19,
1998, the Merger Consideration to be received by the stockholders of
General Re in the Transactions is fair to such stockholders from a
financial point of view;
(ii) General Re's business, management, financial performance and
condition, strategic objectives, prospects and competitive position, and
the recommendations of General Re's management;
(iii) a review of strategic alternatives, including other possible
business combinations and, based on the foregoing, the belief that a
transaction with another company could not reasonably be expected to offer
terms with advantages comparable to those of a business combination with
Berkshire;
(iv) the fact that the Merger Consideration on a per share basis
represented a premium over recently prevailing market prices of General Re
Common Stock;
(v) the ability of the stockholders of General Re who wish to do so to
continue to participate in General Re's business as part of Berkshire after
the Mergers and to benefit from the potential appreciation of the common
stock of Berkshire; however, the General Re Board noted that because of the
large size of Berkshire's capital base, Berkshire's book value is not
expected to increase in the future at its historical rate;
(vi) its knowledge and review of the financial condition, results of
operations and business prospects of Berkshire, as well as the results of
General Re's due diligence review of Berkshire, and its belief that
Berkshire's historical practice has been to retain management and allow the
companies to operate autonomously, and that consequently the Mergers would
not be likely to adversely affect General Re's relationships with its
clients and associates;
(vii) the terms and conditions of the Merger Agreement and the parties
respective representations, warranties, covenants, agreements and
conditions to their respective obligations, including the condition that
the Mergers be approved by the General Re Voting Stockholders; and
(viii) the risk that benefits sought in the Mergers would not be
obtained, the risk that the Mergers would not be consummated, the fact
that, with a fixed exchange ratio, the relative values of Berkshire and
General Re are fixed by the parties in advance and would not take into
account subsequent changes or changed market perceptions, and the effect of
the public announcement of the Mergers on the trading price of the common
stock of the parties.
The General Re Board also considered the factors set forth in the section
entitled "Certain Risk Factors and Other Investment Considerations."
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Each company's Board determined that the potential advantages of the
Transactions far outweigh the disadvantages. Each company's Board believes
that the Transactions will result in its company's stockholders realizing
greater value than its company could deliver to them alone. Based on the
consideration of these and other relevant matters, each company's Board
unanimously determined that the Merger Agreement and the Mergers, and the
other Transactions, are in the best interests of its company and its company's
stockholders.
The foregoing discussion of the factors considered by each company's Board
is not intended to be exhaustive, but is believed to include all material
factors considered by each company's Board. In reaching its decision to
approve the Merger Agreement and the Mergers, neither company's Board
quantified or assigned any relative weights to the factors considered, or
considered any one factor to be determinative, and individual directors may
have given different weight to different matters.
THE BERKSHIRE BOARD OF DIRECTORS AND THE GENERAL RE BOARD OF DIRECTORS HAVE
EACH UNANIMOUSLY CONCLUDED THAT THE MERGERS ARE IN THE BEST INTERESTS OF THEIR
RESPECTIVE STOCKHOLDERS, AND EACH UNANIMOUSLY RECOMMENDS THAT ITS STOCKHOLDERS
VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS.
SEE "THE TRANSACTIONS--CONFLICTS OF INTEREST" AND "THE TRANSACTIONS--OTHER
AGREEMENTS AND TRANSACTIONS."
FORM OF THE MERGERS
If the approval of the holders of Berkshire Common Stock is obtained and all
other conditions to the Berkshire Merger are satisfied or waived, pursuant to
the Berkshire Merger Agreement (a copy of which is attached as Annex V to this
Agreement) Merger Sub A will be merged with and into Berkshire, with Berkshire
being the surviving corporation after the Berkshire Merger and a wholly owned
subsidiary of New Berkshire. If the approval of the holders of General Re
Voting Stock is obtained and all other conditions to the General Re Merger are
satisfied or waived, pursuant to the General Re Merger Agreement (a copy of
which is attached as Annex VI to this Agreement) Merger Sub B will be merged
with and into General Re, with General Re being the surviving corporation
after the General Re Merger and a wholly owned subsidiary of New Berkshire.
After the Berkshire Merger, Berkshire will change its name to "OBH, Inc." and
New Berkshire will change its name to "Berkshire Hathaway Inc." The date on
which the closing of the Mergers occurs is referred to herein as the "Closing
Date."
THE ALTERNATIVE TRANSACTION
The Merger Agreement gives Berkshire the right to elect an alternative form
of transaction (the "Alternative Transaction") if the IRS refuses to grant tax
rulings requested by the companies or does not do so prior to February 19,
1999. This section of the Joint Proxy Statement/Prospectus describes the
Alternative Transaction and the events that may cause the parties to
consummate the Alternative Transaction. If the Alternative Transaction occurs,
each holder of General Re Common Stock will recognize gain or loss equal to
the difference between (i) the sum of the fair market value of the shares of
Berkshire Common Stock and the amount of cash received by such holder and (ii)
such holder's tax basis in its shares of General Re Common Stock. For a
further explanation of the tax consequences of the Alternative Transaction,
see "The Transactions--Federal Income Tax Considerations of the Transactions."
On June 29, 1998, Berkshire and General Re filed a joint private letter
ruling request (the "Ruling Request") with the IRS. Each company agreed in the
Merger Agreement to use its reasonable best efforts to obtain three specified
rulings (the "Rulings") as soon as practicable. The three requested Rulings
specified in the Merger Agreement are as follows:
(i) The "351(e) Ruling": The companies requested that the IRS rule that
New Berkshire will not be an "investment company" within the meaning of
Section 351(e) of the Internal Revenue Code of 1986, as amended (the
"Code").
(ii) The "No Gain or Loss Ruling": The companies also requested that the
IRS rule that, if the Mergers qualify as an exchange under Section 351 of
the Code, no gain or loss will be recognized by New
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Berkshire or by the stockholders of Berkshire or General Re, including by
application of certain provisions of Section 368 of the Code, upon the
exchange of Berkshire Common Stock or General Re Common Stock for New
Berkshire Common Stock pursuant to the Mergers, except that gain realized
by holders of General Re Common Stock will be recognized to the extent of
any cash received in lieu of a fractional share interest in New Berkshire
Class B Common Stock.
(iii) The "368(c) Ruling": The companies also requested that the IRS rule
that New Berkshire will neither acquire "control" of Berkshire or General
Re in the Mergers nor have "control" of Berkshire or General Re immediately
after the Mergers, in both cases within the meaning of Section 368(c) of
the Code.
The purpose of the Ruling Request is to provide assurance that the Mergers
of Berkshire and General Re with subsidiaries of New Berkshire will not result
in unintended, adverse tax consequences to New Berkshire or its stockholders.
If New Berkshire were an investment company within the meaning of Section
351(e), adverse tax consequences to New Berkshire and its stockholders could
follow. Certain proposed Treasury regulations (the "Proposed Regulations")
could suggest, under certain circumstances, that New Berkshire might be such
an investment company. The Proposed Regulations were proposed in 1981 and have
never been adopted in final form, but they purport to apply to transactions
occurring after February 17, 1976. The 351(e) Ruling is intended to provide
assurance that the Proposed Regulations, even if adopted, will not result in
such adverse tax consequences.
The No Gain or Loss Ruling and the 368(c) Ruling are intended to provide
assurance that, if the Mergers qualify as tax-free exchanges under Section 351
of the Code, the Mergers will not result in unintended, adverse tax
consequences under certain provisions of Section 368 of the Code. Assuming
that the Rulings are issued, the companies' respective obligations to
consummate the Mergers are conditioned upon their receipt from their tax
counsel of legal opinions, based upon reasonably requested representation
letters and dated the Closing Date, that the Mergers will be treated as a
transfer of property to New Berkshire by the companies' respective
stockholders governed by Section 351 of the Code. For a discussion of the tax
consequences of the Mergers qualifying as exchanges under Section 351 of the
Code, see "The Transactions--Federal Income Considerations of the
Transactions".
As of the date of this Proxy Statement/Prospectus, the IRS has neither
granted nor denied any of the three Rulings.
In general, Berkshire may elect to proceed with the Alternative Transaction
(the "Alternative Election") if the IRS informs Berkshire that it will not
grant the 351(e) Ruling. However, it is possible that the United States
Treasury Department (the "Treasury Department") may withdraw or announce its
intention to withdraw the Proposed Regulations that prompted the 351(e) Ruling
request. If the IRS will not grant the 351(e) Ruling because the Treasury
Department has withdrawn or announced its intention to withdraw the Proposed
Regulations, then Berkshire may elect to proceed with the Alternative
Transaction only if the IRS also informs Berkshire that it will not grant the
368(c) Ruling. Also, Berkshire may elect to proceed with the Alternative
Transaction if the IRS neither grants nor denies the requested Rulings by
February 19, 1999. Berkshire may make the election by giving written notice to
General Re within 10 business days after the earlier of its being so informed
by the IRS or February 19, 1999. In the event Berkshire is entitled to make
the Alternative Election and does not give any written, timely notice to
General Re declining to make the Alternative Election, Berkshire will be
deemed to have made the Alternative Election, and the Alternative Transaction
will occur, subject to the conditions contained in the Merger Agreement.
Berkshire cannot make the Alternative Election if it has received notice
that the IRS has issued the 351(e) Ruling and the No Gain or Loss Ruling. If
the Treasury Department has withdrawn or announced its intention to withdraw
the Proposed Regulations that prompted the 351(e) Ruling request, Berkshire
cannot make the Alternative Election if it has received notice that the IRS
has issued either the No Gain or Loss Ruling or the 368(c) Ruling on or prior
to the date Berkshire elects to proceed with the Alternative Transaction.
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If Berkshire makes or is deemed to make the Alternative Election, then the
Alternative Transaction will be consummated, subject to the conditions
contained in the Merger Agreement. In that event, the Alternative General Re
Merger will occur and the Berkshire Merger will not occur. More specifically,
General Re will merge with, and will become, an indirect wholly owned
subsidiary of Berkshire itself rather than New Berkshire. As a result of that
merger, holders of General Re Common Stock will receive a combination of
Berkshire Common Stock (rather than New Berkshire Common Stock) and cash.
Berkshire itself will not merge with a New Berkshire subsidiary or any other
entity. Accordingly, Berkshire will remain as the ultimate holding company of
its businesses, including, after the merger, General Re. Each share of General
Re Common Stock will be converted into the right to receive, at the option of
the holder, either (A) 0.003395 of a share of Berkshire Class A Common Stock
and an amount of cash equal to 0.000105 times the Average Trading Price (as
defined in "The Transactions--Merger Consideration") of a share of Berkshire
Class A Common Stock or (B) 0.10185 of a share of Berkshire Class B Common
Stock and an amount of cash equal to 0.00315 times the Average Trading Price
of a share of Berkshire Class B Common Stock. The Berkshire Common Stock
received by General Re stockholders will have identical rights and privileges
as the New Berkshire Common Stock that General Re stockholders would have
received. The existing Berkshire Common Stock held by Berkshire stockholders
will remain outstanding and be unchanged.
If the Alternative Transaction occurs, certain other aspects of the
Transactions will also be adjusted. Specifically, because the Berkshire Merger
will not occur, there will be no effect on the any existing Berkshire stock
options. Also, Mr. Ferguson will be appointed to the Berkshire Board (rather
than the New Berkshire Board). Wherever appropriate, the rights and
obligations of New Berkshire under the Merger Agreement will become rights and
obligations of Berkshire.
Neither the failure to receive one or more of the Rulings nor the making of
the Alternative Election constitutes a basis for either party to refuse to
consummate the Transactions.
MERGER CONSIDERATION
General Re. Except for the payment of cash in lieu of fractional shares or
as stated otherwise in the event of the Alternative Transaction, at the
Effective Time, each issued and outstanding share of General Re Common Stock
(other than shares owned by General Re, Berkshire, or their respective
subsidiaries) will be converted into the right to receive from New Berkshire
either (a) 0.0035 of a share of New Berkshire Class A Common Stock or (b)
0.105 of a share of New Berkshire Class B Common Stock (the "New Berkshire
Merger Consideration"), at the option of the holder.
Notwithstanding the foregoing, in the event of the Alternative Transaction,
at the Effective Time, each issued and outstanding share of General Re Common
Stock (other than shares owned by General Re, Berkshire or their respective
subsidiaries and shares of holders who have properly exercised appraisal
rights under the DGCL) will be converted into the right to receive from
Berkshire either (a) 0.003395 of a share of Berkshire Class A Common Stock
plus an amount in cash equal to the product of 0.000105 and the Average
Trading Price of one share of Berkshire Class A Common Stock or (b) 0.10185 of
a share of Berkshire Class B Common Stock plus an amount in cash equal to the
product of 0.00315 and the Average Trading Price of one share of Berkshire
Class B Common Stock (the "Alternative Merger Consideration" and, together
with the New Berkshire Merger Consideration, the "Merger Consideration"), at
the option of the holder. The "Average Trading Price" is the average of the
high and low trading prices of Berkshire Class A Common Stock or Berkshire
Class B Common Stock, as the case may be, as reported on the New York Stock
Exchange Composite Tape for each of the five consecutive trading days ending
on the last full trading day immediately prior to the date on which the
Effective Time occurs. See "The Transactions--The Alternative Transactions"
and "The Transactions--Federal Income Tax Considerations."
All outstanding shares of General Re Preferred Stock will be called for
redemption and redeemed prior to the Effective Time. Therefore, prior to or
concurrently with the Effective Time, holders of General Re Preferred Stock
will have received the right to obtain the redemption price for their shares
of General Re Preferred Stock,
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or such holders will have become holders of General Re Common Stock by virtue
of the exercise of their right to convert the General Re Preferred Stock. Upon
such conversion, such holders will have the same rights to elect and receive
Merger Consideration as the other holders of General Re Common Stock. See "The
Transactions--Other Agreements and Transactions."
If prior to the Effective Time the outstanding shares of Berkshire Class A
or Class B Common Stock have been changed into a different number of shares or
a different class, due to any stock dividend, reclassification,
recapitalization, split or similar transaction, the Merger Consideration will
be correspondingly adjusted to the extent appropriate to reflect such changes.
Any shares of General Re Common Stock owned by General Re, Berkshire or any
of their subsidiaries, will automatically be cancelled and retired at the
Effective Time and will cease to exist, and no New Berkshire Common Stock,
Berkshire Common Stock or other consideration will be delivered in exchange
therefor.
Berkshire. Except for shares owned by Berkshire or any of its subsidiaries,
at the Effective Time, without any action on the part of any Berkshire
stockholder, each issued and outstanding share of Berkshire Class A Common
Stock will be converted into one share of New Berkshire Class A Common Stock
and each issued and outstanding share of Berkshire Class B Common Stock will
be converted into one share of New Berkshire Class B Common Stock. In the
event of the Alternative Transaction, the Berkshire Merger will not occur;
therefore no conversion of Berkshire Common Stock will occur and the
outstanding shares of Berkshire Class A and Class B Common Stock will remain
outstanding and be unchanged. See "The Transactions--The Alternative
Transaction."
OPINION OF GENERAL RE'S FINANCIAL ADVISOR
On June 19, 1998, Goldman Sachs rendered an oral opinion to the General Re
Board (subsequently confirmed in writing to the General Re Board) to the
effect that, as of such date and based upon the qualifications and assumptions
made and matters considered by Goldman Sachs described in its written opinion
dated June 19, 1998 (the "Goldman Sachs Opinion"), the Merger Consideration to
be received in the Transactions by holders of shares of General Re Common
Stock pursuant to the Merger Agreement is fair from a financial point of view
to such holders.
THE FULL TEXT OF THE GOLDMAN SACHS OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, PROCEDURES FOLLOWED AND MATTERS CONSIDERED IN, AND THE LIMITATIONS ON,
THE REVIEW UNDERTAKEN IN CONNECTION WITH THE GOLDMAN SACHS OPINION, IS
ATTACHED HERETO AS ANNEX IV AND IS INCORPORATED HEREIN BY REFERENCE.
STOCKHOLDERS OF GENERAL RE SHOULD READ THE GOLDMAN SACHS OPINION IN ITS
ENTIRETY AND CONSIDER IT CAREFULLY. THE SUMMARY OF THE GOLDMAN SACHS OPINION
SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF
THE GOLDMAN SACHS OPINION. THE GOLDMAN SACHS OPINION IS ADDRESSED TO THE BOARD
OF DIRECTORS OF GENERAL RE AND DOES NOT ADDRESS THE MERITS OF THE UNDERLYING
DECISION OF GENERAL RE TO ENGAGE IN THE TRANSACTIONS CONTEMPLATED BY THE
MERGER AGREEMENT AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER
OF GENERAL RE AS TO HOW SUCH STOCKHOLDER SHOULD VOTE WITH RESPECT TO ANY
MATTER TO BE VOTED UPON AT THE GENERAL RE MEETING.
In connection with the Goldman Sachs Opinion, Goldman Sachs reviewed, among
other things: the Merger Agreement; Annual Reports to Shareholders and Annual
Reports on Form 10-K for the five years ended December 31, 1997 of General Re
and Berkshire, certain interim reports to shareholders and Quarterly Reports
on Form 10-Q of General Re and Berkshire; Statutory Annual Statements filed by
certain insurance subsidiaries of General Re and Berkshire with the Insurance
Departments of the States under the laws of which they are respectively
organized for the five years ended December 31, 1997; certain interim
statutory financial information
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filed by such subsidiaries with such Insurance Departments; certain other
communications from General Re and Berkshire to their respective shareholders;
and certain internal financial analyses and forecasts for General Re prepared
by its management. Goldman Sachs also held discussions with members of the
senior management of General Re and Berkshire regarding the strategic,
financial and operating rationale for, and expected benefits of, the
transactions contemplated by the Merger Agreement and the past and current
business operations, financial condition and future prospects of their
respective companies. In addition, Goldman Sachs reviewed the reported price
and trading activity for shares of General Re Common Stock and shares of
Berkshire Common Stock, compared certain financial and stock market
information for General Re and Berkshire with similar information for certain
other companies the securities of which are publicly traded, reviewed the
financial terms of certain recent business combinations in the reinsurance
industry specifically and in other industries generally and performed such
other studies and analyses as Goldman Sachs considered appropriate.
In preparing the Goldman Sachs Opinion, Goldman Sachs relied upon the
accuracy and completeness of all of the financial and other information
reviewed by Goldman Sachs and assumed such accuracy and completeness for
purposes of rendering its opinion. In addition, Goldman Sachs noted that they
are not actuaries and that the services of Goldman Sachs did not include
actuarial determinations or evaluations or an attempt to evaluate actuarial
assumptions. In addition, Goldman Sachs noted that they did not make an
independent evaluation or appraisal of the assets and liabilities (including
the loss and loss adjustment expense reserves) of General Re or Berkshire or
any of their subsidiaries and was not furnished with any such evaluation or
appraisal. In that regard, Goldman Sachs made no analyses of, and expressed no
opinion as to, the adequacy of the loss and loss adjustment expense reserves
of General Re or Berkshire. Goldman Sachs noted that it was advised by the
management of Berkshire that Berkshire does not prepare financial forecasts,
and that Goldman Sachs' review of Berkshire was limited to publicly available
information and discussions with the management of Berkshire. Goldman Sachs
noted in the Goldman Sachs Opinion that it was not requested to, and did not,
solicit from third parties indications of interest in acquiring all or part of
General Re or in engaging in a business combination or any other strategic
transaction with General Re.
Goldman Sachs was not requested to make, and did not make, a recommendation
as to whether any holder of General Re Common Stock who is entitled to make a
Class A Election should make such a Class A Election. Goldman Sachs noted that
it was expected that the General Re Merger will be tax-free to the holders of
General Re Common Stock but that, in the event that the Alternative
Transaction occurs, holders of General Re Common Stock will recognize gain or
loss for federal income tax purposes. Goldman Sachs noted that in rendering
its opinion Goldman Sachs did not take into account the particular tax
consequences of the General Re Merger or the Alternative Transaction to the
holders of General Re Common Stock. The Goldman Sachs Opinion was necessarily
based upon financial, economic, market and other conditions as they existed
and could be evaluated on the date of such opinion.
The following is a summary of certain of the financial analyses reviewed by
Goldman Sachs with the General Re Board on June 19, 1998 and used by Goldman
Sachs in connection with providing its oral opinion to the General Re Board on
June 19, 1998 and in providing the written Goldman Sachs Opinion.
Summary of Terms of Proposed Transaction. Goldman Sachs reviewed the terms
of the proposed Transactions, including the exchange ratios for the shares of
General Re Common Stock in the Transactions, the consideration per share of
General Re Common Stock and the aggregate consideration. Utilizing a price of
$78,500 (the closing price on the New York Stock Exchange of the Berkshire
Class A Common Stock on June 17, 1998) (the "Berkshire June 17 Closing Price")
and applying an exchange ratio equal to 0.0035 shares of New Berkshire Class A
Common Stock for each share of General Re Common Stock, Goldman Sachs
calculated a consideration per share of General Re Common Stock equal to
$274.75 (the "Per Share Consideration") and an aggregate consideration equal
to approximately $21.7 billion (the "Aggregate Consideration").
Transaction Multiples. Utilizing a Per Share Consideration equal to $274.75,
Goldman Sachs analyzed the consideration to be paid per share of General Re
Common Stock in relation to (i) $225.63 (the closing price on
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the New York Stock Exchange of General Re Common Stock on June 17, 1998) (the
"General Re June 17 Closing Price"), (ii) $228.06 (the latest twelve months'
("LTM") high closing price on the New York Stock Exchange of General Re Common
Stock (the "LTM High")), (iii) $182.00 (the LTM low closing price on the New
York Stock Exchange of General Re Common Stock (the "LTM Low")), (iv) the 1997
actual earnings per share ("EPS") of General Re Common Stock, (v) the LTM EPS
of General Re Common Stock (the "LTM EPS"), (vi) the estimated 1998 EPS for
General Re Common Stock based on median 1998 earnings estimates for General Re
reported by the Institutional Brokers Estimates System ("IBES") (the "1998
IBES EPS Estimate"), (vii) the estimated 1999 EPS for General Re Common Stock
based on median 1999 earnings estimates for General Re reported by IBES (the
"1999 IBES EPS Estimate"), (viii) General Re's stated shareholders' equity
(including and excluding the effect of Statement of Financial Accounting
Standards No. 115 ("FAS 115")), and (ix) General Re's tangible shareholders'
equity (including and excluding the effect of FAS 115). All EPS calculations
exclude realized gains on investments taxed at 35%, and all shareholders'
equity calculations are as of March 31, 1998, include the proceeds from the
exercise of outstanding stock options and are on a fully-diluted basis.
Such analysis indicated that the Per Share Consideration represented: (i) a
21.8% premium to the General Re June 17 Closing Price, (ii) a 20.5% premium to
the LTM High, (iii) a 51.0% premium to the LTM Low, (iv) 23.4x the actual 1997
EPS of General Re Common Stock, (v) 23.1x the LTM EPS, (vi) 21.3x the 1998
IBES EPS Estimate, (vii) 19.5x the 1999 IBES EPS Estimate, (viii) 2.7x General
Re's stated shareholders' equity (including the effect of FAS 115), (ix) 3.0x
General Re's tangible shareholders' equity (including the effect of FAS 115),
(x) 3.9x General Re's stated shareholders' equity (excluding the effect of FAS
115), and (xi) 4.7x General Re's tangible shareholders' equity (excluding the
effect of FAS 115).
Comparable Public Company Analysis. Goldman Sachs reviewed and compared
certain financial information relating to General Re to corresponding
financial information, ratios and public market multiples for two groups of
selected publicly traded companies in the insurance industry considered by
Goldman Sachs to be reasonably comparable to General Re for purposes of this
analysis. Such comparable companies consisted of: (i) Transatlantic Holdings,
Inc., Everest Reinsurance Holdings, NAC Re Corporation, Trenwick Group Inc.
and Chartwell Re Corporation (the "U.S. Reinsurance Companies"), and (ii)
American International Group Inc., Allstate Corporation, Travelers Property
Casualty Corporation, Hartford Financial Services Group Inc., The St. Paul
Companies, Inc., Progressive Corporation and SAFECO Corporation (the "Property
and Casualty Companies", and together with the U.S. Reinsurance Companies, the
"Comparable Companies"). Goldman Sachs calculated and compared various
financial multiples and ratios for General Re with those of the Comparable
Companies using the respective closing price per common share on June 17,
1998. The multiples and ratios for General Re and the Comparable Companies
were based on the most recent publicly available information and on median
IBES estimates.
With respect to the Comparable Companies and General Re, Goldman Sachs
considered, among other multiples and ratios, (i) the June 17, 1998 closing
price as a percentage of the 52 week high, (ii) the price/earnings ("P/E")
multiple based on 1998 and 1999 IBES estimates, (iii) the IBES estimate of
five-year EPS growth rate, (iv) the market price to adjusted book value
(excluding the effect of FAS 115) multiple, (v) the return on average common
equity ("ROE") based on IBES 1998 estimates (calculated as IBES 1998 estimates
of operating earnings divided by common equity excluding FAS 115 adjustments),
(vi) the dividend yield, (vii) the debt to capital ratio, and (viii) the net
premiums written to statutory surplus ratio (based on LTM net premiums
written).
Goldman Sachs' analysis indicated that (i) the June 17, 1998 closing price
as a percentage of the 52 week high ranged from 80% to 96% with a median of
87% for the U.S. Reinsurance Companies, and from 80% to 98% with a median of
91% for the Property and Casualty Companies, as compared to 99% for General
Re, (ii) 1998 P/E multiples ranged from 9.7x to 14.5x with a median of 12.0x
for the U.S. Reinsurance Companies, and from 13.0x to 26.7x with a median of
15.1x for the Property and Casualty Companies, as compared to 17.5x for
General Re, (iii) 1999 P/E multiples ranged from 8.9x to 13.4x with a median
of 10.7x for the U.S. Reinsurance Companies, and from 11.9x to 23.3x with a
median of 13.6x for the Property and Casualty
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Companies, as compared to 16.0x for General Re, (iv) five year estimated
growth rates ranged from 10.0% to 13.0% with a median of 11.3% for the U.S.
Reinsurance Companies, and from 10.0% to 15.0% with a median of 12.0% for the
Property and Casualty Companies, as compared to 12.0% for General Re, (v) the
market price to adjusted book value multiple ranged from 1.1x to 2.0x with a
median of 1.5x for the U.S. Reinsurance Companies, and from 1.5x to 5.1x with
a median of 2.8x for the Property and Casualty Companies, as compared to 3.1x
for General Re, (vi) ROE ranged from 10.8% to 14.1% with a median of 11.4% for
the U.S. Reinsurance Companies, and from 10.1% to 19.2% with a median of 17.1%
for the Property and Casualty Companies, as compared to 17.7% for General Re,
(vii) dividend yield ranged from 0.5% to 2.7% with a median of 0.6% for the
U.S. Reinsurance Companies, and from 0.2% to 3.1% with a median of 1.2% for
the Property and Casualty Companies, as compared to 1.0% for General Re,
(viii) the debt to capital ratio ranged from 0.0% to 32.4% with a median of
24.6% for the U.S. Reinsurance Companies, and from 10.1% to 41.4% with a
median of 21.3% for the Property and Casualty Companies, as compared to 4.7%
for General Re, and (ix) the net premiums written to statutory surplus ratio
ranged from 0.6x to 1.1x with a median of 1.0x for the U.S. Reinsurance
Companies, and from 0.6x to 2.9x with a median of 0.9x for the Property and
Casualty Companies, as compared to 0.5x for General Re's U. S. operations.
Comparison of Total Annual Returns. Goldman Sachs reviewed and compared the
Total Annual Return (defined as the annualized appreciation of common stock
price plus dividends received) with respect to each of General Re, Berkshire,
American International Group Inc., Progressive Corporation and the S&P 500
Index over (to the extent applicable) the one, three, five, ten, fifteen and
twenty year periods ending June 17, 1998. Goldman Sachs' analysis indicated
that (i) the Total Annual Return on the General Re Common Stock was 22.54%,
21.15%, 17.13%, 17.32% and 16.12% over the one, three, five, ten and fifteen
year periods, respectively, ending June 17, 1998, (ii) the Total Annual Return
on the Berkshire Class A Common Stock was 69.18%, 52.11%, 37.50%, 34.85%,
44.62% and 35.51% over the one, three, five, ten, fifteen and twenty year
periods, respectively, ending June 17, 1998, (iii) the Total Annual Return on
the common stock of American International Group Inc. was 38.97%, 38.62%,
28.93%, 25.94% and 20.79% over the one, three, five, ten and fifteen year
periods, respectively, ending June 17, 1998, (iv) the Total Annual Return on
the common stock of Progressive Corporation was 70.28%, 56.25%, 37.43% and
31.08% over the one, three, five and ten year periods, respectively, ending
June 17, 1998, and (v) the Total Annual Return of the S&P 500 Index was
23.78%, 27.04%, 19.81%, 15.13%, 13.34% and 12.92% over the one, three, five,
ten, fifteen and twenty year periods, respectively, ending June 17, 1998.
Berkshire Historical Outperformance. Goldman Sachs reviewed and compared the
average amount, if any, by which the percentage increase in the book value and
price per share of the Berkshire Class A Common Stock exceeded the percentage
increase in the S&P 500 Index over the three month period ending March 31,
1998 and over the one, three, five, ten, fifteen and twenty year periods
ending December 31, 1997. Goldman Sachs' analysis indicated that (i) the
percentage increase in the S&P 500 Index exceeded the percentage increase in
the book value per share of the Berkshire Class A Common Stock by 3.6% over
the three month period ending March 31, 1998, (ii) the percentage increase in
the price per share of the Berkshire Class A Common Stock exceeded the
percentage increase in the S&P 500 Index by 32.6% over the three month period
ending March 31, 1998, (iii) the annual percentage increase in the book value
per share of the Berkshire Class A Common Stock exceeded the annual percentage
increase in the S&P 500 Index by 0.7%, 5.1%, 6.6%, 8.2%, 9.2% and 10.9% over
the one, three, five, ten, fifteen and twenty year periods, respectively,
ending December 31, 1997, (iv) the annual percentage increase in the price per
share of the Berkshire Class A Common Stock exceeded the annual percentage
increase in the S&P 500 Index by 1.5%, 11.1%, 13.5%, 13.8% and 17.1% over the
one, five, ten, fifteen and twenty year periods, respectively, ending December
31, 1997, and (v) the annual percentage increase in the S&P 500 Index exceeded
the annual percentage increase in the price per share of the Berkshire Class A
Common Stock by 0.1% over the three year period ending December 31, 1997.
Present Value of Consideration Received Analysis. Goldman Sachs noted that
it is the opinion of certain commentators that Berkshire's stock has from time
to time traded above the intrinsic value per share of Berkshire, reflecting a
"Berkshire Premium", and that the amount of any Berkshire Premium has varied
over
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time. In its analyses, Goldman Sachs did not estimate the intrinsic value per
share of General Re or Berkshire, or the amount or expected future duration,
if any, of any Berkshire Premium.
To help assess the potential effect of a Berkshire Premium, Goldman Sachs
performed an analysis of the implied present value of the consideration to be
received in the Transactions per share of General Re Common Stock over periods
of three, five, seven and ten years as derived on the basis of the Aggregate
Pro Forma Value (as defined below) of the Transactions, utilizing a discount
rate of 10%, a current aggregate intrinsic value of the General Re Common
Stock equal to the Aggregate Consideration (the "Aggregate General Re Value")
and a range of assumed intrinsic values per share of Berkshire Class A Common
Stock (each such intrinsic value per share being a "Berkshire Intrinsic Value
Per Share"). Goldman Sachs derived a range of Berkshire Intrinsic Values Per
Share calculated by reference to the Berkshire June 17 Closing Price, assuming
that such price included a Berkshire Premium equal to 0%, 5%, 15%, 25%, 35%
and 45% of the Berkshire Intrinsic Value Per Share. In order to calculate the
"Aggregate Pro Forma Value" of the Transactions, Goldman Sachs multiplied each
Berkshire Intrinsic Value Per Share by the number of issued and outstanding
shares of Berkshire Common Stock (as adjusted to take into account the
economic relationship between the Berkshire Class A Common Stock and the
Berkshire Class B Common Stock), and added to each resulting amount the
Aggregate General Re Value. Goldman Sachs applied three assumed growth rates
to the range of Aggregate Pro Forma Values obtained. Such growth rates were
characterized by Goldman Sachs as percentage amounts (7%, 5% and 3%) (each
such percentage amount being a "Berkshire Outperformance Percentage") by which
the growth rate of a range of Aggregate Pro Forma Values exceeds an assumed
S&P Index annual growth rate of 10%.
Goldman Sachs analysis indicated that (i) over a ten year period, the
implied present value of the consideration to be received per share of General
Re Common Stock was greater than the Per Share Consideration in each scenario
other than when the Berkshire Outperformance Percentage was equal to 3% and
the Berkshire Premium was equal to 45%, (ii) over a seven year period, the
implied present value of the consideration to be received per share of General
Re Common Stock was greater than the Per Share Consideration in each scenario
other than when the Berkshire Outperformance Percentage was equal to 3% and
the Berkshire Premium was equal to 35% and 45%, (iii) over a five year period,
the implied present value of the consideration to be received per share of
General Re Common Stock was greater than the Per Share Consideration in each
scenario other than (x) when the Berkshire Outperformance Percentage was equal
to 3% and the Berkshire Premium was equal to 25%, 35% and 45% and (y) when the
Berkshire Outperformance Percentage was equal to 5% and the Berkshire Premium
was equal to 35% and 45%, and (iv) over a three year period, the implied
present value of the consideration to be received per share of General Re
Common Stock was greater than the Per Share Consideration in each scenario
other than (x) when the Berkshire Outperformance Percentage was equal to 3%
and the Berkshire Premium was equal to 15%, 25%, 35% and 45%, (y) when the
Berkshire Outperformance Percentage was equal to 5% and the Berkshire Premium
was equal to 25%, 35% and 45%, and (z) when the Berkshire Outperformance
Percentage was equal to 7% and the Berkshire Premium was equal to 35% and 45%.
Goldman Sachs noted that if the Berkshire Common Stock traded with a Berkshire
Premium in the future, the number of instances where the Per Share
Consideration was less than the implied present value of the consideration to
be received per share of General Re Common Stock would be reduced and in some
cases eliminated.
Pro Forma Merger Analysis. Goldman Sachs analyzed the estimated pro forma
effect of the Transactions on the EPS of General Re and Berkshire on both a
reported income and a comprehensive income basis. Goldman Sachs noted that
comprehensive income is equal to net income plus after-tax unrealized
appreciation in investment portfolio and foreign translation adjustments.
Goldman Sachs' analysis was based on, among other things, the following
assumptions: (i) approximately $14.5 billion of goodwill amortized over 40
years, and (ii) an effective capital gains tax rate of 35%. In addition, in
its analysis, Goldman Sachs excluded the effects of any cost savings and
synergies. In connection with its analysis of estimated pro forma EPS on a
reported income basis, Goldman Sachs utilized (i) with respect to General Re,
the 1998 IBES EPS Estimate and the 1999 IBES EPS Estimate, and (ii) with
respect to Berkshire, EPS estimates for Berkshire as calculated by Goldman
Sachs based on historical net operating income of Berkshire (excluding all
realized investment gains), as adjusted for certain intervening acquisitions
by Berkshire, and an assumed annual growth rate of 12.5%. In connection with
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its analysis of estimated pro forma EPS on a comprehensive income basis,
Goldman Sachs utilized (i) with respect to General Re, the 1998 IBES EPS
Estimate and the 1999 IBES EPS Estimate and an assumed rate of appreciation of
General Re's equity portfolio equal to 10% per annum, and (ii) with respect to
Berkshire, EPS estimates for Berkshire as calculated by Goldman Sachs based on
historical net operating income of Berkshire, an assumed annual growth rate of
12.5% per annum and an assumed rate of appreciation of Berkshire's equity
portfolio equal to 15% per annum.
Goldman Sachs' analysis indicated that (i) on a reported EPS basis, the
proposed Transactions would be highly dilutive to holders of General Re Common
Stock and substantially accretive to holders of Berkshire Common Stock in 1998
and 1999, and (ii) on a comprehensive EPS basis, the proposed Transactions
would be substantially dilutive to holders of General Re Common Stock and
mildly dilutive (1.2% and 1.3%, respectively) to holders of Berkshire Common
Stock in 1998 and 1999. Goldman Sachs noted that, in view of the trading
characteristics of the Berkshire Common Stock (particularly the high P/E
multiples at which the Berkshire Common Stock trades), an earnings-based
analysis does not provide a meaningful measure or indication of the estimated
pro forma effect of the Transactions. Goldman Sachs noted, however, that the
analysis of the comprehensive EPS effect of the Transactions on the holders of
Berkshire Common Stock was the most relevant earnings-based means by which to
measure the estimated pro forma effect of the Transactions.
Pro Forma Contribution and Ownership Analysis. Goldman Sachs analyzed and
compared the respective contribution of net income (including realized gains
on investments), operating income (excluding realized gains on investments
based upon an assumed 35% tax rate), comprehensive income (net income plus
after-tax unrealized appreciation in investment portfolio and foreign
translation adjustments) and book value of General Re and Berkshire to the
combined entity resulting from the Transactions. Based upon figures for the
twelve months ended March 31, 1998 or as of March 31, 1998, as the case may
be, Goldman Sachs noted that the contribution of General Re to the net income,
operating income, comprehensive income and book value of the combined entity
resulting from the Transactions would be 29.9%, 45.2%, 16.8% and 19.4%,
respectively.
Goldman Sachs performed an analysis of the pro forma equity ownership of the
combined entity resulting from the Transactions of the holders of General Re
Common Stock. Goldmans Sachs' analysis indicated that holders of General Re
Common Stock would own approximately 18.2% of the equity of the combined
entity resulting from the Transactions.
The summary set forth above does not purport to be a complete description of
the analyses performed by Goldman Sachs. The preparation of a fairness opinion
is a complex process and is not susceptible to partial analysis or summary
description. Selecting portions of the analyses or the summary set forth
above, without considering the analyses as a whole, could create an incomplete
view of the processes underlying the Goldman Sachs Opinion. In arriving at its
fairness determination, Goldman Sachs considered the results of all such
analyses and did not assign relative weights to any of the analyses. No public
company used in the above analyses as a comparison is completely comparable to
General Re or Berkshire. The analyses were prepared solely for purposes of
Goldman Sachs providing the Goldman Sachs Opinion to the General Re Board and
do not purport to be appraisals or necessarily reflect the prices at which
businesses or securities actually may be sold or may trade in the future.
Analyses based upon forecasts of future results are not necessarily indicative
of actual future results, which may be significantly more or less favorable
than suggested by such analyses. Because such analyses are inherently subject
to uncertainty, being based upon numerous factors or events beyond the control
of the parties or their respective advisors, none of General Re, Berkshire,
Goldman Sachs or any other person assumes responsibility if future results are
materially different from those forecast. As described above, the Goldman
Sachs Opinion delivered to the General Re Board was one of many factors taken
into consideration by the General Re Board in making its determination to
approve the Merger Agreement.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Goldman Sachs is
familiar with General Re, having acted as its financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Merger
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Agreement. Goldman Sachs is familiar with Berkshire, having acted in 1996 as
co-manager of Berkshire's public offering of $500 million principal amount of
1.00% Senior Exchangeable Notes due December 2, 2001. In addition, on July 22,
1998, Berkshire agreed to acquire Executive Jet, Inc. An investment fund
affiliated with Goldman Sachs (and in which Goldman Sachs has a financial
interest) is an approximately 27% stockholder of Executive Jet, Inc. In
connection with the transaction, Goldman Sachs also acted as the financial
advisor to, and will receive an advisory fee from, Executive Jet, Inc.
Goldman Sachs provides a full range of financial, advisory and brokerage
services and in the course of its normal trading activities may from time to
time effect transactions and hold positions in the securities or options on
securities of General Re and/or Berkshire for its own account and/or for the
account of customers.
Pursuant to a letter agreement (the "Goldman Sachs Engagement Letter"),
General Re engaged Goldman Sachs as its financial advisor in connection with
the possible sale of all or a portion of General Re to Berkshire. Pursuant to
the terms of the Goldman Sachs Engagement Letter, General Re has agreed to pay
to Goldman Sachs a transaction fee of 0.145% of the aggregate consideration
paid in a transaction in which the purchase of 50% or more of the outstanding
shares of General Re Common Stock is accomplished. Any such transaction fee is
payable to Goldman Sachs in cash in accordance with the following schedule:
(i) $3 million upon execution of the agreement with respect to such
transaction, and (ii) the remainder upon consummation of any such transaction.
General Re also has agreed to reimburse Goldman Sachs for its reasonable out-
of-pocket expenses, including all fees and disbursements of counsel, and to
indemnify Goldman Sachs and certain related persons against certain
liabilities in connection with their engagement, including certain liabilities
under the federal securities laws.
PROCEDURES FOR ELECTION OF MERGER CONSIDERATION AND SURRENDER OF GENERAL RE
COMMON STOCK CERTIFICATES; FRACTIONAL SHARES
General Re. Each holder of an outstanding certificate which, immediately
prior to the Effective Time, represented shares of General Re Common Stock may
elect the aggregate number of shares of General Re Common Stock represented by
the certificate(s) surrendered therewith to be converted into the right to
receive shares of New Berkshire Class A Common Stock (or, if the Alternative
Transaction occurs, Berkshire Class A Common Stock and cash) (a "Class A
Election") . All shares of General Re Common Stock represented by such
certificate for which a Class A Election has not been effectively made shall
be converted into the right to receive New Berkshire Class B Common Stock (or,
if the Alternative Transaction occurs, Berkshire Class B Common Stock and
cash).
Shares of New Berkshire Class A Common Stock and New Berkshire Class B
Common Stock will have different voting rights and shares of New Berkshire
Class B Common Stock will not be convertible into shares of New Berkshire
Class A Common Stock, exactly as is the case with the existing Berkshire Class
A and Class B Common Stock. In addition, stockholders of record of New
Berkshire Class A Common Stock may designate charitable contributions to be
made by the corporation. In 1997, stockholders of record of Berkshire Class A
Common Stock as of August 31, 1997 were entitled to designate $16 per share,
an amount that is expected to increase in the future. It is anticipated that
this program will continue in the future for stockholders of record of Class A
Common Stock. Shares of Class B Common Stock do not participate in this
program. Accordingly, General Re stockholders who receive shares of New
Berkshire or Berkshire Class B Common Stock will not be entitled to
participate in this program with respect to such shares. See "Certain Risk
Factors and Investment Considerations" and "Description of New Berkshire
Capital Stock."
No certificates or scrip representing fractional shares of New Berkshire or
Berkshire Common Stock will be issued upon the surrender for exchange of
certificates representing shares of General Re Common Stock, and such
fractional share interests will not entitle the owner thereof to vote or to
any rights as a stockholder. Each holder of shares of General Re Common Stock
exchanged pursuant to the General Re Merger who would have otherwise been
entitled to receive a fraction of a share of Class A Common Stock will
receive, in lieu thereof, the number of whole shares of Class B Common Stock
determined by multiplying such fraction by 30. After
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application of the procedure described in the previous sentence, each holder
of shares of General Re Common Stock exchanged pursuant to the General Re
Merger who would have otherwise been entitled to receive a fraction of a share
of Class B Common Stock will receive, in lieu thereof, a cash payment (without
interest) equal to the product of (x) such fraction and (y) the Average
Trading Price of Berkshire Class B Common Stock.
The Exchange Agent is BankBoston, N.A., whose address is c/o Boston
Equiserve 150 Royall Street, Canton, Massachusetts 02021.
In order to receive the Merger Consideration, a General Re stockholder must
surrender to the Exchange Agent the certificate or certificates which, prior
to the Effective Time, represented outstanding shares of General Re Common
Stock. As soon as practicable after the Effective Time, the Exchange Agent
will send to each such stockholder a letter of transmittal and instructions
for use in effecting the Class A Election, if desired, and the surrender of
certificates. The Exchange Agent will accept such certificates upon compliance
with such reasonable terms and conditions as the Exchange Agent may impose to
effect an orderly exchange thereof in accordance with normal exchange
practices.
After the Effective Time of the Merger, there will be no further transfer on
the records of General Re or its transfer agent of certificates representing
shares of General Re Common Stock and if such certificates are presented to
General Re for transfer, they will be cancelled against delivery of the Merger
Consideration pursuant to the Merger Agreement. Until surrendered in
accordance with the Merger Agreement, each certificate for shares of General
Re Common Stock will be deemed at any time after the Effective Time of the
Mergers to represent only the right to receive upon such surrender the Merger
Consideration pursuant to the Merger Agreement. No interest will be paid or
will accrue on any cash payable as consideration in the Mergers or in lieu of
any fractional shares of New Berkshire or Berkshire Common Stock.
No dividends or other distribution with respect to New Berkshire or
Berkshire Common Stock with a record date after the Effective Time of the
Mergers will be paid to the holder of any unsurrendered certificate for shares
of General Re Common Stock with respect to the shares of New Berkshire or
Berkshire Common Stock represented thereby and no payment of cash as Merger
Consideration, in lieu of fractional shares or for dividends or distributions
on New Berkshire or Berkshire Common Stock will be paid to any such holder
until the surrender of such certificate in accordance with the Merger
Agreement. Subject to the effect of applicable laws, following surrender of
any such certificate, there will be paid to the holder of the certificate
representing whole shares of New Berkshire or Berkshire Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender the
amount of any cash payable in lieu of a fractional share of Class B Common
Stock to which such holder is entitled pursuant to the Merger Agreement and
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to whole shares of such stock,
and (ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to such
surrender and a payment date subsequent to such surrender payable with respect
to whole shares of such stock.
Berkshire. In no event will holders of shares of Berkshire Common Stock be
required to exchange their stock certificates. At the Effective Time, each
certificate representing shares of Berkshire Class A or Class B Common Stock
will, without any action on the part of the holder thereof, be deemed to
represent a certificate for an equal number of shares of New Berkshire Class A
or Class B Common Stock, respectively. In the event of the Alternative
Transaction, there will be no change, deemed or otherwise, with respect to
Berkshire Common Stock. HOLDERS OF BERKSHIRE COMMON STOCK SHOULD NOT SEND ANY
CERTIFICATES REPRESENTING BERKSHIRE COMMON STOCK WITH THE ENCLOSED PROXY CARD
OR TO THE EXCHANGE AGENT.
STOCK OPTION AGREEMENT
In connection with the Merger Agreement, Berkshire and General Re entered
into the Stock Option Agreement. The following description of the Stock Option
Agreement does not purport to be complete and is qualified in its entirety by
reference to the Stock Option Agreement, a copy of which is attached as Annex
II to this Joint Proxy Statement/Prospectus. Pursuant to the Stock Option
Agreement, General Re granted Berkshire
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an irrevocable option (the "Option") to purchase up to 15,000,000 shares of
General Re Common Stock at a cash purchase price equal to $283.71 per share
(the "Option Purchase Price"). The Option may be exercised by Berkshire, in
whole or in part, at any time, or from time to time, following (but not prior
to) the occurrence of one of the Triggering Events (as defined below) and
prior to the termination of the Option in accordance with the terms of the
Stock Option Agreement.
The Stock Option Agreement provides that in the event of any change in the
number of issued and outstanding shares of General Re Common Stock by reason
of any stock dividend, stock split, split-up, recapitalization, reorganization
or other change in the corporate or capital structure of General Re, the
number and/or kind of General Re shares subject to the Option and the purchase
price per General Re share will be appropriately adjusted to restore Berkshire
to its rights, including its right to purchase shares of General Re Common
Stock representing 19.9% of the capital stock of General Re entitled to vote
generally for the election of the directors which is issued and outstanding
immediately prior to the exercise of the Option.
A "Triggering Event" occurs when (a) any person (other than Berkshire or any
of its subsidiaries) has acquired beneficial ownership (as such term is
defined in Rule 13d-3 under the Securities Exchange Act of 1934 (the "Exchange
Act")) or the right to acquire beneficial ownership of, or any "group" (as
such term is defined under the Exchange Act) has been formed which
beneficially owns or has the right to acquire beneficial ownership of, General
Re Common Stock aggregating 20 percent or more of the then outstanding General
Re Common Stock; (b) General Re shall have terminated the Merger Agreement to
enter into an agreement for a Superior Proposal (as defined under "Certain
Provisions of the Merger Agreement--No Solicitation"); (c) a Takeover Proposal
(as defined under "Certain Provisions of the Merger Agreement--No
Solicitation") shall have been made to General Re or any of its subsidiaries
or any of its stockholders or any person shall have publicly announced an
intention (whether or not conditional) to make a Takeover Proposal with
respect to General Re or any of its subsidiaries, and thereafter the Merger
Agreement shall have been terminated by either Berkshire or General Re because
of the failure to obtain the required approval of the stockholders of General
Re, and within 18 months of the date of such termination General Re entered
into any Third Party Acquisition Agreement (as defined under "Certain
Provisions of the Merger Agreement--No Solicitation"), or the Merger Agreement
shall have been terminated by Berkshire because (A) General Re withdrew,
modified or amended in any respect adverse to Berkshire or New Berkshire its
approval or recommendation of the Merger Agreement or the General Re
Transactions, recommended any Takeover Proposal from a person other than
Berkshire or resolved to do any of the foregoing, or (B) General Re, in
response to a Superior Proposal, furnished information or participated in
discussion as permitted by the Merger Agreement, and such discussions,
directly or through agents or representatives, continued for more than 10
business days after the receipt of such Superior Proposal, or a Takeover
Proposal was publicly disclosed commenced or was publicly proposed or
communicated to General Re and which contained a proposal as to price (without
regard to whether such proposal specified a specific price or a range of
potential prices) and General Re did not reject such proposal within 10
business days of its receipt or, if sooner, the date its existence first
became publicly disclosed, and, in any event described in this clause (B),
within 18 months of the date of such termination General Re entered into any
Third Party Acquisition Agreement.
Pursuant to the Stock Option Agreement, at any time the Option is
exercisable, Berkshire may elect, by sending a written notice to General Re
(the "Cash Exercise Notice"), in lieu of exercising the Option for shares of
General Re Common Stock, to have General Re pay cash in an amount equal to the
Spread (as defined below) multiplied by all or such portion of the General Re
shares subject to the Option as Berkshire specifies. The term "Spread" is
defined in the Stock Option Agreement as the excess, if any, over the Option
Purchase Price of the higher of (i) if applicable, the highest price per share
of General Re Common Stock paid or proposed to be paid in cash or property by
any person pursuant to any Takeover Proposal or (ii) the closing price of the
shares of General Re Common Stock on the NYSE Composite Tape on the last
trading day immediately prior to the date of the Cash Exercise Notice (the
"Closing Price").
Pursuant to the terms of the Stock Option Agreement, General Re's
obligations to deliver General Re shares upon exercise of the Option is
subject only to the conditions that: (a) no preliminary or permanent
injunction or
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other order issued by any federal or state court of competent jurisdiction in
the United States prohibiting the delivery of the General Re shares is in
effect; (b) any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") shall have
expired or shall have been terminated; (c) any other consent, approval, order,
notification, or authorization, the failure of which to obtain or make would
make the issuance of the General Re shares illegal, shall have been obtained
or made and be in full force and effect; and (d) a Triggering Event shall have
occurred.
The Stock Option Agreement provides that, if within 18 months after the date
the Merger Agreement was terminated pursuant to the terms thereof (the "Merger
Termination Date"), neither Berkshire nor any other person has acquired more
than fifty percent (excluding the General Re shares purchased pursuant to the
Option) of the outstanding General Re Common Stock, then General Re has the
right to purchase (the "Repurchase Right") all, but not less than all, of the
General Re shares acquired upon exercise of the Option of which Berkshire is
the beneficial owner on the date General Re gives written notice of its
intention to exercise the Repurchase Right at the greater of (a) the Option
Purchase Price or (b) the average of the last sales prices for shares of
General Re Common Stock on the thirty trading days ending on the date General
Re gives written notice of its intention to exercise the Repurchase Right. If
General Re does not exercise the Repurchase Right within thirty days following
the date the Repurchase Right becomes exercisable, the Repurchase Right
expires and cannot be exercised.
The Stock Option Agreement also provides that at any time prior to the date
that is 18 months after the Merger Termination Date, Berkshire will have the
right to sell (the "Sale Right") to General Re all, but not less than all, of
the General Re shares acquired upon exercise of the Option of which Berkshire
is the beneficial owner on the date Berkshire gives written notice of its
intention to exercise the Sale Right at the greater of (a) the Option Purchase
Price, or (b) the average of the last sales prices for shares of General Re
Common Stock on the 30 trading days ending on the date Berkshire gives written
notice of its intention to exercise the Sale Right. If Berkshire does not
exercise the Sale Right within thirty days following the date the Sale Right
becomes exercisable, the Sale Right expires and cannot be exercised.
The Stock Option Agreement provides that the right to exercise the Option
will terminate at the earliest of (a) the Effective Time, (b) the date 120
days after the Option first becomes exercisable (if the Option is not
previously exercised) and (c) if not then exercisable, thirty days after
termination of the Merger Agreement in accordance with its terms (the "Option
Termination Date") provided, if the Option cannot be exercised or the General
Re shares cannot be delivered because (a) an injunction or other order issued
by a federal or state court of competent jurisdiction in the U.S. prohibits
the delivery of the General Re shares, (b) the waiting period under the HSR
Act has not expired or been terminated or (c) any consent, approval, order,
notification, or authorization, the failure of which to obtain or make would
make the issuance of the General Re shares illegal, has not been obtained or
made and is in full force and effect, the Option Termination Date will be
extended until 30 days after such impediment to exercise or delivery has been
removed.
The Stock Option Agreement provides that in no event will Berkshire's Total
Profit (as defined below) exceed $600 million and, if it otherwise would
exceed such amount, Berkshire will repay such excess amount to General Re in
cash (or the purchase price of the Repurchase Right or the Sale Right, as
applicable, will be reduced) so that Berkshire's Total Profit will not exceed
$600 million after taking into account the foregoing actions.
The Stock Option Agreement further provides that the Option may not be
exercised for a number of General Re Shares as would, as of the date of the
Stock Exercise Notice (as defined in the Stock Option Agreement), result in a
Notional Total Profit (as defined below) of more than $600 million and, if
exercise of the Option otherwise would exceed such amount, Berkshire, at its
discretion, may increase the Option Purchase Price for that number of shares
of General Re Common Stock set forth in the Stock Exercise Notice so that the
Notional Total Profit will not exceed $600 million. The Stock Option Agreement
provides that this restriction will not restrict any exercise of the Option
permitted on any subsequent date at the Option Purchase Price.
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The term "Total Profit" is defined in the Stock Option Agreement as the
aggregate amount (before taxes) of the following: (a) (i) the amount of cash
received by Berkshire as the Termination Fee (see "Certain Provisions of The
Merger Agreement--Termination Fee") and the amount received by Berkshire as
cash in lieu of General Re shares upon exercise of the Option for cash (as
described above), less (ii) any repayment of such cash to General Re, (b) (i)
the amount received by Berkshire pursuant to General Re's repurchase of
General Re shares, less (ii) Berkshire's purchase price for such General Re
shares, and (c) (i) the net cash amounts received by Berkshire pursuant to the
sale of General Re shares (or any other securities into or for which such
General Re Shares are converted or exchanged) to any unaffiliated party, less
(ii) Berkshire's purchase price for such General Re shares.
As used in the Stock Option Agreement the term "Notional Total Profit," with
respect to any number of General Re shares as to which Berkshire may propose
to exercise the Option, will be the Total Profit determined as of the date of
the Stock Exercise Notice assuming that the Option was exercised on such date
for such number of General Re shares and assuming that such General Re shares
together with all other General Re shares acquired upon exercise of the Option
and held by Berkshire and its affiliates as of such date, were sold for cash
at the closing market price for the General Re Common Stock as of the close of
business on the preceding trading day.
OTHER AGREEMENTS AND TRANSACTIONS
Voting Agreements. In connection with the Merger Agreement, Warren E.
Buffett and Charles T. Munger, the beneficial owners of approximately 40% and
1.5%, respectively, of the voting power of Berkshire Common Stock entered into
voting agreements with General Re (the "Voting Agreements.") The following
description of the Voting Agreements does not purport to be complete and is
qualified in its entirety by reference to the form of Voting Agreement which
is attached as Annex III hereto. Pursuant to the Voting Agreements, Mr.
Buffett and Mr. Munger have each agreed to vote the shares of Class A Common
Stock beneficially owned by them, other than any such shares that they give as
gifts to family members or charities (the "Voting Agreement Shares"), in favor
of the adoption of the Merger Agreement and approval of the Berkshire Merger
and the Transactions and in favor of any other matter necessary to the
consummation of the Transactions considered and voted upon at the Berkshire
Meeting. The Voting Agreements also provide, among other things, that until
the close of business on the date of the Berkshire Meeting, Mr. Buffett and
Mr. Munger will not (a) sell, pledge, or otherwise dispose of any of the
Voting Agreement Shares, (b) deposit the Voting Agreement Shares into a voting
trust or enter into a voting agreement or arrangement with respect to the
Voting Agreement Shares, or grant any proxy with respect thereto (other than a
proxy naming such person as one of the proxy holders), (c) enter into any
contract, option or other arrangement or undertaking with respect to the
direct or indirect sale, assignment, transfer or other disposition of any of
the Voting Agreement Shares, or (d) convert any of the Voting Agreement Shares
into shares of Berkshire Class B Common Stock.
Redemption of General Re Preferred Stock. Pursuant to the Merger Agreement,
and as a condition to Berkshire's obligation to consummate the Transactions,
General Re has agreed to take all actions necessary to call for redemption,
and to redeem, all of the shares of General Re Preferred Stock as of
immediately prior to the Effective Time. Shares of General Re Preferred Stock
may be converted into shares of General Re Common Stock until the close of
business on the date of redemption.
Preferred Stock Issuance. Pursuant to the Merger Agreement, as of June 29,
1998 Berkshire issued to General Re 10,000 shares of its 5.10% Preferred
Stock, without par value ("Berkshire 5.10% Preferred Stock"), a non-voting,
non-participating cumulative preferred stock, with an aggregate face amount of
$1,000,000, redeemable at face amount (plus accrued but unpaid dividends) at
Berkshire's option after five years from the date of issuance, and in exchange
General issued to Berkshire 10,000 shares of its 5.10% Preferred Stock,
without par value ("General Re 5.10% Preferred Stock") having equivalent value
and substantially identical terms. The Berkshire 5.10% Preferred Stock and the
General Re 5.10% Preferred Stock will not be converted in the Mergers and will
remain outstanding following the Effective Time.
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EFFECTIVE TIME
On the Closing Date, the parties will file certificates of merger or other
appropriate documents (in any such case, the "Certificates of Merger") and
will make all other filings or recordings required under the Delaware General
Corporation Law ("DGCL"). The Mergers will become effective at such time as
the Certificate of Mergers are duly filed with the Secretary of State of the
State of Delaware, or at such other time as Berkshire and General Re specify
in the Certificates of Merger (the time the Mergers become effective being the
"Effective Time"). Such filing will be made as promptly as practicable after
satisfaction or waiver of the conditions to the Mergers.
EFFECT ON GENERAL RE STOCK PLANS
The Merger Agreement provides that as a result of the Transactions each
outstanding and unexercised stock option to purchase shares of General Re
Common Stock and stock appreciation rights (payable in shares of General Re
Common Stock) granted under the General Re stock plans (the "General Re Stock
Plans") will cease to represent the right to acquire shares of General Re
Common Stock and will be converted into and become a right with respect to New
Berkshire Common Stock. Pursuant to the terms of the General Re Stock Plans,
as a result of the Transactions the unvested stock options and stock
appreciation rights which were granted prior to June 9, 1998 and held by
employees will become fully vested and exercisable. In addition, upon certain
terminations of employment within two years following the General Re Merger,
the restrictions on the shares of restricted stock and restricted share units
will lapse.
EFFECT ON BERKSHIRE STOCK PLAN
Each outstanding option or right to purchase shares of Berkshire Class B
Common Stock (a "Berkshire Option") will, if agreed by the holder of such
Berkshire Option (if such agreement is required), be assumed by New Berkshire
in such manner that it is converted into an option to purchase shares of New
Berkshire Class B Common Stock, with each such Berkshire Option to otherwise
be exercisable upon the same terms and conditions as then are applicable to
such Berkshire Option, including the number of shares and exercise price
provided thereby. New Berkshire will assume all rights and obligations of
Berkshire under Berkshire's stock option plan as in effect at the Effective
Time and shall continue such plans in accordance with their terms. In the
event of the Alternative Transaction, there will be no change to the Berkshire
Options.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material United States federal income tax
consequences of the Mergers and the Alternative Transaction to holders of
Berkshire Common Stock and General Re Voting Stock who hold such stock as a
capital asset. The summary is based on the Code, Treasury regulations
thereunder, and administrative rulings and court decisions in effect as of the
date hereof, all of which are subject to change at any time, possibly with
retroactive effect. This summary is not a complete description of all of the
consequences of the Mergers and the Alternative Transaction and, in
particular, may not address United States federal income tax considerations
applicable to stockholders subject to special treatment under United States
federal income tax law (including, for example, foreign persons, financial
institutions, dealers in securities, insurance companies or tax-exempt
entities, holders who acquired Berkshire Common Stock or General Re Voting
Stock pursuant to the exercise of an employee stock option or right or
otherwise as compensation, and holders who hold Berkshire Common Stock or
General Re Voting Stock as part of a hedge, straddle or conversion
transaction). In addition, no information is provided herein with respect to
the tax consequences of the Mergers and the Alternative Transaction under
applicable foreign, state or local laws. HOLDERS OF BERKSHIRE COMMON STOCK OR
GENERAL RE VOTING STOCK ARE URGED TO CONSULT WITH THEIR TAX ADVISORS REGARDING
THE TAX CONSEQUENCES OF THE MERGERS AND THE ALTERNATIVE TRANSACTION TO THEM,
INCLUDING THE EFFECTS OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
The Mergers
If Berkshire does not make the Alternative Election (as defined above under
"The Transactions--The Alternative Transaction"), either because it is not
entitled to do so under the terms of the Merger Agreement or
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because it expressly declines to make the Alternative Election, the parties
will proceed with the Mergers, subject to the conditions described under the
caption "Certain Provisions of the Merger Agreement--Conditions to
Consummation of the Transactions."
If Berkshire does not make the Alternative Election, the respective
obligations of each party to consummate the Mergers are conditioned upon one
of the following having occurred: (i) Berkshire having received written notice
of the issuance of the 351(e) Ruling and the No Gain or Loss Ruling; (ii) if
the IRS will not grant the 351(e) Ruling as a result of the Treasury
Department having withdrawn the Proposed Regulations, Berkshire having
received written notice of the issuance of the No Gain or Loss Ruling or the
368(c) Ruling; or (iii) Berkshire having expressly declined to make the
Alternative Election.
In addition, Berkshire's obligations to consummate the Mergers are further
conditioned upon the following: (i) the Final Regulations (as defined in
"Certain Provisions of the Merger Agreement--Conditions to Consummation of the
Transactions") being in effect; (ii) either (A) Berkshire having received the
351(e) Ruling and the No Gain or Loss Ruling or (B) the Proposed Regulations
having been withdrawn and Berkshire having received either the No Gain or Loss
Ruling or the 368(c) Ruling; and (iii) Berkshire having received an opinion of
Munger, Tolles & Olson LLP, counsel to Berkshire, based upon reasonably
requested representation letters and dated the Closing Date, to the effect
that the Berkshire Merger will be treated as a transfer of property to New
Berkshire by the holders of Berkshire Common Stock governed by Section 351(a)
or 351(b) of the Code. If Berkshire receives any of the Rulings, General Re's
obligations to consummate the Mergers will be further conditioned upon the
receipt by General Re of an opinion of Wachtell, Lipton, Rosen & Katz, counsel
to General Re, based upon reasonably requested representation letters and
dated the Closing Date, to the effect that the General Re Merger will be
treated as a transfer of property to New Berkshire by the holders of General
Re Common Stock governed by Section 351(a) of 351(b) of the Code.
Berkshire has received an opinion of Munger, Tolles & Olson LLP, dated the
date of this Joint Proxy Statement/Prospectus, to the effect that, under
currently applicable United States federal income tax law, the Berkshire
Merger will be treated as a transfer of property to New Berkshire by the
holders of Berkshire Common Stock governed by Section 351(a) or 351(b) of the
Code. General Re has received an opinion of Wachtell, Lipton, Rosen & Katz,
dated the date of this Joint Proxy Statement/Prospectus, to the effect that,
under currently applicable United States federal income tax law, the General
Re Merger will be treated as a transfer of property to New Berkshire by the
holders of General Re Common Stock governed by Section 351(a) or 351(b). These
opinions are based upon certain assumptions (including an assumption that the
Rulings will be granted, as to which there can be no assurance) and certain
representations made to Munger, Tolles & Olson LLP and Wachtell, Lipton, Rosen
& Katz by Berkshire and General Re.
Based upon such opinions, if Berkshire receives the Rulings described above
and the Mergers are consummated, the following United States federal income
tax consequences will result:
(i) No gain or loss will be recognized by holders of Berkshire Common
Stock or General Re Common Stock who exchange all of their Berkshire Common
Stock or General Re Common Stock solely for New Berkshire Common Stock
pursuant to the Mergers, except to the extent of any cash received in the
General Re Merger in lieu of a fractional share interest in New Berkshire
Common Stock;
(ii) No gain or loss will be recognized by New Berkshire as a result of
the Mergers;
(iii) The aggregate tax basis of the shares of New Berkshire Common Stock
received in the Berkshire Merger will be the same as the aggregate tax
basis of the shares of Berkshire Common Stock surrendered in exchange
therefor;
(iv) The aggregate tax basis of the shares of New Berkshire Common Stock
received in the General Re Merger will be the same as the aggregate tax
basis of the shares of General Re Common Stock surrendered in exchange
therefor, decreased by the amount of cash received in lieu of a fractional
share interest in New Berkshire Common Stock, and increased by the amount
of income or gain which was recognized on such exchange; and
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(v) The holding period of the shares of New Berkshire Common Stock
received in the Mergers will include the holding period of the shares of
Berkshire Common Stock or General Re Common Stock surrendered in exchange
therefor.
A holder of General Re Common Stock who receives in the General Re Merger
cash in lieu of a fractional share interest in New Berkshire Common Stock will
recognize capital gain equal to the lesser of (i) the excess of (A) the sum of
the fair market value of the shares of New Berkshire Common received in the
Mergers and the amount of cash received in the General Re Merger in lieu of a
fractional share interest in New Berkshire Common Stock over (B) such holder's
basis in the shares of General Re Common Stock surrendered in the Merger or
(ii) the amount of cash so received, provided that as expected, immediately
after the Effective Time, the General Re stockholders will not, in the
aggregate, own stock of New Berkshire possessing 50% or more of the total
combined voting power of all classes of New Berkshire stock entitled to vote
or 50% or more of the total value of all classes of New Berkshire stock
("Section 304 Control"), taking into account certain constructive ownership
rules of the Code and, in the case of a General Re shareholder who also owns
Berkshire Common Stock, taking into account any New Berkshire Common Stock
received by such General Re stockholder in the Berkshire Merger in its
capacity as a Berkshire stockholder. Moreover, assuming that the General Re
stockholders do not have Section 304 Control immediately after the Effective
Time, no loss will be recognized by a General Re stockholder with respect to
the receipt of cash in lieu of a fractional share interest in New Berkshire
Common Stock. In the extremely unlikely event that the stockholders of General
Re were to have Section 304 Control of New Berkshire immediately after the
Effective Time, holders of General Re Common Stock who do not actually or
constructively own any shares of Berkshire Common Stock at the Effective Time
will recognize capital gain or loss equal to the difference between the amount
of cash received in lieu of a fractional share interest in New Berkshire
Common Stock and the portion of the General Re stockholder's tax basis in its
General Re Common Stock that is allocable to such fractional share interest.
Holders of General Re Common Stock who actually or constructively own shares
of Berkshire Common Stock should consult their own tax advisors as to the
amount and character of any income in the event that the General Re
stockholders have Section 304 Control of New Berkshire immediately after the
Effective Time.
Any capital gain or loss recognized on the receipt of cash in lieu of a
fractional interest in New Berkshire Common Stock will be long-term capital
gain or loss if the holder's holding period is more than one year at the
Effective Time. In the case of individual holders, any such capital gain will
be subject to tax at varying rates depending upon the holder's holding period
and income level. The Code limits the deductibility of capital losses.
Shares of General Re Preferred Stock that are redeemed by General Re for
cash immediately prior to the Effective Time will be subject to the rules of
Section 302 of the Code. Under Section 302 of the Code a redemption of shares
of General Re Preferred Stock by General Re for cash will be treated as a
distribution taxable as a dividend to the redeemed stockholders to the extent
of General Re's current or accumulated earnings and profits unless the
redemption (i) results in a "complete redemption" of the stockholder's
interest in General Re, (ii) is "substantially disproportionate" with respect
to the holder or (iii) is "not essentially equivalent to a dividend". In
determining whether any of these three tests have been met, shares of General
Re Common Stock will be taken into account along with shares of General Re
Preferred Stock. Moreover, shares considered to be owned by the holder by
reason of the constructive ownership rules of the Code, as well as shares
actually owned, will be taken into account. If any of the foregoing tests are
met, then, except with respect to declared and unpaid dividends, if any, the
redemption of shares of General Re Preferred Stock for cash will result in
taxable gain or loss equal to the difference between the amount of cash
received and the holder's tax basis in the redeemed shares. Any such gain or
loss will be capital gain or loss and will be long-term capital gain or loss
if the stockholder's holding period exceeds one year. In the case of an
individual, any such long-term capital gain will be taxed at varying rates
depending upon the holder's holding period and income level. The Code limits
the deductibility of capital losses. Based on a published IRS ruling, the
redemption of a stockholder's General Re Preferred Stock for cash will be
treated as "not essentially equivalent to a dividend" if, taking into account
the constructive ownership rules, (a) the holder's relative stock interest in
General Re is minimal, (b) the holder exercises no control over General Re's
affairs and (c) there is a reduction in the holder's proportionate interest in
General Re.
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The Alternative Transaction
If Berkshire makes, or is deemed to have made, the Alternative Election, the
parties will proceed with the Alternative Transaction, subject to the
conditions described under the caption "Certain Provisions of the Merger
Agreement--Conditions to Consummation of the Transactions."
If Berkshire makes, or is deemed to have made, the Alternative Election,
Berkshire's obligation to consummate the Alternative Transaction is
conditioned upon Berkshire's having received the opinions of Munger, Tolles &
Olson LLP, counsel to Berkshire, and Wachtell, Lipton, Rosen & Katz, counsel
to General Re, based upon reasonably requested representation letters and
dated the Closing Date, that the Alternative Transaction will not qualify as a
reorganization within the meaning of Section 368 of the Code, the Merger
Consideration will be taxable to the stockholders of General Re, and the
Alternative Transaction will not be a taxable transaction to either Berkshire
or its stockholders.
Berkshire has received opinions of Munger, Tolles & Olson LLP and Wachtell,
Lipton, Rosen and Katz, dated the date of this Joint Proxy
Statement/Prospectus to the foregoing effect, in each case based upon certain
assumptions and certain representations made to Munger, Tolles & Olson LLP and
Wachtell, Lipton, Rosen & Katz by Berkshire and General Re.
Based upon such opinions, if the Alternative Election is made, the
Alternative Transaction will not be taxable to Berkshire or its stockholders.
The Alternative General Re Merger will, however, be a taxable transaction to
the holders of General Re Common Stock. Each holder of General Re Common Stock
will recognize gain or loss equal to the difference between (i) the sum of the
fair market value of the shares of Berkshire Common Stock and the amount of
cash received by such holder in the Alternative General Re Merger and (ii)
such holder's tax basis in its shares of General Re Common Stock, provided
that either (i) as expected, the stockholders of General Re do not have
Section 304 Control of Berkshire immediately after the Effective Time or
(ii) such holder does not actually or constructively own any shares of
Berkshire Common Stock prior to the Effective Time. Such gain or loss will be
capital gain or loss, and will be long-term capital gain or loss if the
holder's holding period in the General Re Common Stock is more than one year
at the Effective Time. Any such capital gain will be taxed at varying rates
depending upon the holder's holding period and income level. The Code limits
the deductibility of capital losses. Holders of General Re Common Stock who
actually or constructively own shares of Berkshire Common Stock prior to the
Effective Time should consult their own tax advisors as to the amount and
character of any income in the extremely unlikely event that the General Re
stockholders have Section 304 Control of Berkshire immediately after the
Effective Time.
If the Alternative Election is made, the redemption of shares of General Re
Preferred Stock by General Re for cash immediately prior to the Effective Time
of the Alternative General Re Merger will be subject to Section 302 of the
Code and will be taxed in the same manner described above with respect to
redemptions of General Re Preferred Stock by General Re for cash immediately
prior to the Effective Time of the General Re Merger.
CONFLICTS OF INTEREST
In considering the respective recommendations of the Berkshire Board and the
General Re Board with respect to the Transactions, stockholders of Berkshire
and General Re should be aware that, as described below, certain members of
General Re's and Berkshire's management and Boards may have interests in the
Transactions that are different from, or in addition to, the interests of
stockholders of Berkshire and General Re, and that may create potential
conflicts of interest. The Berkshire Board and the General Re Board have each
considered these interests, among other matters, in approving and adopting the
Merger Agreement and the Transactions.
Executive Officers and Board of New Berkshire. All of the current directors
of Berkshire will become directors of New Berkshire. Following the
Transactions, Ronald E. Ferguson, Chairman and Chief Executive Officer of
General Re, will be appointed as a member of the New Berkshire Board of
Directors. See "Directors
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and Executive Officers of New Berkshire Following the Mergers." In addition,
the executive officers of Berkshire will become the executive officers of New
Berkshire.
Employment Agreement. In connection with the execution of the Merger
Agreement, General Re and New Berkshire entered into an employment agreement
with Ronald E. Ferguson (the "Employment Agreement"). The Employment Agreement
is for a term of five years, commencing at the Effective Time and terminating
on the fifth anniversary thereof (the "Employment Period"). During the
Employment Period, Mr. Ferguson will serve as the Chairman and Chief Executive
Officer of General Re, reporting directly to the Chief Executive Officer of
New Berkshire. During the Employment Period, Mr. Ferguson will also serve on
the Board of Directors of New Berkshire and have an annual base salary of not
less than the annual base salary payable to Mr. Ferguson prior to the
Effective Time and an annual bonus pursuant to the terms of the annual bonus
and long-term incentive compensation plans for senior executives of General
Re. The Employment Agreement provides that upon Mr. Ferguson's termination of
employment, he will be paid an annual retirement benefit pursuant to the
Employee Retirement Plan of General Re and its Affiliates (the "Retirement
Plan") and the General Re Supplemental Benefits Equalization Plan, calculated
without an actuarial reduction as if Mr. Ferguson had remained employed until
his Normal Retirement Date (as defined in the Retirement Plan) (the
"Retirement Benefit"). During the Employment Period, Mr. Ferguson will be
eligible to receive benefits which are no less favorable in the aggregate than
the benefits he received prior to the Effective Time. The Employment Agreement
further provides that, upon the termination of Mr. Ferguson's employment other
than for cause, death or disability or if Mr. Ferguson terminates employment
for good reason, Mr. Ferguson is entitled to a lump-sum cash payment equal to
the sum of (i) any unpaid base salary, (ii) a pro rata annual bonus, based on
the average of the annual bonuses earned in the three years prior to the date
of termination (the "Average Annual Bonus") and (iii) the product of (x) the
greater of (A) three and (B) the number of months from the date of termination
until the end of the Employment Period divided by 12 (the "Continuation
Period") and (y) the sum of Mr. Ferguson's base salary and the Average Annual
Bonus. Upon any such termination, any incentive compensation awards granted
after the Effective Time will vest immediately, and the Retirement Benefit
will be calculated to include the additional age and service credit that Mr.
Ferguson would have accrued if he had remained employed during the
Continuation Period. In addition, Mr. Ferguson will continue to be provided
with benefits during the Continuation Period. If any amounts payable to Mr.
Ferguson under the Employment Agreement or otherwise would subject him to the
excise tax under Section 4999 of the Code, General Re will make a payment to
Mr. Ferguson such that after the payment of all income and excise taxes, he
will be in the same after-tax position as if no excise tax under Section 4999
had been imposed. The Employment Agreement contains restrictive covenants,
which prohibit Mr. Ferguson from competing with General Re, soliciting its
employees, and disclosing confidential information, during the Employment
Period and for specified periods thereafter. The Employment Agreement contains
substantially the same terms as the Ferguson Agreements (as defined below) and
replaces and supersedes the Ferguson Agreements.
Change of Control Arrangements. Mr. Ferguson is a party to an employment and
a change of control agreement with General Re (the "Ferguson Agreements"),
both of which will be superseded by the Employment Agreement described above
and, as such, Mr. Ferguson will not be entitled to receive the payments and
benefits described herein. James E. Gustafson, Tom N. Kellogg and certain
other senior management employees of General Re (together with Mr. Ferguson,
the "Covered Executives") are parties to change of control employment
agreements with General Re (together with the Ferguson Agreements, the
"Executive Agreements"). The Executive Agreements provide that if within two
years following a change of control of General Re, a Covered Executive's
employment is terminated other than for cause, death or disability or the
Covered Executive terminates his employment for good reason, such Covered
Executive will be entitled to receive a lump sum payment equal to the product
of (i) three and (ii) the sum of (A) the Covered Executive's annual base
salary and (B) the greater of (x) 50% of the annual base salary and (y) the
target formula amount of the annual incentive bonus under the General Re 1995
Long Term Compensation Plan for the calendar year in which the date of
termination occurs. In addition, the Covered Executive will be entitled to
continued coverage under General Re's welfare benefit plans or the cost of
providing such benefits. Under the Ferguson Agreements, Mr. Ferguson would
have been entitled to an unreduced normal retirement pension benefit.
Stockholder approval
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of the Transactions contemplated by the Merger Agreement will constitute a
Change of Control for purposes of the Executive Agreements. If any amounts
payable to a Covered Executive under the Executive Agreements or otherwise
would subject such executive to the excise tax under Section 4999 of the Code,
General Re will make a payment to the Covered Executive such that after the
payment of all income and excise taxes, the Covered Executive will be in the
same after-tax position as if no excise tax under Section 4999 had been
imposed.
Long-Term Compensation Programs. Stockholder approval of the Transactions
will constitute a change in control under General Re's 1989 Long-Term
Compensation Plan, as amended (the "1989 Plan") and the 1995 Long-Term
Compensation Plan, as amended (the "1995 Plan"). Prior to a change in control,
each participant in the 1989 Plan and the 1995 Plan, including certain
executive officers, who is eligible to receive a long-term performance bonus
under the 1989 Plan or 1995 Plan and/or an annual incentive bonus under the
1995 Plan shall elect that any such long-term performance bonus and/or annual
incentive bonus will either (i) become immediately payable or creditable,
where applicable, based upon the assumption that the applicable performance
objectives have been fully achieved (or, in the case of the long-term
performance bonus, if greater, on actual performance achieved), and pro-rated
based on a fraction, the numerator of which will be the number of days in the
award period that have elapsed prior to the occurrence of such change in
control, and the denominator of which will be the total number of days in the
award period, or (ii) continue to be earned without interruption based on
continuing employment for the full award period, pursuant to the terms of the
original award with a minimum award of not less than the pro rated award. In
addition, prior to a change in control, each participant in the 1995 Plan
and/or General Re's Share Partnership Program, including certain executive
officers, who has elected to defer amounts otherwise payable as long-term
performance bonus or annual incentive bonus shall have the right to elect that
all such amounts deferred into stock units will either (i) become immediately
payable in cash in a lump-sum or (ii) continue to be deferred and converted
into share units with respect to Berkshire Class B Common Stock.
Directors Plans. Stockholder approval of the Transactions will constitute a
change in control under General Re's Deferred Compensation Plan for Directors
(the "Deferred Compensation Plan"). Upon a change in control, the account
balance of a participating director, at the election of the director, may be
distributed immediately or may continue to be deferred in accordance with a
director's original election. In addition, pursuant to the terms of General
Re's Retirement Plan for Directors (as amended and restated), Directors' Stock
Unit Plan, 1989 Long-Term Compensation Plan and 1995 Long-Term Compensation
Plan (the "Director Plans"), a cessation of service from the General Re Board
of Directors, as a result of the General Re Merger will be deemed to be a
"Retirement" within the meaning of each such Director Plan for all purposes of
such Director Plans, without regard to the director's actual age or years of
service upon any such cessation of service. In addition, upon cessation of
service entitling such former directors to payments thereunder from the
General Re Board as a result of the Transactions, the restrictions on the
shares of restricted stock granted under Director Plans will lapse.
Stock-Based Rights. As described under "The Transactions--Effect on General
Re Stock Plans" above, pursuant to terms of the General Re Stock Plans,
unvested stock options and stock appreciation rights granted prior to June 9,
1998, including those held by executive officers, will become fully vested and
exercisable as a result of stockholder approval of the Transactions. In
addition, upon certain terminations of employment within two years following
the General Re Merger, the restrictions on the shares of restricted stock and
share units held by employees, including certain executive officers, will
lapse. The number of unvested stock options to acquire shares of General Re
Common Stock held by Messrs. Ferguson, Gustafson, Kellogg, Minton and Dr.
Lutke-Bornefeld that will become fully vested and exercisable as a result of
the Transactions is 214,432, 57,534, 38,907, 6,085 and 24,000, respectively.
The number of shares of General Re Common Stock underlying awards of
restricted stock and share units held by Messrs. Ferguson, Gustafson, Kellogg,
Minton and Dr. Lutke-Bornefeld that may become transferable as a result of the
Transactions is 26,955.55, 23,946.87, 9,347.41, 2,000.00 and 13,367.21,
respectively.
Indemnification. The Merger Agreement also provides that from and after the
Effective Time, New Berkshire and General Re will indemnify, defend, protect
and hold harmless the present and former officers and
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directors of General Re, subject to certain limitations, for all claims
arising as a result of their service to General Re or relating to the Merger
Agreement and the Transactions. See "Certain Provisions of The Merger
Agreement--Indemnification."
CERTAIN EMPLOYEE BENEFIT MATTERS
The Merger Agreement provides generally that the current General Re employee
benefit plans will, to the extent practicable and except as necessary or
desirable to facilitate compliance with applicable statutory and regulatory
requirements and their terms, remain in effect without material amendment
through the consummation of the Transactions and (other than the General Re
Stock Plans) for a period of at least three years thereafter. However, New
Berkshire, Berkshire and General Re will not be required to issue any shares
of its equity securities in connection with such plans following the
consummation of the Transactions other than with respect to unexercised stock
options (including replacement options) to purchase outstanding shares of
General Re Common Stock and existing share units (payable in shares of General
Re Common Stock) that are converted into rights with respect to New Berkshire
Common Stock upon consummation of the Transactions. See "The Transactions--
Effect on General Re Stock Plans." General Re and Berkshire will use their
reasonable best efforts to agree on compensation plans for the officers and
employees of General Re after consummation of the Transactions to provide them
incentive compensation for a period of at least three years thereafter that in
the aggregate is reasonably comparable (without giving effect to any payments
resulting from the Transactions) to that historically provided by the General
Re Stock Plans.
The Merger Agreement also provides that New Berkshire or Berkshire, as the
case may be, will honor without material modification for a period of at least
three years following consummation of the Transactions all current employee
severance plans or policies and employment and severance agreements of General
Re.
ACCOUNTING TREATMENT
The General Re Merger will be accounted for under the purchase method of
accounting, in accordance with generally accepted accounting principles. Under
the purchase method of accounting, the purchase price of General Re, including
direct costs of the Transactions, will be allocated to the assets acquired and
liabilities assumed based upon their estimated fair values, with the excess
purchase consideration allocated to goodwill. The conversion of Berkshire
Common Stock into New Berkshire Common Stock will be treated as a
reorganization with no change in the recorded amount of Berkshire's assets and
liabilities. The financial statements of Berkshire will become the financial
statements of New Berkshire. The results of New Berkshire operations will
include the results of operations of General Re commencing at the Effective
Time.
The Unaudited Pro Forma Combined Condensed Financial Statements appearing
elsewhere in this Joint Proxy Statement/Prospectus are based upon certain
assumptions and allocate the purchase price to assets and liabilities based
upon preliminary estimates of their respective fair values. The unaudited pro
forma adjustments and combined amounts are included for informational purposes
only. If the Transactions are consummated, then New Berkshire's financial
statements will reflect effects of acquisition adjustments only from the
Effective Time. The actual allocation of the purchase price may differ
significantly from the allocation reflected in the Unaudited Pro Forma
Combined Condensed Financial Statements.
APPROVALS AND CONSENTS
The Merger Agreement provides that General Re and Berkshire will use their
best efforts and cooperate with one another (i) in promptly determining
whether any filings are required to be made or consents, approvals, waivers,
permits or authorizations are required to be obtained under any applicable law
or regulation or from any governmental authorities or third parties in
connection with the transactions contemplated by the Merger Agreement and the
Stock Option Agreement and (ii) in promptly making any such filings, in
furnishing information required in connection therewith and in timely seeking
to obtain any such consents, approvals, waivers, permits or authorizations.
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U. S. Antitrust Laws
Under the HSR Act, certain acquisition transactions may not be consummated
unless notice has been given and certain information furnished to the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") and the FTC and specified waiting period requirements have been
satisfied, unless earlier termination has been granted. General Re and
Berkshire each filed with the Antitrust Division and the FTC a Notification
and Report Form with respect to the Mergers on July 9, 1998 and July 10, 1998,
respectively. On August 9, 1998, the waiting period under the HSR Act expired.
At any time before or after the Effective Time, and notwithstanding that the
HSR Act waiting period has been terminated, the Antitrust Division could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin consummation of the Mergers or
seeking divestiture of substantial assets of Berkshire or General Re. At any
time before or after the Effective Time, and notwithstanding that the HSR Act
waiting period has been terminated, any state could take such action under the
antitrust laws as it deems necessary or desirable in the public interest. Such
action could include seeking to enjoin consummation of the Merger or
divestiture of businesses of Berkshire or General Re. Private parties also may
seek to take legal action under the antitrust laws under certain
circumstances.
State Insurance Regulatory Approvals
State insurance company holding laws and regulations applicable to General
Re generally provide that no person may acquire control of certain General Re
insurance subsidiaries unless such person has provided certain required
information to, and such acquisition has been approved by, the appropriate
insurance regulatory authorities. In accordance with these laws, an
application on Form A for approval of the Transactions has been filed with the
Commissioners of Insurance of the States of Connecticut, Delaware, Ohio and
North Dakota. As of the date of this Joint Proxy Statement/Prospectus, these
Commissioners of Insurance have not completed their respective review of
Berkshire's applications.
Foreign Insurance and Securities Broker-Dealer Regulatory Approvals
The insurance company or securities broker-dealer laws of Australia, Hong
Kong, South Africa and the United Kingdom generally provide that no person may
acquire control of General Re or of certain General Re insurance subsidiaries
unless such person has provided certain required information to, and such
acquisition has been approved by, the appropriate regulatory authorities of
that country. In accordance with the laws of these countries, Berkshire has
filed an application for approval of the Transactions with the appropriate
governmental entities in each country. As of the date of this Joint Proxy
Statement/Prospectus, these countries' respective governments have not
completed their review of Berkshire's filings.
European Economic Community Merger Approval
The acquisition by New Berkshire of the voting securities of General Re
pursuant to the Merger Agreement is subject to disapproval by the European
Commission. In accordance with the Regulation 4064/89 as amended, promulgated
by the Council of the European Union and generally known as the Merger
Regulation, Berkshire and General Re have filed a draft Application Form CO
with the European Commission notifying the Commission of the proposed Merger.
As of the date of this Joint Proxy Statement/Prospectus, the Commission is
reviewing the draft filing.
STOCK EXCHANGE LISTING
Berkshire will use its best efforts to cause the shares of New Berkshire
Common Stock issued in the Mergers to be approved for listing on the NYSE,
subject to notice of issuance, prior to the Closing Date.
DELISTING AND DEREGISTRATION OF GENERAL RE COMMON STOCK
If the General Re Merger is consummated, General Re Common Stock will be
delisted from the NYSE and deregistered under the Exchange Act.
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RESALES OF COMMON STOCK
Shares of Class A Common Stock and Class B Common Stock to be issued in
connection with the Mergers will be registered under the Securities Act of
1933, as amended (the "Securities Act"). Such shares will be freely
transferable, except that shares received by any person who may be deemed to
be an affiliate of General Re or Berkshire within the meaning of Rule 145 of
the Securities Act (each such person being an "Affiliate") may not be resold
except in transactions permitted by such Rule or as otherwise permitted under
the Securities Act.
General Re has agreed in the Merger Agreement to use its best efforts to
cause each person who may be deemed to be an Affiliate of General Re to
deliver to Berkshire a written agreement intended to ensure compliance with
the Securities Act.
APPRAISAL RIGHTS
General Re
Record holders of shares of General Re Common Stock will not be entitled to
appraisal rights under Section 262 of the DGCL in connection with the General
Re Merger. However, record holders of General Re Common Stock will be entitled
to such appraisal rights with respect to the Alternative General Re Merger if
the Alternative Transaction is consummated. The following discussion is not a
complete statement of the law pertaining to appraisal rights under the DGCL
and is qualified in its entirety by reference to the full text of Section 262,
which is reprinted as Annex IX to this Joint Proxy Statement/Prospectus.
Under the DGCL, record holders of General Re Common Stock who do not wish to
accept the Berkshire Common Stock and cash upon consummation of the
Alternative General Re Merger, who follow the procedures set forth in Section
262, and who have not voted in favor of the Transactions, will be entitled to
have their shares of General Re Common Stock appraised by the Delaware Court
of Chancery and to receive payment for the "fair value" of such shares,
exclusive of any element of value arising from the accomplishment or
expectation of the Alternative Transaction, together with a fair rate of
interest, as determined by such court, if the Alternative Transaction is
consummated.
Pursuant to Section 262, General Re must provide not less than 20 days
notice of the General Re Special Meeting to all persons who held shares of
General Re Common Stock on the Record Date, and such notice must state that
such appraisal rights are available and include a copy of Section 262. This
Joint Proxy Statement/Prospectus constitutes such notice for purposes of the
General Re Special Meeting. Any stockholder of record who wishes to exercise
appraisal rights should review the following discussion and Annex IX carefully
because failure to comply timely and properly with the procedures specified in
Section 262 will result in the loss of appraisal rights under the DGCL.
A holder of General Re Common Stock wishing to exercise appraisal rights
must deliver to General Re, before the vote on the approval and adoption of
the Merger Agreement at the General Re Special Meeting, a written demand for
appraisal of such holder's shares of General Re Common Stock. A proxy or vote
against the Transactions will not constitute such a demand. Failure to vote
against the Transactions will not constitute a waiver of the holder's
appraisal rights, but a vote in favor of the Transactions will constitute such
a waiver. In addition, a holder of General Re Common Stock wishing to exercise
appraisal rights must hold of record such General Re Common Stock on the date
that written demand therefor is made and continue to hold such shares of
General Re Common Stock through the Effective Time.
All written demands for appraisal of shares of General Re Common Stock
should be mailed or delivered to General Re Corporation, 695 East Main Street,
Stamford, Connecticut 06904, Attention: Corporate Secretary.
Within 10 days after the Effective Time of the Alternative General Re
Merger, General Re must send a notice as to the effectiveness of the
Alternative General Re Merger to each person who has satisfied the appropriate
provisions of Section 262. Within 120 days after such Effective Time, but not
thereafter, General Re
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or any such stockholder who has satisfied the foregoing conditions and is
otherwise entitled to appraisal rights under Section 262, may file a petition
in the Delaware Court of Chancery demanding a determination of the fair value
of the shares of General Re Common Stock held by such stockholder. Upon the
filing of any such petition by a stockholder, service of a copy of the
petition must be made to General Re. If no such petition is filed, appraisal
rights will be lost for all stockholders who had previously demanded appraisal
of their shares of General Re Common Stock. Stockholders of General Re seeking
to exercise appraisal rights should assume that General Re will not file a
petition with respect to the appraisal of the value of shares of General Re
Common Stock and that General Re will not initiate any negotiations with
respect to the "fair value" of shares of General Re Common Stock. Accordingly,
stockholders of General Re who wish to exercise their appraisal rights should
regard it as their obligation to take all steps necessary to perfect their
appraisal rights in the manner described in Section 262.
Within 120 days after the Effective Time of the Alternative General Re
Merger, any record holder of shares of Common Stock who has complied with the
provisions of Section 262 will be entitled, upon written request, to receive
from General Re a statement setting forth the aggregate number of shares of
General Re Common Stock not voted in favor of approval of the Merger Agreement
and with respect to which demands for appraisal were received by General Re,
and the number of holders of such shares of General Re Common Stock.
If a petition for appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine the holders of shares
of General Re Common Stock entitled to appraisal rights and will appraise the
"fair value" of the shares of General Re Common Stock, exclusive of any
element of value arising from the accomplishment or expectation of the
Alternative Transaction, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value. Stockholders seeking
appraisal should be aware that the fair value of their shares of General Re
Common Stock as determined under Section 262 could be more than, the same as
or less than the value of the value of the Berkshire Common Stock and cash
that they would otherwise receive if they did not seek appraisal.
Any stockholder of General Re who has duly demanded an appraisal in
compliance with Section 262 will not, after the Effective Time of the
Alternative General Re Merger, be entitled to vote such holder's shares of
General Re Common Stock for any purpose nor, after such Effective Time, be
entitled to the payment of dividends or other distributions thereon.
If no petition for an appraisal is filed within the time provided, or if a
stockholder of General Re delivers to General Re a written withdrawal of such
holder's demand for an appraisal and an acceptance of the merger consideration
within 60 days after the Effective Time of the Alternative General Re Merger
or with the written approval of General Re thereafter, then the right of such
stockholder to an appraisal will cease and such stockholder shall be entitled
to receive the merger consideration with respect to such stockholders shares
of General Re Common Stock, without interest, as if such stockholder had not
demanded appraisal of such holder's shares of General Re Common Stock.
Berkshire. Under the DGCL, holders of Berkshire Common Stock are not
entitled to dissenters' appraisal rights, which would give them the right to
obtain the payment of cash in exchange for their shares of Berkshire Common
Stock as a result of the Berkshire Merger. Such rights are unavailable because
the Berkshire Common Stock is listed on the NYSE and the consideration such
holders will own after the Berkshire Merger will be shares of New Berkshire
Common Stock. Holders of Berkshire Common Stock are also not entitled to such
appraisal rights in the event the Alternative Transaction is consummated.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Berkshire and General Re have each made forward-looking statements in this
document (and in certain documents that are incorporated by reference in this
Joint Proxy Statement/Prospectus) that are subject to risks and uncertainties.
These statements are based on the beliefs and assumptions of the respective
company's management, and on information currently available to such
management. Forward-looking statements include
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the information concerning possible or assumed future results of operations of
Berkshire, General Re and New Berkshire set forth under "Summary," "The
Transactions--Background of the Transactions," "The Transactions--Reasons for
the Transactions; Recommendations of the Boards of Directors" and "Unaudited
Pro Forma Condensed Combined Financial Statements," and statements preceded
by, followed by or that include the words "believes," "expects,"
"anticipates," "intends," "plans," "estimates" or similar expressions.
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. The future results and stockholder
values of the combined companies following the Transactions may differ
materially from those expressed in these forward-looking statements. Many of
the factors that will determine these results and values are beyond
Berkshire's, General Re's, and New Berkshire's ability to control or predict.
Stockholders are cautioned not to place undue reliance on any forward-looking
statements. In addition, Berkshire, General Re and New Berkshire do not have
any intention or obligation to update forward-looking statements after they
distribute this Joint Proxy Statement/Prospectus, even if new information,
future events or other circumstances have made them incorrect or misleading.
Berkshire, General Re and New Berkshire claim the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.
Actual events and results may differ materially from those expressed or
forecasted in forward-looking statements due to a number of factors. The
principal important risk factors that could cause the combined companies'
actual performance and future events and actions to differ materially from
such forward-looking statements, include, but are not limited to, changes in
market prices of Berkshire's significant investees, the occurrence of one or
more catastrophic events, such as an earthquake or hurricane, that causes
losses insured by General Re or members of Berkshire's insurance group,
changes in insurance laws or regulations, changes in Federal income tax laws,
as well as general economic and market factors that affect the prices of
securities or the industries in which Berkshire and their affiliates do
business, especially those affecting the property and casualty insurance
industry.
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THE SPECIAL MEETINGS
PURPOSE, TIME AND PLACE
This Joint Proxy Statement/Prospectus is being furnished to stockholders of
Berkshire in connection with the solicitation of proxies by the Berkshire
Board for use at the Berkshire Meeting and to stockholders of General Re in
connection with the solicitation of proxies by the General Re Board from
holders of General Re Voting Stock for use at the General Re Meeting.
General Re. The General Re Meeting is to be held on September 18, 1998, at
10:00 a.m., local time, and at any adjournments or postponements thereof. At
the General Re Meeting, holders of General Re Voting Stock will be asked to
consider and vote upon a proposal to approve the Merger Agreement and the
Transactions, including the General Re Merger and the Alternative Transaction
and such other matters as may properly come before the General Re Meeting.
Berkshire. The Berkshire Meeting is to be held on September 16, 1998, at
9:30 a.m., local time, and at any adjournments or postponements thereof. At
the Berkshire Meeting, holders of Berkshire Common Stock will be asked to
consider and vote upon a proposal to approve and adopt the Merger Agreement
and the Transactions, including the Berkshire Merger and the Alternative
Transaction, and upon a proposal to approve the Berkshire Charter Amendment,
and upon such other matters as may properly come before the Berkshire Meeting.
RECORD DATE; VOTING POWER
General Re. The General Re Board has fixed the close of business (5:00 p.m.,
New York City time) on August 10, 1998 (the "Record Date") as the record date
for determining the holders of General Re Voting Stock entitled to notice of,
and to vote at, the General Re Meeting. Only holders of record of General Re
Voting Stock at the close of business on the Record Date will be entitled to
notice of, and to vote at, the General Re Meeting.
At the close of business on the Record Date, (i) shares of General
Re Common Stock were issued and outstanding and entitled to vote at the
General Re Meeting; and (ii) shares of General Re Preferred Stock were
issued and outstanding and entitled to vote at the General Re Meeting. Holders
of record of General Re Common Stock and General Re Preferred Stock are
entitled to one vote at the General Re Meeting for each share of General Re
Common Stock held of record on the Record Date or underlying such General Re
Preferred Stock on any matter which may properly come before the General Re
Meeting. Votes may be cast at the General Re Meeting in person or by proxy.
See "The Stockholders' Meetings--Voting of Proxies."
The presence at the General Re Meeting, either in person or by proxy of the
holders of a majority of the voting power represented by the General Re Voting
Stock is necessary to constitute a quorum in order to transact business at the
General Re Meeting. In the event that a quorum is not present at the General
Re Meeting, such meeting will be adjourned or postponed in order to solicit
additional proxies.
Berkshire. The Berkshire Board has fixed the close of business (5:00 p.m.,
New York City time) on August 10, 1998 as the record date for determining the
holders of Berkshire Common Stock entitled to notice of, and to vote at, the
Berkshire Meeting. Only holders of record of Berkshire Common Stock at the
close of business on the Record Date will be entitled to notice of, and to
vote at, the Berkshire Meeting.
At the close of business on the Record Date, (i) shares of
Berkshire Class A Common Stock were issued and outstanding and entitled to
vote at the Berkshire Meeting; and (ii) shares of Berkshire Class
B Common Stock were issued and outstanding and entitled to vote at the
Berkshire Meeting. Holders of record of Berkshire Class A Common Stock are
entitled to one vote per share on any matter which may properly come before
the Berkshire Meeting and holders of record of Berkshire Class B Common Stock
are entitled to 1/200 of a vote per share on any matter which may properly
come before the Berkshire Meeting. Votes may be cast at the Berkshire Meeting
in person or by proxy. See "The Stockholders' Meetings--Voting of Proxies."
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The presence at the Berkshire Meeting, either in person or by proxy of the
holders of a majority of the outstanding Berkshire Common Stock entitled to
vote, is necessary to constitute a quorum of the Berkshire Common Stock, in
order to transact business at the Berkshire Meeting. In the event that a
quorum is not present at the Berkshire Meeting, it is expected that such
meeting will be adjourned or postponed in order to solicit additional proxies.
VOTES REQUIRED
General Re. Approval of the proposal to adopt the Merger Agreement and the
Transactions, including the General Re Merger and the Alternative Transaction
and the Alternative General Re Merger, will require the affirmative vote of
the majority of the voting power of the outstanding shares of General Re
Voting Stock entitled to vote thereon. Under applicable Delaware law, in
determining whether the proposal to approve and adopt the Merger Agreement and
the Transactions has received the requisite number of affirmative votes,
abstentions will be counted and have the same effect as a vote against the
proposals. Brokers who hold shares of General Re Voting Stock as nominees, in
the absence of instructions from the beneficial owners thereof, will not have
discretionary authority to vote such shares for the approval and adoption of
the Merger Agreement and the Transactions. Any shares which are not voted
because the nominee-broker lacks discretionary authority will be counted and
have the same effect as a vote against the proposals.
Berkshire. Approval of each of the proposals to (a) adopt the Merger
Agreement and the Transactions, including the Berkshire Merger and the
Alternative Transaction and (b) approve the Berkshire Charter Amendment, will
require the affirmative vote of the majority of the voting power of the
outstanding shares of Berkshire Common Stock entitled to vote thereon. Under
applicable Delaware law, in determining whether either proposal has received
the requisite number of affirmative votes, abstentions will be counted and
have the same effect as a vote against the proposal. Brokers who hold shares
of Berkshire Common Stock as nominees, in the absence of instructions from the
beneficial owners thereof, will not have discretionary authority to vote such
shares for the approval and adoption of the Merger Agreement and the
Transactions. Any shares which are not voted because the nominee-broker lacks
such discretionary authority will be counted and have the same effect as a
vote against the proposal. However, even in the absence of instructions from
the beneficial owners thereof, brokers who hold shares of Berkshire Common
Stock as nominees will have discretionary authority to vote such shares for
the approval of the Berkshire Charter Amendment.
SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN STOCKHOLDERS
General Re. As of the close of business on the Record Date, General Re's
directors and executive officers and their affiliates may be deemed to be the
beneficial owners of 271,454 outstanding shares of General Re Common Stock
(collectively representing approximately % of the voting power of the
General Re Voting Stock) and shares of General Re Preferred Stock.
Berkshire. As of the close of business on the Record Date, Berkshire's
directors and executive officers and their affiliates may be deemed to be the
beneficial owners of 546,770 outstanding shares of Berkshire Class A Common
Stock and 92 outstanding shares of Berkshire Class B Common Stock
(collectively representing approximately 45.7% of the voting power of the
Berkshire Common Stock). See "The Transactions--Other Agreements--Voting
Agreements."
VOTING OF PROXIES
Shares represented by properly executed proxies received in time for a
Special Meeting will be voted at such Special Meeting in the manner specified
by such proxies. Berkshire stockholders should be aware that, if your proxy is
properly executed but does not contain voting instructions, your proxy will be
voted FOR approval of the Merger Agreement, including the Transactions and the
Alternative Transaction and FOR approval of the Berkshire Charter Amendment.
General Re stockholders should be aware that, if your proxy is properly
executed but does not contain voting instructions, your proxy will be voted
FOR approval of the Merger Agreement,
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including the Transactions and the Alternative Transaction. It is not expected
that any matter other than as described herein will be brought before the
Special Meetings. If other matters are properly presented before the Special
Meetings, the persons named in such proxy will have authority to vote in
accordance with their judgment on any other such matter, including without
limitation, any proposal to adjourn or postpone the meeting or otherwise
concerning the conduct of the meeting; provided, that a proxy that has been
designated to vote against the approval of the Merger Agreement will not be
voted, either directly or through a separate proposal, to adjourn the meeting
to solicit additional votes.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed Berkshire or General Re proxy card does
not preclude a stockholder from voting in person. A stockholder of General Re
may revoke a proxy at any time prior to its exercise by (i) delivering, prior
to the General Re Special Meeting, to Charles F. Barr, Secretary, General Re
Corporation, 695 East Main Street, Stamford, Connecticut 06904, a written
notice of revocation bearing a later date or time than the proxy; (ii)
delivering to the Secretary of General Re a duly executed proxy bearing a
later date or time than the revoked proxy; or (iii) attending the General Re
Meeting and voting in person. A stockholder of Berkshire may revoke a proxy at
any time prior to its exercise by (i) delivering, prior to the Berkshire
Special Meeting, to Forrest N. Krutter, Secretary, Berkshire Hathaway Inc.,
1440 Kiewit Plaza, Omaha, Nebraska 68131, a written notice of revocation
bearing a later date or time than the proxy; (ii) delivering to the Secretary
of Berkshire a duly executed proxy bearing a later date or time than the
revoked proxy; or (iii) attending the Berkshire Meeting and voting in person.
Attendance at the relevant Special Meeting will not by itself constitute
revocation of a proxy. Neither Berkshire nor General Re expects to adjourn the
relevant Special Meeting for a period of time long enough to require the
setting of a new Record Date for such meeting. If an adjournment occurs, it
will have no effect on the ability of either Berkshire's or General Re's
stockholders of record as of the Record Date to exercise their voting rights
or to revoke any previously delivered proxies.
SOLICITATION OF PROXIES
Each of Berkshire and General Re will bear the cost of solicitation of
proxies from its own stockholders, except that General Re and Berkshire intend
to share equally the cost associated with this Joint Proxy
Statement/Prospectus, including related filing fees. Arrangements will be made
with brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation material to the beneficial owners of stock held of
record by such persons, and Berkshire and General Re will reimburse such
company's custodians, nominees and fiduciaries for their reasonable out-of-
pocket expenses in connection therewith. In addition to solicitation by mail,
the directors, officers and employees of General Re and its subsidiaries may
solicit proxies from General Re stockholders by telephone, telegram or in
person.
In addition, General Re has retained Georgeson & Company Inc. to assist them
in the solicitation of proxies from stockholders in connection with the
General Re Meeting. Georgeson & Company Inc. will receive a fee which General
Re expects will not exceed $15,000 as compensation for its services and will
also receive reimbursement of its out-of-pocket expenses. General Re has
agreed to indemnify Georgeson & Company Inc. against certain liabilities
arising out of or in connection with its engagement.
GENERAL RE STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY
CARDS. IN NO EVENT SHOULD BERKSHIRE STOCKHOLDERS SEND IN THEIR STOCK
CERTIFICATES.
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CERTAIN PROVISIONS OF THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement, which is attached as Annex I to this Joint Proxy
Statement/Prospectus and incorporated herein by reference. Other provisions of
the Merger Agreement are summarized elsewhere in this Joint Proxy
Statement/Prospectus. All such summaries are qualified in their entirety by
reference to the Merger Agreement.
CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS
The respective obligation of each party to consummate the Mergers is subject
to the satisfaction or waiver on or prior to the Closing Date of various
conditions which include, in addition to certain other closing conditions, the
following:
(i) the Merger Agreement and the Transactions having been adopted and
approved by the affirmative vote of a majority of the voting power of the
outstanding shares of General Re Voting Stock and Berkshire Common Stock
entitled to vote thereon;
(ii) the shares of New Berkshire Common Stock issuable to General Re's
and Berkshire's stockholders pursuant to the Merger Agreement having been
approved for listing on the NYSE, subject to official notice of issuance;
(iii) the waiting period (and any extension thereof) applicable to the
Mergers under the HSR Act having terminated or expired (see "The
Transactions--Approvals and Consents");
(iv) 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 Transactions or
any of the Mergers being in effect, provided that General Re and Berkshire
must use their best efforts to have any such injunction, order, restraint
or prohibition vacated;
(v) the registration statement of which this Joint Proxy
Statement/Prospectus is a part not being the subject of any stop order or
proceedings seeking a stop order under the Securities Act, and any material
"blue sky" and other state securities laws applicable to the issuance of
New Berkshire Common Stock having been complied with;
(vi) one of the following having occurred: (a) Berkshire shall have
received written notice of the issuance of the 351(e) Ruling and the No
Gain or Loss Ruling, or (b) if the IRS will not grant the 351(e) Ruling as
a result of the Treasury Department having withdrawn the Proposed
Regulations, Berkshire shall have received written notice of the issuance
of the No Gain or Loss Ruling or the 368(c) Ruling, or (c) Berkshire shall
have made or be deemed to have made the Alternative Election, or (d)
Berkshire shall have declined to make the Alternative Election;
(vii) Berkshire and General Re having received satisfactory evidence that
such licenses, permits, consents, approvals, authorizations, qualifications
and orders of governmental authorities and other third parties as are
necessary in connection with the transactions contemplated by the Merger
Agreement have been obtained, except for those which are not, individually
or in the aggregate, material to Berkshire or General Re or the failure of
which to have been received would not materially dilute the aggregate
benefits to the parties of the Transactions;
(viii) the representations and warranties of the other party in the
Merger Agreement being true and correct in all material respects, in each
case as of the date of the Merger Agreement and as of the Closing Date as
though made on and as of such date; provided that for purposes of
determining the satisfaction of the foregoing, such representations and
warranties will be deemed true and correct if the failure or failures of
such representations and warranties to be so (excluding the effect of any
qualification set forth therein relating to "materiality", "material
adverse change" or "material adverse effect") have not had and could not
reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the other party or on the ability of the other
party to consummate the Transactions or to perform its obligations under
the Merger Agreement; and
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(ix) each party having performed the obligations required to be performed
by it under the Merger Agreement at or prior to the Closing Date (except
for such failures to perform as have not had or could not reasonably be
expected, either individually or in the aggregate, to have a material
adverse effect with respect to the other party or adversely affect the
ability of the party to consummate the transactions therein contemplated or
perform its obligations thereunder).
Berkshire's obligation to consummate the Transactions is subject to the
following additional conditions:
(i) if there has been no Alternative Election, (a) the Final Regulations
(as defined below) being in effect, (b) either (1) Berkshire having
received the 351(e) Ruling and the No Gain or Loss Ruling or (2) the
Proposed Regulations having been withdrawn and Berkshire having received
either the No Gain or Loss Ruling or the 368(c) Ruling, and (c) Berkshire
having received the opinion of Munger, Tolles & Olson LLP, counsel to
Berkshire, based upon reasonably requested representation letters and dated
the Closing Date, to the effect that the Berkshire Merger will be treated
as a transfer of property to Holding Company by the holders of Berkshire
Common Stock governed by Section 351(a) or 351(b) of the Code;
(ii) if there has been an Alternative Election, Berkshire having received
the opinions of Munger, Tolles & Olson LLP, counsel to Berkshire, and
Wachtell, Lipton, Rosen & Katz, counsel to General Re, based upon
reasonably requested representation letters and dated the Closing Date,
that the Alternative Transaction will not qualify as a reorganization
within the meaning of Section 368 of the Code, the Merger Consideration
will be taxable to the stockholders of General Re, and the Alternative
Transaction will not be a taxable transaction to either Berkshire or its
stockholders; and
(iii) all shares of General Re Preferred Stock having been redeemed in
accordance with the terms of its Certificate of Designations, the DGCL and
applicable state and federal securities laws.
The "Final Regulations" means Treasury Regulation Section 1.351-1(c) as in
effect on the date of the Merger Agreement (or as may be amended prior to the
Closing Date either (1) in a manner affecting only the diversification test of
Treasury Regulation Section 1.351-1(c)(1)(i) and not the test of Treasury
Regulation Section 1.351-1(c)(1)(ii) or (2) solely to conform the Final
Regulations to the amendments made to Section 351(e)(1) of the Code by the
Taxpayer Relief Act of 1997).
General Re's obligation to consummate the Merger is subject to the
additional condition that, if there has been no Alternative Election and
Berkshire shall have received any of the Rulings, General Re having received
the opinion of Wachtell, Lipton, Rosen & Katz, counsel to General Re, based
upon reasonably requested representation letters and dated the Closing Date,
to the effect that the General Re Merger will be treated as a transfer of
property to Holding Company by the holders of General Re Common Stock governed
by Section 351(a) or 351(b) of the Code.
CONDUCT OF BUSINESS PENDING THE EFFECTIVE TIME
Pursuant to the Merger Agreement, General Re has agreed, among other things,
until the Effective Time (except as otherwise specifically required by the
terms of the Merger Agreement) that it will, and it will cause its
subsidiaries to, act and carry on their respective businesses in the usual,
regular and ordinary course of business consistent with past practice and, to
the extent consistent therewith, use its best efforts to preserve intact their
current business organizations, keep available the services of their current
officers and employees and preserve their relationships with insureds,
reinsurers, customers, suppliers, insurance brokers and agents, and others
having business dealings with them so that their goodwill and ongoing
businesses will not be impaired at the Effective Time. Except for certain
exceptions for actions in the ordinary course of business consistent with past
practices or as disclosed to Berkshire, General Re agreed to not, and not
permit any of its subsidiaries to, without prior consent of Berkshire, among
other things, (i) declare or pay any dividend or distribution (other than
regular quarterly cash dividends on General Common Stock not in excess of
$0.59 per share, with usual record and payment dates for such dividends in
accordance with General Re's past dividend practice, and regular annual cash
dividends on General Re Preferred Stock not in excess of $6.20 per share (or
not in excess of the amount
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required to be paid pursuant to the Certificate of Designations for the
General Re Preferred Stock, with usual record and payment date for such
dividends in accordance with such Certificate of Designations)), (ii)
reclassify or acquire any shares of its capital stock or certain other
securities, (iii) issue or encumber any shares of its capital stock and
certain other securities, (iv) amend its charter documents, (v) acquire a
substantial portion of the stock or assets of another business organization,
(vi) sell, lease, or encumber any of its materials properties or assets, (vii)
incur any indebtedness or make any loans or capital contributions to, or
investments in, any other person (other than a General Re subsidiary), (viii)
acquire any material assets or agree to make any capital expenditures, (ix)
pay or satisfy any claims or obligations (except as contemplated in General
Re's most recent audited financial statements), (x) grant, transfer, or modify
any rights of material value, (xi) adopt or amend in any material respect any
employee or director benefit plan or arrangement, (xii) change any material
accounting principal, (xiii) take any action that would result in any of its
representations and warranties in the Merger Agreement becoming untrue, or in
any of the conditions to the Mergers not being satisfied, (xiv) make any
material tax election or settle or compromise any tax liability, or (xv)
authorize or commit to take any of the foregoing actions.
NO SOLICITATION
The Merger Agreement provides that neither General Re nor any of its
subsidiaries will, nor will General Re authorize or permit any of its
directors, officers or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
subsidiaries to, directly or indirectly through another person, (i) solicit,
initiate or encourage (including by way of furnishing information), or take
any other action designed to facilitate, any inquiries or the making of any
inquiry, proposal or offer from any person relating to any direct or indirect
acquisition or purchase of a business that constitutes 20% or more of the net
revenues, net income or assets of General Re and its subsidiaries, taken as a
whole, or 20% or more of any class of equity securities of General Re, any
tender offer or exchange offer that if consummated would result in any person
beneficially owning 20% or more of any class of any equity securities of
General Re, or any merger, consolidation, business combination,
recapitalization, reorganization, liquidation, dissolution or similar
transaction involving General Re (or any General Re subsidiary whose business
constitutes 20% or more of the net revenues, net income or assets of General
Re and its subsidiaries, taken as a whole), other than the transactions
contemplated by the Merger Agreement or the Stock Option Agreement (a
"Takeover Proposal") or (ii) participate in any discussions or negotiations
regarding any Takeover Proposal.
Notwithstanding the foregoing, however, if the General Re Board of Directors
determines in good faith, after consultation with outside counsel, that it is
necessary to do so in order to act in a manner consistent with its fiduciary
duties to General Re's stockholders under applicable law, General Re may, in
response to any proposal made by a third party to acquire, directly or
indirectly, including pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization, reorganization,
liquidation, dissolution or similar transaction, for consideration to General
Re's stockholders consisting of cash and/or securities, all of the shares of
General Re's capital stock then outstanding or all or substantially all the
assets of General Re, on terms which the Board of Directors of General Re
determines in its good faith judgment to be more favorable to General Re's
stockholders than the Transactions and for which financing, to the extent
required, is then committed or which, in the good faith judgment of the Board
of Directors of General Re, is reasonably capable of being obtained by such
third party (a "Superior Proposal") made prior to the approval of the
Transactions by the General Re stockholders, which Superior Proposal was not
solicited by it and which did not otherwise result from a breach of the
covenant not to solicit, and subject to providing prior written notice of its
decision to take such action to Berkshire and compliance with the other
provisions of the covenant not to solicit, (x) furnish information with
respect to General Re and its subsidiaries to any person making a Superior
Proposal pursuant to a customary confidentiality agreement (as determined by
General Re based on the advice of its outside counsel) and (y) participate in
discussions or negotiations regarding such Superior Proposal.
Except as expressly permitted by the covenant not to solicit, neither the
Board of Directors of General Re nor any committee thereof may (i) withdraw or
modify, or propose publicly to withdraw or modify, in a manner
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adverse to Berkshire, the approval or recommendation by such Board of
Directors or such committee of the Transactions or this Agreement, (ii)
approve or recommend, or propose publicly to approve or recommend, any
Takeover Proposal, or (iii) cause General Re to enter into any letter of
intent, agreement in principle, acquisition agreement or other similar
agreement related to any Takeover Proposal (a "Third Party Acquisition
Agreement"). Notwithstanding the foregoing, the Board of Directors of General
Re, to the extent that it determines in good faith, after consultation with
outside counsel, that in light of a Superior Proposal it is necessary to do so
in order to act in a manner consistent with its fiduciary duties to General
Re's stockholders under applicable law, may terminate the Merger Agreement
solely in order to concurrently enter into a Third Party Acquisition Agreement
with respect to any Superior Proposal, but only at a time that is after the
second business day following Berkshire's receipt of written notice advising
Berkshire that the Board of Directors of General Re is prepared to accept a
Superior Proposal, specifying the material terms and conditions of such
Superior Proposal and identifying the person making such Superior Proposal,
all of which information will be kept confidential by Berkshire.
In addition to the obligations of General Re set forth above, General Re has
agreed to immediately advise Berkshire orally and in writing of any request
for information or any Takeover Proposal, the material terms and conditions of
such request or Takeover Proposal and the identity of the person making such
request or Takeover Proposal. General Re has further agreed to keep Berkshire
reasonably informed of the status and details (including amendments or
proposed amendments) of any such request or Takeover Proposal.
Nothing contained in the covenant not to solicit prohibits General Re 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
General Re's stockholders if, in the good faith judgment of the Board of
Directors of General Re, after consultation with outside counsel, failure so
to disclose would be inconsistent with its obligations under applicable law;
provided, however, that, neither General Re nor its Board of Directors nor any
committee thereof may withdraw or modify, or propose publicly to withdraw or
modify, its position with respect to the Merger Agreement or the Transactions
or approve or recommend, or propose publicly to approve or recommend, a
Takeover Proposal.
TERMINATION
The Merger Agreement may be terminated and abandoned at any time prior to
the Effective Time, whether before or after approval of the Transactions by
the stockholders of General Re and Berkshire:
(i) by mutual written consent of Berkshire and General Re;
(ii) by either party if (a) any Federal, state or local government or any
court, administrative agency or commission or other governmental authority
or agency, domestic or foreign, shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting one or both of the Mergers or the Transactions and
such order, decree, ruling or other action shall have become final and
nonappealable; (b) the Transactions shall not have been consummated on or
before June 1, 1999 (other than due to the failure of the party seeking to
terminate the Merger Agreement to perform its obligations thereunder); (c)
any required approval of the stockholders of either party shall not have
been obtained by reason of the failure to obtain the required vote upon a
vote held at a duly held meeting of stockholders or at any adjournment
thereof; or (d) if the other party fails to perform any of its material
obligations under this Agreement and such failure has not been cured within
thirty days after receipt of written notice of such failure;
(iii) by Berkshire, (a) if General Re (1) withdraws, modifies or amends
in any respect adverse to Berkshire or New Berkshire its approval or
recommendation of the Merger Agreement or the Transactions, (2) recommends
any Takeover Proposal from a person other than Berkshire or (3) resolves to
do any of the foregoing, or (b) if (1) General Re, in response to a
Superior Proposal, furnishes information or participates in discussion as
permitted by the Merger Agreement, and such discussions, directly or
through agents or representatives, continue for more than 10 business days
after the receipt of such Superior Proposal, or
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(2) (x) a Takeover Proposal that is publicly disclosed shall have been
commenced, publicly proposed or communicated to General Re which contains a
proposal as to price (without regard to whether such proposal specifies a
specific price or a range of potential prices) and (y) General Re shall not
have rejected such proposal within 10 business days of its receipt or, if
sooner, the date its existence first becomes publicly disclosed; or
(iv) by General Re, to concurrently enter into a Third Party Acquisition
Agreement with respect to a Superior Proposal.
Upon termination, the Merger Agreement shall become void and have no effect,
without any liability or obligation on the part of Berkshire or General Re,
other than the payment of expenses as described in "The Transactions--Fees and
Expenses" below, and the payment of the Termination Fee (as defined below).
Termination does not relieve any party for any breach of the representations,
warranties, covenants or agreements set forth in the Merger Agreement prior to
any such termination.
TERMINATION FEE
If the Merger Agreement is terminated by General Re in order for General Re
to concurrently enter into a Third Party Acquisition Agreement with respect to
a Superior Proposal or if prior to any termination of the Merger Agreement,
General Re or General Re's Board of Directors or any committee thereof shall
have taken any action to make the General Re's Rights Agreement dated as of
September 11, 1991 with Bank of New York, as right agent (the "Rights Plan"),
inapplicable to any person other than Berkshire or New Berkshire, then,
concurrently with any such termination or action, General Re is required to
(i) pay Berkshire a fee equal to $400 million and (ii) promptly reimburse
Berkshire its out-of-pocket expenses related to the Merger Agreement and the
Transactions.
If the Merger Agreement is terminated by Berkshire due to a reason set forth
in paragraph (iii) under "The Transactions--Termination" above, or if a
Takeover Proposal shall have been made to General Re or any of its
subsidiaries or stockholders or any person shall have publicly announced an
intention (whether or not conditional) to make a General Re Takeover Proposal
and thereafter this Agreement is terminated by either party due to the failure
to obtain the required stockholder vote of Berkshire or General Re and, in
either case, within 18 months after the date of such termination General Re
enters into any Third Party Acquisition Agreement relating to any Takeover
Proposal, then General Re is required to (i) promptly (but in no event later
than two business days after the date such agreement is entered into) pay
Berkshire a fee equal to $400 million and (ii) reimburse Berkshire its out-of-
pocket expenses related to the Merger Agreement and the Transactions.
The fee described in the preceding paragraphs is referred to herein as the
"Termination Fee."
CERTAIN REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains representations and warranties of General Re
relating, among other things, with respect to General Re and its subsidiaries,
to (i) their organization, good standing and corporate power; (ii) ownership
of subsidiaries by General Re; (iii) General Re's capital structure; (iv) its
corporate power to enter into, and its due authorization, execution and
delivery of the Merger Agreement and the Stock Option Agreement and the Merger
Agreement and the Stock Option Agreement not violating its Certificate of
Incorporation or By-Laws, applicable law, and certain other material
agreements; (v) documents filed by General Re with the Securities and Exchange
Commission (the "Commission") and the accuracy of information contained
therein and the absence of undisclosed liabilities; (vi) the accuracy of
information supplied by General Re in connection with this Joint Proxy
Statement/Prospectus; (vii) the absence of certain changes or events since the
date of the most recent audited financial statements filed with the
Commission, including material adverse changes with respect to General Re;
(viii) the absence of pending or threatened litigation, certain labor matters
and compliance with all applicable laws; (ix) benefit plans and other matters
relating to the Employee Retirement Income Security Act of 1974, as amended,
and employment matters; (x) filing of tax returns and payment of taxes;
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(xi) the inapplicability of any state takeover statute or similar statute or
regulation of the State of Delaware (and, to the knowledge of General Re, of
any other state or jurisdiction) to the Merger Agreement and the Stock Option
Agreement and the transactions contemplated thereby, the absence of any
provision of General Re's Certificate of Incorporation, Bylaws or other
governing instruments that would restrict or impair the ability of Berkshire
or New Berkshire to exercise the rights of a stockholder with respect to
securities of General Re and its subsidiaries or the rights granted under the
Merger Agreement and the Stock Option Agreement or permit any stockholder to
acquire securities of General Re or its subsidiaries on a basis not available
to Berkshire or New Berkshire; (xii) environmental matters; (xiii) good title
to properties and assets free of liens; (xiv) insurance matters, (xv)
compliance with reserve requirements, adequacy of reserves and absence of
certain assessments, (xvi) investment advisory and investment company matters,
(xvii) brokers' fees and expenses; (xviii) receipt of the opinion of Goldman
Sachs to the effect that the Merger Consideration to be received in the
Transactions by General Re stockholders is fair from a financial point of
view; (xix) the General Re Board's recommendation and determinations with
respect to the Merger Agreement and the Stock Option Agreement and the
transactions contemplated thereby, including the Transactions, the General Re
Merger, and the Alternative General Re Merger; (xx) the taking of all actions
necessary with respect to General Re's Rights Plan; and (xxi) the required
vote of General Re's stockholders necessary to approve the Merger Agreement,
the General Re Merger, the Alternative General Re Merger, and the other
transactions contemplated thereby.
The Merger Agreement also contains representations and warranties of
Berkshire relating, among other things, with respect to Berkshire and its
subsidiaries, to (i) their organization, good standing, and corporate power;
(ii) ownership of subsidiaries by Berkshire; (iii) Berkshire's capital
structure; (iv) its corporate power to enter into, and its due authorization,
execution and delivery of the Merger Agreement and the Stock Option Agreement
and the Merger Agreement and the Stock Option Agreement not violating its
Certificate of Incorporation or By-Laws, applicable law and certain material
agreements; (v) documents filed by Berkshire with the Commission and the
accuracy of information contained therein and the absence of undisclosed
liabilities; (vi) the accuracy of information supplied by Berkshire in
connection with the registration statement of which this Joint Proxy
Statement/Prospectus is a part and this Joint Proxy Statement/Prospectus;
(vii) the absence of certain changes or events since the most recent audited
financial statements filed with the Commission, including material adverse
changes with respect to Berkshire; (viii) compliance with all applicable laws;
(ix) the inapplicability of any state takeover statute or similar statute or
regulation of the State of Delaware (and, to the knowledge of Berkshire, of
any other state or jurisdiction) to the Merger Agreement and the transactions
contemplated thereby, the absence of any provision of Berkshire's Certificate
of Incorporation, Bylaws or other governing instruments that would restrict or
impair the ability of New Berkshire to exercise the rights of a stockholder
with respect to securities of Berkshire and its subsidiaries or the rights
granted under the Merger Agreement or permit any stockholder to acquire
securities of Berkshire or its subsidiaries on a basis not available to New
Berkshire; (x) the interim operations of New Berkshire and the Merger Subs;
(xi) brokers' fees and expenses; (xii) the Berkshire Board's recommendation
and determinations with respect to the Merger Agreement and the transactions
contemplated thereby, including the Transactions, the Berkshire Merger, and
the Alternative General Re Merger; and (xiii) the required vote of Berkshire's
stockholders necessary to approve the Merger Agreement, the Berkshire Merger
and the other transactions contemplated thereby.
INDEMNIFICATION
The Merger Agreement provides that General Re will, and from and after the
Effective Time, New Berkshire will, indemnify, defend, protect and hold
harmless each person who is now, or has been at any time prior to the date of
the Merger Agreement or who becomes such prior to the Effective Time, an
officer or director of General Re 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 will 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
General Re or any of its subsidiaries (the "Indemnified Parties"), whether
pertaining to any matter existing or occurring at or prior to the Effective
Time and whether
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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, arising in whole or in part out of, or pertaining to the Merger Agreement,
the Stock Option Agreement or the transactions contemplated thereby. In the
case of General Re, such indemnification will only be to the fullest extent a
corporation is permitted under the DGCL to indemnify its own directors and
officers, and in the case New Berkshire, such indemnification will not be
limited by the DGCL but will not be applicable to any claims made against the
Indemnified Parties if a judgment or other final adjudication establishes that
their acts or omissions (A) were committed in bad faith or were the result of
active and deliberate dishonesty and were material to the cause of action so
deliberated or (B) arose out of, were based upon or attributable to the
gaining of any financial profit or other advantage to which they were not
legally entitled. General Re or New Berkshire, as the case may be, will pay
all expenses of each Indemnified Party in advance of the final disposition of
any such action or proceeding to the fullest extent permitted by law upon
receipt of any undertaking contemplated by Section 145(e) of the DGCL.
FEES AND EXPENSES
Whether or not the Transactions are consummated, all costs and expenses
incurred in connection with the Agreement and the transactions contemplated
thereby will be paid by the party incurring such expenses, except that
expenses in connection with the printing and mailing of this Joint Proxy
Statement/Prospectus, the registration statement of which this is a part, and
filing fees with the Commission, will be shared equally between Berkshire and
General Re.
AMENDMENT AND WAIVER
The Merger Agreement may be amended by the parties at any time before or
after required approval of the Transactions by the stockholders of General Re
and of Berkshire; provided, however, that after such approvals, no amendment
will be made that by law requires further stockholder approval unless such
approval is obtained. Prior to the Effective Time, the parties may (i) extend
the time for the performance of any obligation or other act of any other party
to the Merger Agreement, (ii) waive any inaccuracies in the representations
and warranties contained in the Merger Agreement or in any document delivered
pursuant thereto or (iii) subject to any required stockholder approval, waive
compliance with any of the agreements or conditions contained in the Merger
Agreement.
56
<PAGE>
COMPARATIVE MARKET PRICES AND DIVIDEND INFORMATION
COMPARATIVE MARKET PRICE DATA
The following table presents trading information for Berkshire and General
Re Common Stock on the NYSE on June 19, 1998 and August 12, 1998. June 19,
1998 was the last full trading day prior to our announcement of the signing of
the Merger Agreement. August 12, 1998 was the last trading day for which
information was available prior to the date of the first mailing of this Joint
Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
BERKSHIRE CLASS A
BERKSHIRE CLASS A BERKSHIRE CLASS B GENERAL RE COMMON STOCK PRICE
COMMON STOCK COMMON STOCK COMMON STOCK X.0035
(DOLLARS PER SHARE) (DOLLARS PER SHARE) (DOLLARS PER SHARE) (DOLLARS PER SHARE)
-------------------- ---------------------------------------- ----------------------
HIGH LOW CLOSE HIGH LOW CLOSE HIGH LOW CLOSE HIGH LOW CLOSE
------ ------ ------ ------ ------ -------------- --- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
June 19, 1998........... 81,000 79,000 80,900 2,714 2,636 2,705 222 1/2 220 220 1/4 283 1/2 276 1/2 283.15
August 12, 1998.........
</TABLE>
On the Record Date, there were approximately holders of record of
General Re Common Stock, holders of record of Berkshire Class A Common
Stock and holders of record of Berkshire Class B Common Stock.
HISTORICAL MARKET PRICES AND DIVIDENDS
The principal trading market for Berkshire and General Re Common Stock is
the NYSE. The following tables set forth, for the periods indicated, the high
and low sales price per share on the NYSE, based on published financial
sources, of Berkshire and General Re Common Stock and dividends declared on
General Re Common Stock.
<TABLE>
<CAPTION>
BERKSHIRE
CLASS A BERKSHIRE CLASS B
COMMON STOCK COMMON STOCK
(DOLLARS PER SHARE) (DOLLARS PER SHARE)
------------------- -------------------
CALENDAR PERIOD HIGH LOW HIGH LOW
--------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Fiscal 1996 (ended December 31,
1996)
First Quarter..................... 38,000 29,800 N/A N/A
Second Quarter.................... 36,000 30,000 1,220 990
Third Quarter..................... 33,500 30,500 1,117 1,005
Fourth Quarter.................... 36,500 31,000 1,175 1,036
Fiscal 1997 (ended December 31,
1997)
First Quarter..................... 37,900 33,000 1,264 1,088
Second Quarter.................... 48,600 35,900 1,624 1,197
Third Quarter..................... 48,300 41,300 1,608 1,377
Fourth Quarter.................... 47,200 42,500 1,565 1,400
Fiscal 1998 (ending December 31,
1998)
First Quarter..................... 69,500 45,700 2,324 1,526
Second Quarter.................... 84,000 65,800 2,795 2,184
Third Quarter (through August 12,
1998)............................
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
GENERAL RE
COMMON STOCK
(DOLLARS PER
SHARE)
-------------
CALENDAR PERIOD HIGH LOW DIVIDENDS
--------------- ------ ------ ---------
<S> <C> <C> <C>
Fiscal 1996 (ended December 31, 1996)
First Quarter...................................... 156.00 142.38 .51
Second Quarter..................................... 153.25 139.13 .51
Third Quarter...................................... 154.50 140.83 .51
Fourth Quarter..................................... 169.38 142.50 .51
Fiscal 1997 (ended December 31, 1997)
First Quarter...................................... 176.38 151.25 .55
Second Quarter..................................... 189.00 154.00 .55
Third Quarter...................................... 208.50 185.50 .55
Fourth Quarter..................................... 219.38 193.19 .55
Fiscal 1998 (ending December 31, 1998)
First Quarter...................................... 226.50 203.63 .59
Second Quarter..................................... 259.50 217.25 .59
Third Quarter (through August 12, 1998)............
</TABLE>
Post-Merger Dividend Policy. Berkshire has not declared a cash dividend
since 1967 and has no present intention to pay a dividend on Berkshire Common
Stock in the future. New Berkshire will continue Berkshire's dividend policy.
58
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
are based on the historical consolidated financial statements of Berkshire and
General Re, combined and adjusted to give effect to the Mergers. Certain
reclassifications have been made to the historical financial statements to
conform with this pro forma presentation. These statements should be read in
conjunction with such historical financial statements and notes thereto, which
are incorporated by reference in this Joint Proxy Statement/Prospectus. See
"Where You Can Find More Information".
The unaudited pro forma combined condensed statements of earnings for the
year ended December 31, 1997 and for the six months ended June 30, 1998
present the results for Berkshire and General Re as if the Mergers had
occurred at the beginning of each period presented. The accompanying unaudited
pro forma combined condensed balance sheet as of June 30, 1998 gives effect to
the Mergers as of that date.
The pro forma adjustments are based upon preliminary estimates, information
currently available and certain assumptions that management believes are
reasonable under the circumstances. Berkshire's actual consolidated financial
statements will reflect the effects of the Mergers on and after the Effective
Time rather than the dates indicated above. The unaudited pro forma combined
condensed financial statements neither purport to represent what the combined
results of operations or financial condition actually would have been had the
Mergers and related transactions in fact occurred on the assumed dates, nor to
project the combined results of operations and financial position for any
future period.
The Mergers will be accounted for by the purchase method and, therefore,
assets and liabilities of General Re will be recorded at their fair values.
The excess of the purchase cost over the fair value of net assets acquired at
the Effective Time will be recorded as goodwill. Allocations included in the
pro forma statements are based on analysis which is not yet completed.
Accordingly, the final value of the purchase price and its allocation may
differ, perhaps significantly, from the amounts included in these pro forma
statements.
At the Effective Time, each issued and outstanding share of General Re
Common Stock will be converted into the right to receive either 0.0035 Class A
shares or 0.105 Class B shares of New Berkshire Common Stock. The pro forma
combined condensed financial statements assume that all General Re shares were
converted into Class A shares at the fixed exchange ratio of 0.0035. The total
value of the consideration for pro forma purposes was determined using the
average closing price of Berkshire Class A Common Stock on the NYSE for the
ten day trading period ended June 26, 1998. The total consideration for the
transaction using this value was $21.1 billion.
The pro forma financial statements were prepared under the expectation that
the IRS issues certain rulings requested by the companies on the tax aspects
of the transaction. See "The Transactions--Federal Income Tax Considerations
of the Transactions". If the rulings are denied or not obtained prior to
February 19, 1999, Berkshire has the right to elect to proceed with the
Alternative Transaction, as described under "The Transactions--The Alternative
Transaction." Under the Alternative Transaction, Berkshire would have paid
cash of approximately $634 million for 3% of the total consideration and
issued approximately 8,200 fewer Class A equivalent shares than reflected in
the following pro forma financial statements. The Alternative Transaction
scenario would not result in materially different pro forma combined results
from operations or financial condition than the pro forma information
presented herein.
59
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
--------------------
BERKSHIRE GENERAL RE ADJUSTMENTS PRO FORMA
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Insurance premiums earned......... $ 4,761 $6,607 $ 11,368
Sales and service revenues........ 3,578 83 3,661
Interest, dividend and other
investment income................ 953 1,314 $(111)(A) 2,156
Income from financial services.... 32 302 334
Realized investment gain.......... 1,106 3 1,109
--------- ------ ------- ---------
10,430 8,309 (111) 18,628
--------- ------ ------- ---------
COST AND EXPENSES:
Insurance losses and loss
adjustment expenses.............. 3,420 4,671 8,091
Insurance underwriting expenses... 880 1,955 63 (B) 2,898
Cost of products and services
sold............................. 2,187 2,187
Selling, general and
administrative expenses.......... 921 269 1,190
Goodwill amortization............. 83 29 320 (C) 432
Interest expense.................. 112 58 (2)(D) 168
--------- ------ ------- ---------
7,603 6,982 381 14,966
--------- ------ ------- ---------
EARNINGS BEFORE INCOME TAXES AND
MINORITY INTEREST................ 2,827 1,327 (492) 3,662
Income taxes...................... 898 302 (60)(E) 1,140
Minority interest................. 28 57 85
--------- ------ ------- ---------
NET EARNINGS...................... $ 1,901 $ 968 $ (432) $ 2,437
========= ====== ======= =========
Average common shares
outstanding*..................... 1,233,192 270,710 1,503,902
NET EARNINGS PER COMMON SHARE*.... $ 1,542 $ 1,620
</TABLE>
- --------
* Average shares outstanding include average Class A Common shares and average
Class B Common shares determined on an equivalent Class A Common stock basis.
Net earnings per common share shown above represents net earnings per
equivalent Class A Common share. Net earnings per Class B Common share is
equal to one-thirtieth ( 1/30) of such amount or $54 per share on a pro forma
basis.
See the accompanying notes to the unaudited pro forma combined condensed
financial statements.
60
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
-------------------- PRO FORMA
BERKSHIRE GENERAL RE ADJUSTMENTS PRO FORMA
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Insurance premiums earned......... $ 2,616 $2,946 $ 5,562
Sales, service and other revenues. 2,016 33 2,049
Interest, dividend and other
investment income................ 532 699 $ (56)(A) 1,175
Income from financial services.... 23 188 211
Realized investment gain.......... 2,074 35 2,109
--------- ------ ------- ---------
7,261 3,901 (56) 11,106
--------- ------ ------- ---------
COST AND EXPENSES:
Insurance losses and loss
adjustment expenses.............. 1,948 2,005 3,953
Insurance underwriting expenses... 532 952 31 (B) 1,515
Cost of products and services
sold............................. 1,280 1,280
Selling, general and
administrative expenses.......... 496 130 626
Goodwill amortization............. 47 14 161 (C) 222
Interest expense.................. 54 72 (1)(D) 125
--------- ------ ------- ---------
4,357 3,173 191 7,721
--------- ------ ------- ---------
EARNINGS BEFORE INCOME TAXES AND
MINORITY INTEREST................ 2,904 728 (247) 3,385
Income taxes...................... 987 170 (31)(E) 1,126
Minority interest................. 19 32 51
--------- ------ ------- ---------
NET EARNINGS...................... $ 1,898 $ 526 $ (216) $ 2,208
========= ====== ======= =========
Average common shares
outstanding*..................... 1,240,957 270,710 1,511,667
NET EARNINGS PER COMMON SHARE*.... $ 1,529 $ 1,461
========= =========
</TABLE>
- --------
* Average shares outstanding include average Class A Common shares and average
Class B Common shares determined on an equivalent Class A Common stock
basis. Net earnings per common share shown above represents net earnings per
equivalent Class A Common share. Net earnings per Class B Common share is
equal to one-thirtieth ( 1/30) of such amount or $49 per share on a pro
forma basis.
See the accompanying notes to the unaudited pro forma combined condensed
financial statements.
61
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
JUNE 30, 1998
(IN MILLIONS)
<TABLE>
<CAPTION>
HISTORICAL
--------------------
BERKSHIRE GENERAL RE ADJUSTMENTS PRO FORMA
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents......... $ 7,118 $ 222 $ 7,340
Investments:
Securities with fixed
maturities..................... 5,483 18,634 24,117
Equity securities and other
investments.................... 41,629 6,122 47,751
Receivables....................... 1,735 5,470 7,205
Assets of financial services...... 1,340 10,560 11,900
Goodwill of acquired businesses... 3,410 956 $12,991 (F) 17,357
Other assets...................... 3,232 1,298 4,530
------- ------- ------- --------
$63,947 $43,262 $12,991 $120,200
======= ======= ======= ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS'
EQUITY:
<S> <C> <C> <C> <C>
Losses and loss adjustment
expenses......................... $ 7,241 $16,617 $ 23,858
Unearned premiums................. 1,468 2,003 3,471
Accounts payable, accruals and
other liabilities................ 2,014 3,469 $ 709 (G) 6,008
(184)(H)
Income taxes, principally
deferred......................... 12,409 1,361 (222)(I) 13,548
Borrowings under investment
agreements and other debt........ 2,192 334 41 (J) 2,567
Liabilities of financial services. 1,190 9,998 11,188
------- ------- ------- --------
26,514 33,782 344 60,640
Minority shareholders' interests.. 516 1,001 1,517
Total shareholders' equity........ 36,917 8,479 12,647 (K) 58,043
------- ------- ------- --------
$63,947 $43,262 $12,991 $120,200
======= ======= ======= ========
</TABLE>
See the accompanying notes to the unaudited proforma combined condensed
financial statements.
62
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA COMBINEDCONDENSED FINANCIAL STATEMENTS
The pro forma adjustments to the combined condensed statements of earnings
are described below.
(A) Reduction of interest income due to amortization of purchase accounting
adjustments related to certain of General Re's investments in securities
with fixed maturities.
(B) Estimation of (1) the increase in compensation expense related to the
anticipated replacement of General Re's employee stock option plan with a
new incentive compensation plan that would not require the issuance of
stock options or securities of Berkshire and (2) the increase in
compensation expense related to the use of non-dividend paying Berkshire
stock with respect to the General Re Employee Savings and Stock Ownership
Plan ("ESSOP").
(C) Amortization of the excess of purchase price over the fair value of net
assets acquired, net of the elimination of goodwill amortization included
in General Re's historical statement of earnings. The excess of purchase
price over fair value of net assets recorded with respect to the merger
will be amortized ratably over 40 years.
(D) Amortization of purchase accounting adjustments related to General Re's
outstanding debt.
(E) Income tax effects on pro forma adjustments.
The purchase accounting and pro forma adjustments related to the combined
condensed balance sheet are described below. Dollar amounts are in millions.
(F) Excess of purchase price over the fair value of net assets acquired
($13,947), less the elimination of goodwill included in General Re's
historical balance sheet ($956).
(G) Recognition of liabilities related to the estimated value of General Re
employee stock options ($635) and estimated General Re and Berkshire
merger costs ($74).
(H) Conversion of General Re's redeemable cumulative convertible preferred
stock into Berkshire common stock ($144) and adjustment of related ESSOP
loan balances to fair value ($40).
(I) Adjustment of income tax liabilities applicable to pro forma adjustments,
other than goodwill, estimated merger costs and General Re Preferred
stock.
(J) Adjustment of General Re's consolidated debt to fair value.
(K) Issuance of 270,710 Class A equivalent New Berkshire shares in exchange
for General Re shares ($21,126), less elimination of General Re's
historical shareholders' equity accounts ($8,479).
63
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF NEW BERKSHIRE
FOLLOWING THE MERGERS
DIRECTORS
The following table sets forth information as to the persons who are expected
to serve as directors of New Berkshire (or, in the event of the Alternative
Transaction, of Berkshire) following the Transactions.
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE
NAME AND YEAR FIRST BECAME DURING THE PAST FIVE YEARS
A DIRECTOR OF BERKSHIRE AGE AND OTHER INFORMATION
-------------------------- --- --------------------------
<C> <C> <S>
Warren E. Buffett (1965)......... 67 Chairman and Chief Executive Officer
since 1970. Mr. Buffett is a
controlling person of Berkshire. He
is also a director of The Coca-Cola
Company, The Gillette Company and
The Washington Post Company.
Howard G. Buffett (1993)......... 43 Mr. Buffett is Chairman of the Board
of Directors of The GSI Group, a
company primarily engaged in the
manufacture of agricultural
equipment. From 1992 until July 5,
1995, Mr. Buffett was Vice
President, Assistant to the Chairman
and a Director of Archer Daniels
Midland Company, a company engaged
principally in the business of
processing and merchandising
agricultural commodities. He is also
a director of Coca-Cola Enterprises
Inc. and Lindsay Manufacturing Co.
Susan T. Buffett (1991).......... 66 Mrs. Buffett has not been employed in
the past five years.
Malcolm G. Chace (1992).......... 63 In 1996 Mr. Chace was named Chairman
of the Board of Directors of BankRI,
a community bank located in the
State of Rhode Island. Prior to 1996
Mr. Chace had been a private
investor.
Ronald E. Ferguson............... 56 Chairman and Chief Executive Officer
of General Re since 1987. He has
been with General Re since 1969. Mr.
Ferguson is also a director of
Colgate-Palmolive Company and
General Signal Corporation.
Charles T. Munger (1978)......... 74 Chairman of the Board of Directors
and Chief Executive Officer of Wesco
Financial Corporation, approximately
80%-owned by Berkshire. Mr. Munger
is also Chairman of the Board of
Directors of Daily Journal
Corporation and a director of Costco
Companies, Inc.
Ronald L. Olson (1997)........... 57 For more than the past five years,
Mr. Olson has been a partner in the
law firm of Munger, Tolles & Olson
LLP. He is also a director of Edison
International, Western Asset Trust,
Inc. and Pacific American Income
Shares Inc.
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE
NAME AND YEAR FIRST BECAME DURING THE PAST FIVE YEARS
A DIRECTOR OF BERKSHIRE AGE AND OTHER INFORMATION
-------------------------- --- --------------------------
<C> <C> <S>
Walter Scott, Jr. (1988)......... 67 For more than the past five years, Mr.
Scott has been Chairman of the Board of
Directors of Level 3 Communications,
Inc., a successor to certain businesses
of Peter Kiewit Sons', Inc., which is
engaged in telecommunications and
computer outsourcing. He is also a
director of Burlington Resources Inc.,
CalEnergy Company, Inc., Commonwealth
Telephone Enterprises, Inc., ConAgra,
Inc., Peter Kiewit Sons', Inc., RCN
Corporation, U.S. Bancorp and Valmont
Industries Inc.
</TABLE>
Warren E. Buffett and Susan T. Buffett are husband and wife. Howard G.
Buffett is the son of Warren and Susan Buffett. Otherwise, there is no family
relationship between any other officer or director of the Corporation.
Ronald L. Olson is a partner of the law firm of Munger, Tolles & Olson LLP,
which rendered legal services to Berkshire and its subsidiaries in 1997 and is
expected to render legal services to New Berkshire in 1998. In January 1998,
Mr. Olson and his wife agreed to sell a home owned by them to MS Property
Company, a subsidiary of Wesco Financial Corporation, which is an 80.1% owned
subsidiary of Berkshire, and to purchase another home from MS Property
Company. Both homes are located in a community developed by MS Property
Company. The values of the homes and terms of the exchange were determined by
Mr. Munger, approved by Wesco Financial Corporation's board of directors and
accepted by Mr. Olson.
COMPENSATION OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS
Mr. Scott is expected to be the member of the audit committee of the New
Berkshire Board. The functions of the audit committee are to select the
independent auditors; review the results of the annual audit; inquire into
important internal control, accounting and financial reporting matters; and
report and make recommendations to the full Board of Directors. New Berkshire
will not have standing nominating or compensation committees of the Board of
Directors.
Directors who are employees of New Berkshire or its subsidiaries will not
receive fees for attendance at directors' meetings. Directors who are not
employees will receive a fee of $900 for each meeting attended in person and
$300 for participating in any meeting conducted by telephone. A director who
serves as a member of the audit committee will receive additional fees of
$1,000 quarterly. Directors will be reimbursed for their out-of-pocket
expenses incurred in attending meetings of directors or shareholders.
EXECUTIVE OFFICERS
Set forth below are the names and titles of certain of the persons who are
expected to serve as executive officers of New Berkshire (or, in the event of
the Alternative Transaction, of Berkshire) following the Transactions.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH REGISTRANT SINCE
---- --- ------------------------ -----
<S> <C> <C> <C>
Warren E. Buffett...................... 67 Chairman of the Board 1970
Marc D. Hamburg........................ 49 Vice President 1992
Charles T. Munger...................... 74 Vice Chairman of the Board 1978
</TABLE>
Each executive officer will serve, in accordance with the bylaws of New
Berkshire, until the first meeting of the Board of Directors following the
next annual meeting of shareholders and until his respective successor is
chosen and qualified or until he sooner dies, resigns, is removed or becomes
disqualified. Mr. Buffett and Mr. Munger will also serve as directors of New
Berkshire.
65
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
New Berkshire has not yet paid any compensation to any of its executive
officers, and the form and amount of such compensation has not yet been
determined. However, New Berkshire is expected to continue Berkshire's
program, which has been different from that of most public corporations. Mr.
Buffett recommends to the Berkshire Board of Directors the amount of his
proposed remuneration and he sets the remuneration of Berkshire's other
executive officers (including both salary and bonus). Mr. Buffett has been
paid an annual salary of $100,000 for each of the last 17 years. Factors
considered by the Board of Directors and Mr. Buffett are typically subjective,
such as their perception of the individual's performance and any planned
change in functional responsibility. Neither the profitability of Berkshire
nor the market value of its stock are considered in setting executive officer
remuneration (including both salary and bonus). Further, it is Berkshire's
policy that all compensation paid to its executive officers be deductible
under Internal Revenue Code Section 162(m).
For information concerning the compensation paid to the Chief Executive
Officers and certain other executive officers of each of Berkshire and General
Re for the 1997 fiscal year, see the 1998 Proxy Statements for Berkshire and
General Re, the relevant portions of which are incorporated by reference into
the Berkshire's and General Re's Annual Report on Form 10-K for the Year Ended
December 31, 1997, respectively. See "Where You Can Find More Information."
66
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT OF NEW BERKSHIRE
The following table sets forth the anticipated beneficial ownership of New
Berkshire Common Stock, after giving effect to the Mergers, as to each person
expected to be a New Berkshire executive officer or director. Warren E.
Buffett, whose address is 1440 Kiewit Plaza, Omaha, NE 68131, is the only
person known to New Berkshire who is likely to be the beneficial owner of more
than 5% of New Berkshire's Class A or Class B Common Stock.
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
PERCENTAGE OF AGGREGATE AGGREGATE
OUTSTANDING VOTING ECONOMIC
TITLE OF SHARES STOCK OF POWER OF INTEREST OF
CLASS OF BENEFICIALLY RESPECTIVE CLASS A AND CLASS A AND
NAME STOCK OWNED(1) CLASS(1)(2) CLASS B(1)(2) CLASS B(1)(2)
---- -------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Warren E. Buffett ...... Class A 478,232(3) 32.8 32.6(4) 31.5
Class B -- --
Susan T. Buffett........ Class A 36,981(3) 2.5 2.5(4) 2.4
Class B 6(3) *
Howard G. Buffett....... Class A 14 * * *
Class B 24 *
Malcom G. Chace......... Class A 13,008(5) 0.9 0.9 0.9
Class B 62(5) *
Ronald E. Ferguson...... Class A 358(6) * * *
Class B 23(6) *
Marc D. Hamburg......... Class A -- -- -- --
Class B -- --
Charles T. Munger....... Class A 18,390 1.3 1.3 1.2
Class B -- --
Ronald L. Olson......... Class A 45 * * *
Class B -- --
Walter Scott, Jr. ...... Class A 100(7) * * *
Class B -- --
Directors and executive
officers as a group
(9 persons)........... Class A 547,127 37.5 37.3 36.1
Class B 115 *
</TABLE>
- --------
* less than 0.1%
(1) Beneficial owners exercise both sole voting and sole investment power
unless otherwise stated. New Berkshire Class A Common Stock is convertible
into thirty shares of New Berkshire Class B Common Stock at the option of
the stockholder. As a result, pursuant to Rule 13d-3(d)(1) of the Exchange
Act, a stockholder will be deemed to have beneficial ownership of the
shares of New Berkshire Class B Common Stock which such stockholder may
acquire upon conversion of the New Berkshire Class A Common Stock. In
order to avoid overstatement, the amount of New Berkshire Class B Common
Stock beneficially owned does not take into account such shares of New
Berkshire Class B Common Stock which may be acquired upon conversion (an
amount which is equal to 30 times the number of shares of New Berkshire
Class A Common Stock held by a stockholder). The percentage of New
Berkshire Class B Common Stock to be outstanding does not take into
account shares of New Berkshire Class B Common Stock which may be issued
upon conversion of New Berkshire Class A Common Stock.
(2) Based upon 1,188,054 shares of Berkshire Class A Common Stock, 1,747,632
shares of Berkshire Class B Common Stock and 75,656,343 shares of General
Re Common Stock, each outstanding as of the Record Date, and assumes (i)
all holders of General Re Common Stock make the Class A Election, (ii)
the
67
<PAGE>
Alternative Election is not made, (iii) all of the 1,692,532 shares of
General Re Preferred Stock are converted into shares of General Re Common
Stock prior to the General Re Merger, and (iv) no stock options have been
exercised.
(3) Includes 474,998 shares to be owned directly and beneficially by Warren E.
Buffett, and 3,234 shares to be owned by three trusts of which Mr. Buffett
is sole trustee but with respect to which Mr. Buffett disclaims any
beneficial economic interest. Mr. Buffett will share investment and voting
power with respect to 36,981 shares of New Berkshire Class A Common Stock
and 6 shares of New Berkshire Class B Common Stock to be owned by Susan T.
Buffett.
(4) Mr. and Mrs. Buffett have entered into a voting agreement with Berkshire,
applicable to New Berkshire, providing that, should the combined voting
power of shares held by Mr. and Mrs. Buffett and the trusts exceed 49.9%
of Berkshire's (and therefore New Berkshire's) total voting power, they
will vote those shares in excess of that percentage proportionately with
votes of the other Berkshire shareholders.
(5) Includes 448 shares of New Berkshire Class A Common Stock for which Mr.
Chace will have sole investment and voting power. Also includes 12,400
shares of New Berkshire Class A and 62 shares of New Berkshire Class B
Common Stock to be held by various trusts of which Mr. Chace is a trustee
and 160 shares of New Berkshire Class A shares to be held by an estate for
which Mr. Chace is an executor and for which he will have shared
investment and voting power. Excluded are 987 shares of New Berkshire
Class A Common Stock in which Mr. Chace will have a pecuniary interest but
with respect to which he will possess neither investment power nor voting
power, and also does not include 54 shares of New Berkshire Class A Common
Stock to be owned by Elizabeth Z. Chace, wife of Mr. Chace.
(6) Assumes Mr. Ferguson makes the Class A Election. Does not include 22,515
shares of Class B Common Stock underlying stock options exercisable within
60 days of the Effective Time.
(7) Does not include 10 shares of New Berkshire Class A Common Stock to be
owned by Suzanne M. Scott, wife of Walter Scott, Jr.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF BERKSHIRE
The following table sets forth the beneficial ownership of Berkshire Class A
and Class B Common Stock on the Record Date, by Mr. Buffett and by any other
executive officers or director of Berkshire. Warren E. Buffett, whose address
is 1440 Kiewit Plaza, Omaha, NE 68131, is the only person known to Berkshire
to be the beneficial owner of more than 5% of Berkshire's Class A or Class B
Common Stock.
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
PERCENTAGE OF AGGREGATE AGGREGATE
OUTSTANDING VOTING ECONOMIC
TITLE OF SHARES STOCK OF POWER OF INTEREST OF
CLASS OF BENEFICIALLY RESPECTIVE CLASS A AND CLASS A AND
NAME STOCK OWNED(1) CLASS(1) CLASS B(1) CLASS B(1)
---- -------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Warren E. Buffett....... Class A 478,232(2) 40.3 40.0(3) 38.4
Class B -- --
Susan T. Buffett........ Class A 36,981(2) 3.1 3.1(3) 3.0
Class B 6(2) *
Howard G. Buffett....... Class A 14 * * *
Class B 24 *
Malcom G. Chace......... Class A 13,008(4) 1.1 1.1 1.0
Class B 62(4) *
Marc D. Hamburg......... Class A -- -- -- --
Class B -- --
Charles T. Munger....... Class A 18,390 1.5 1.5 1.5
Class B -- --
Ronald L. Olson......... Class A 45 * * *
Class B -- --
Walter Scott, Jr........ Class A 100(5) * * *
Class B -- --
Directors and executive Class A 546,770 46.0 45.7 43.9
officers as a group Class B 92 *
(8 persons)............
</TABLE>
- --------
*less than 0.1%
(1) Beneficial owners exercise both sole voting and sole investment power
unless otherwise stated. Berkshire Class A Common Stock is convertible
into thirty shares of Berkshire Class B Common Stock at the option of the
stockholder. As a result, pursuant to Rule 13d-3(d)(1) of the Exchange
Act, a stockholder is deemed to have beneficial ownership of the shares of
New Berkshire Class B Common Stock which such stockholder may acquire upon
conversion of the Berkshire Class A Common Stock. In order to avoid
overstatement, the amount of Berkshire Class B Common Stock beneficially
owned does not take into account such shares of Berkshire Class B Common
Stock which may be acquired upon conversion (an amount which is equal to
30 times the number of shares of Berkshire Class A Common Stock held by a
stockholder). The percentage of outstanding Berkshire Class B Common Stock
is based on the total number of shares of Berkshire Class B Common Stock
outstanding as of the Record Date (1,747,632 shares) and does not take
into account shares of Berkshire Class B Common Stock which may be issued
upon conversion of Berkshire Class A Common Stock.
(2) Includes 474,998 shares owned directly and beneficially by Warren E.
Buffett, and 3,234 shares owned by three trusts of which Mr. Buffett is
sole trustee but with respect to which Mr. Buffett disclaims any
beneficial economic interest. Mr. Buffett shares investment and voting
power with respect to 36,981 shares of Berkshire Class A Common Stock and
6 Class B Common Stock owned by Susan T. Buffett.
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<PAGE>
(3) Mr. and Mrs. Buffett have entered into a voting agreement with Berkshire
providing that, should the combined voting power of shares held by Mr. and
Mrs. Buffett and the trusts exceed 49.9% of Berkshire's total voting
power, they will vote those shares in excess of that percentage
proportionately with votes of the other Berkshire shareholders.
(4) Includes 448 shares of Berkshire Class A Common Stock for which Mr. Chace
has sole investment and voting power. Also includes 12,400 shares of
Berkshire Class A and 62 shares of Berkshire Class B Common Stock held by
various trusts of which Mr. Chace is a trustee and 160 shares of Berkshire
Class A shares held by an estate for which Mr. Chace is an executor and
for which he has shared investment and voting power. Excluded are 987
shares of Berkshire Class A Common Stock in which Mr. Chace has a
pecuniary interest but with respect to which he possesses neither
investment power nor voting power, and also does not include 54 Shares of
Berkshire Class A Common Stock owned by Elizabeth Z. Chace, wife of Mr.
Chace.
(5) Does not include 10 shares of Berkshire Class A Common Stock owned by
Suzanne M. Scott, wife of Walter Scott, Jr.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF GENERAL RE
At the Record Date the only person known by General Re management to be a
beneficial holder, directly or indirectly, of more than 5% of General Re
Common Stock is Capital Research and Management Company, 333 South Hope
Street, Los Angeles, California 90071, which reported in a Schedule 13G dated
July 9, 1998 that it beneficially owned 4,605,300 shares of General Re Common
Stock ( % as of the Record Date), with respect to which it had sole voting
power over 0 shares and sole dispositive power over 4,605,300 shares, and no
shared voting or dispositive power. All of the outstanding shares of General
Re Preferred Stock are held by the ESSOP.
The following table shows the number of shares of General Re Common Stock
beneficially owned as of the Record Date by each director and by the Chief
Executive Officer and the four most highly compensated executive officers of
General Re (including the beneficial ownership of General Re Preferred Stock
held by the ESSOP, which is reported as shares of General Re Common Stock
because the General Re Preferred Stock is convertible into and votes with
General Re Common Stock as a class). Except as otherwise indicated, each
person has sole voting and investment power with respect to the shares shown.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF NUMBER OF
COMMON STOCK SHARES TOTAL SHARES
BENEFICIALLY UNDERLYING AND SHARE
NAME OF BENEFICIAL OWNER OWNED(1) SHARE UNITS(2) UNITS
- ------------------------ ------------ -------------- ------------
<S> <C> <C> <C>
Lucy Wilson Benson................. 560 0 560
Walter M. Cabot.................... 587 7,051 7,638
Ronald E. Ferguson................. 87,502 15,005 102,507
William C. Ferguson................ 2,265 2,133 4,398
James E. Gustafson................. 38,229 7,385 45,614
Tom N. Kellogg..................... 33,302 5,236 38,538
Donald J. Kirk..................... 760 4,644 5,404
Kay Koplovitz...................... 260 2,391 2,765
Peter Lutke-Bornefeld.............. 0 13,367 13,367
Andrew W. Mathieson................ 3,347 8,207 11,554
Martin G. McGuinn.................. 430 637 1,067
David E. McKinney.................. 3,097 1,911 5,008
Peter A. Minton.................... 2,008 0 2,008
James S. Riepe..................... 200 100 300
Stephen A. Ross.................... 1,260 2,187 3,447
Walter F. Williams................. 1,260 1,757 3,017
Directors and executive officers as
a group (32 persons).............. 271,454(3)(4) 98,917 370,371
</TABLE>
- --------
(1) Includes shares of General Re Common Stock held in the names of spouses
and children, as to which beneficial ownership is disclaimed. No person
named above beneficially owns more than 1% of the outstanding stock. Does
not include the following shares underlying stock options exercisable
within 60 days: Ronald E. Ferguson: 62,989 shares; James E. Gustafson:
35,583 shares; Tom N. Kellogg: 41,406 shares; Peter Lutke-Bornefeld:
18,000 shares; Peter A. Minton: 3,340 shares; and all executive officers
as of July 10, 1998 as a group: 338,655 shares.
(2) Non-employee directors may elect to defer all or part of their
compensation to be held in deferral accounts either in cash or as units
equivalent to shares of General Re Common Stock ("share units"). Executive
officers may receive a portion of their bonuses in share units and may
receive, in appropriate circumstances, share units subject to certain
restrictions ("restricted share units"). Share units and restricted share
units carry no voting rights. Also, executive officers receive awards of
share units under the Supplemental Benefit Equalization Plan (the "SBEP")
to the extent that shares of General Re Preferred Stock cannot be
allocated to an executive officer under the terms of the ESSOP because of
limits imposed by the Code. In addition,
71
<PAGE>
Peter Lutke-Bornefeld holds 13,367 restricted share units: 5,225 will
convert to unrestricted shares of General Re Common Stock on January 3,
2000; and 8,142 will convert to unrestricted shares of General Re Common
Stock on April 8, 2006.
(3) Shares of General Re Preferred Stock are allocated to the accounts of
participants in the ESSOP pursuant to the terms of the ESSOP.
Distributions under the ESSOP are made in cash or shares of General Re
Common Stock into which the General Re Preferred Stock is convertible. The
participants in the ESSOP have the right to instruct the trustee with
respect to the vote of the shares allocated to their accounts and a
portion of the General Re Preferred Stock that has not been allocated to
any participant's account or for which no instructions are timely received
by the trustee, whether or not allocated to the account of any
participant. The number of shares of General Re Common Stock disclosed
above includes the shares of General Re Preferred Stock allocated to each
participant's account but excuses any unallocated shares because of the
trustee's fiduciary duty relating to the voting of unallocated shares
under the Employee Retirement Income Security Act of 1974. The number of
shares allocated to the accounts of the persons named above, if any, and
the minimum number of unallocated shares as to which they may give voting
instructions are as follows: Ronald E. Ferguson: 833 allocated shares,
2,205 unallocated shares; James E. Gustafson: 821 allocated shares, 2,173
unallocated shares; Tom N. Kellogg: 1,216 allocated shares,
3,219 unallocated shares; Peter A. Minton: 8 allocated shares, 22
unallocated shares; and all executive officers as of the Record Date as a
group: 11,414 allocated shares and 30,205 unallocated shares.
(4) Includes stock that is subject to restrictions on resale. Ronald E.
Ferguson holds 15,000 restricted shares (15,000 restricted until January
2002); James E. Gustafson holds 18,000 restricted shares (2,500 restricted
until September 1999, 2,500 restricted until November 2001, 13,000
restricted until October 2006); Tom N. Kellogg holds 5,000 restricted
shares (5,000 restricted until February 2000); Peter A. Minton holds
2,000 restricted shares (500 restricted until February 2003, 500
restricted until February 2005, 1,000 restricted until July 2018); and all
executive officers as of the Record Date as a group hold 92,700 restricted
shares.
72
<PAGE>
THE BERKSHIRE CHARTER AMENDMENT
Article Fourth of the Berkshire Restated Certificate of Incorporation (the
"Berkshire Certificate") as currently in effect authorizes the issuance of up
to an aggregate of 51,500,000 shares of Berkshire Common Stock, of which
1,500,000 are shares of Class A Common Stock and 50,000,000 are shares of
Class B Common Stock. As of the Record Date, 1,188,054 shares of Class A
Common Stock and 1,747,632 shares of Class B Common Stock were issued and
outstanding and 35,669,120 shares of Class B Common Stock were reserved for
issuance upon conversion of Class A Common Stock and outstanding stock
options. There were, therefore 311,946 shares of Class A and 14,330,880 shares
of Class B Common Stock available for future issuances.
If the Transactions are approved by Berkshire and General Re stockholders,
and Berkshire elects the Alternative Transaction, up to approximately 262,590
shares of Class A equivalents (assuming all General Re stockholders make the
Class A Election ) will be subject to issuance to holders of General Re Common
Stock and approximately 575,000 shares of Class B Common Stock will be subject
to options, and 49,356 shares of Class A Common Stock and 5,878,180 shares of
Class B Common Stock would be available for future issuances.
The Berkshire Board believes it would be desirable to increase the number of
shares of authorized Berkshire Common Stock in order to make available
additional shares for possible acquisitions or other purposes. After giving
effect to the Berkshire Charter Amendment, the amount of authorized Berkshire
Common Stock will be the same as that currently authorized for New Berkshire.
If Berkshire stockholders approve the Berkshire Charter Amendment, it will be
filed with the Delaware Secretary of State and become effective only in the
event Berkshire makes the Alternative Election.
All newly authorized shares of Berkshire Common Stock would have the same
rights as the presently authorized shares. Under the Berkshire Certificate,
stockholders of Berkshire do not have preemptive rights.
73
<PAGE>
BUSINESS RELATIONSHIPS BETWEEN BERKSHIRE AND GENERAL RE
For many years, certain of Berkshire's property and casualty insurance
subsidiaries have entered into reinsurance contracts with General Re. Within
the contracts, Berkshire either assumed risks from or ceded risks to General
Re. In most cases, these contracts provided that Berkshire serve as the
assuming enterprise and General Re serve as the ceding enterprise. In recent
years, these contracts provided principally excess of loss reinsurance
coverage. Excess of loss reinsurance refers to an arrangement in which the
assuming company indemnifies the ceding company, subject to specified
limitations, for all or a portion of a loss amount in excess of a stipulated
retention by the ceding company.
DESCRIPTION OF NEW BERKSHIRE CAPITAL STOCK
The authorized capital stock of New Berkshire consists of 1,650,000 shares
of New Berkshire Class A Common Stock, 55,000,000 shares of New Berkshire
Class B Common Stock and 1,000,000 shares of preferred stock, no par value per
share ("Berkshire Preferred Stock").
The following summary of certain provisions of the New Berkshire Class A
Stock, Berkshire Class B Common Stock and New Berkshire Preferred Common Stock
does not purport to be complete and is subject to, and qualified in its
entirety by, the provisions of applicable law and New Berkshire's Certificate
of Incorporation.
The holders of outstanding shares of New Berkshire Class A Common Stock are
entitled to one vote, and the holders of outstanding shares of New Berkshire
Class B Common Stock are entitled to one two-hundredth ( 1/200th) of a vote,
for each share held of record on all matters submitted to a vote of
stockholders. Unless otherwise required by the DGCL, the New Berkshire Class A
Common Stock and New Berkshire Class B Common Stock vote as a single class
with respect to all matters submitted to a vote of stockholders of Berkshire.
Mr. Buffett will own approximately 32.8% of the New Berkshire Class A Stock,
(based on the assumptions stated in note (2) to the table under "Security
Ownership of Certain Beneficial Owners and Management of New Berkshire"). He
will share voting and investment power over another 2.5% of such stock, which
will be owned by his wife, Susan T. Buffett, and 0.2% of such stock, which
will be owned by trusts of which he is trustee but in which he has no economic
interest. Mr. and Mrs. Buffett have entered into a voting agreement with
Berkshire, which will be applicable to the shares of New Berkshire
beneficially owned by Mr. and Mrs. Buffett, providing that, should the voting
power of shares held by Mr. and Mrs. Buffett and the trust exceed 49.9% of the
total voting power of Berkshire (and therefore New Berkshire) voting
securities, they will vote their shares in excess of that percentage
proportionally with the votes of the other stockholders.
Each share of New Berkshire Class A Common Stock may be converted into
thirty (30) shares of New Berkshire Class B Common Stock at the holder's
option at any time. Shares of New Berkshire Class B Common Stock are not
convertible into New Berkshire Class A Common Stock or any other security.
Holders of New Berkshire Class A Stock are entitled to receive ratably such
dividends as may be declared by the New Berkshire Board out of funds legally
available therefor. Holders of New Berkshire Class B Common Stock will be
entitled to dividends equal to one-thirtieth ( 1/30th) of the amount per share
declared by New Berkshire's Board for each share of New Berkshire Class A
Common Stock. Dividends with respect to the New Berkshire Class B Common Stock
will be paid in the same form and at the same time as dividends with respect
to New Berkshire Class A Common Stock, except that, in the event of a stock
split or stock dividend, holders of New Berkshire Class A Common Stock will
receive shares of New Berkshire Class A Common Stock and holders of New
Berkshire Class B Common Stock will receive shares of New Berkshire Class B
Stock, unless otherwise specifically designated by resolution of the New
Berkshire Board. New Berkshire will continue Berkshire's dividend policy.
Berkshire has not declared a cash dividend since 1967 and has no present
intention to pay a dividend on Berkshire Class A Common Stock or on Berkshire
Class B Common Stock in the future.
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<PAGE>
In the event of the liquidation, dissolution or winding-up of New Berkshire,
holders of New Berkshire Class A Common Stock and New Berkshire Class B Common
Stock are entitled to share ratably in all assets remaining after the payment
of liabilities, with holders of New Berkshire Class B Common Stock entitled to
receive per share one-thirtieth ( 1/30th) of any amount per share received by
holders of New Berkshire Class A Common Stock. Neither holders of New
Berkshire Class A Common Stock nor New Berkshire Class B Stock shall have
preemptive rights to subscribe for additional shares of either class. All
shares of New Berkshire Class A Common Stock and New Berkshire Class B Common
Stock outstanding upon completion of the Transaction will be fully paid and
nonassessable.
No shares of New Berkshire Preferred Stock are presently outstanding. In the
future, New Berkshire may issue the New Berkshire Preferred Stock in one or
more series. The New Berkshire Board is authorized to determine, with respect
to each series of New Berkshire Preferred Stock which may be issued, the
powers, designations, preferences, and rights of the shares of such series and
the qualifications, limitations, or restrictions thereof, including any
dividend rate, redemption rights, liquidation preferences, sinking fund terms,
conversion rights, voting rights and any other preferences or special rights
and qualifications. The effect of any issuance of the New Berkshire Preferred
Stock upon the rights of holders of the New Berkshire Class A Common Stock and
New Berkshire Class B Common Stock depends upon the respective powers,
designations, preferences, rights, qualifications, limitations and
restrictions of the shares of one or more series of New Berkshire Preferred
Stock as determined by the New Berkshire Board. Such effects might include
dilution of the voting power of the New Berkshire Class A Common Stock and New
Berkshire Class B Common Stock, the subordination of the rights of holders of
New Berkshire Class A Common Stock and New Berkshire Class B Common Stock to
share in New Berkshire's assets upon liquidation, and a reduction in the
amount otherwise available for payment of dividends on New Berkshire Class A
Common Stock and New Berkshire Class B Common Stock.
75
<PAGE>
COMPARISON OF RIGHTS OF STOCKHOLDERS
At the Effective Time, the stockholders of Berkshire and General Re will
become stockholders of New Berkshire. As stockholders of New Berkshire, their
rights will be governed by the DGCL and New Berkshire's Certificate of
Incorporation (the "New Berkshire Certificate") and Bylaws (the "New Berkshire
Bylaws"). Following are summaries of certain differences between (i) the
rights of Berkshire stockholders and New Berkshire stockholders and (ii) the
rights of General Re stockholders and New Berkshire stockholders. The
summaries do not purport to be complete and are qualified in their entirety by
reference to the New Berkshire Certificate and Bylaws, the Berkshire
Certificate of Incorporation and Bylaws and the General Re Restated
Certificate of Incorporation (the "General Re Certificate") and General Re
Bylaws, as applicable.
New Berkshire, Berkshire and General Re are each organized under the laws of
the State of Delaware. Any differences, therefore, in the rights of holders of
New Berkshire Common Stock, on the one hand, and Berkshire Common Stock and
General Re Common Stock, respectively, on the other hand, arise solely from
differences in their respective certificates of incorporation and bylaws.
COMPARISON OF STOCKHOLDERS' RIGHTS WITH RESPECT TO NEW BERKSHIRE AND BERKSHIRE
The New Berkshire Certificate of Incorporation and the New Berkshire Bylaws
are substantially similar to the Berkshire Certificate of Incorporation and
the Berkshire Bylaws, respectively, except as described below.
Authorized Capital. The total number of authorized shares of capital stock
of Berkshire is 52,500,000 shares, consisting of 1,500,000 shares of Berkshire
Class A Common Stock, 50,000,000 shares of Berkshire Class B Common Stock and
1,000,000 shares of preferred stock. The authorized capital of New Berkshire
is 57,650,000 shares, consisting of 1,650,000 shares of New Berkshire Class A
Common Stock, 55,000,000 shares of New Berkshire Class B Common Stock and
1,000,000 shares of preferred stock.
COMPARISON OF STOCKHOLDERS' RIGHTS WITH RESPECT TO NEW BERKSHIRE AND GENERAL
RE
Number of Directors. Under the DGCL, the certificate of incorporation or
bylaws of a corporation may specify the number of directors. The New Berkshire
Bylaws provide that the New Berkshire Board will determine the number of
Berkshire directors. The General Re Bylaws provide that the number of
directors shall be not less than nine (9) nor more than twenty-one (21), as
determined by a resolution of a majority of the directors of the General Re
Board then in office or by the holders of 60% in interest of the outstanding
voting shares of General Re, including the holders of 60% in interest of the
outstanding voting shares of General Re held by persons other than an
"interested stockholder" (as defined in the General Re Bylaws).
Removal of Directors. Under the New Berkshire Bylaws, holders of a majority
of shares issued and outstanding and entitled to vote in the election of
directors may remove a director with or without cause. Under the General Re
Certificate and the General Re Bylaws, a director may only be removed for
cause.
Vacancies in the Board of Directors. Under the New Berkshire Bylaws, a
vacancy on the New Berkshire Board may be filled by a vote of the stockholders
at a meeting called for that purpose, or by a majority of directors then in
office, even though less than a quorum, or by a sole remaining director. Under
the General Re Bylaws, a vacancy on the General Re Board may be filled by a
majority of directors then in office, even though less than a quorum.
Annual Stockholder Meetings. The General Re Bylaws provide for an annual
meeting of stockholders to be held at any time designated by the Board of
Directors. The New Berkshire By-laws provide for an annual meeting to be held
generally on the first Monday in May.
Special Stockholder Meetings. The New Berkshire Bylaws provide that a
special meeting of stockholders may be called at any time by the Chairman of
the Board of the New Berkshire Board. A special meeting may
76
<PAGE>
also be called by New Berkshire's Secretary, or in the case of his death,
absence, incapacity or refusal, by an assistant secretary or other officer,
upon application of a majority of directors or stockholders who hold at least
50% of Berkshire's issued and outstanding capital stock. Under the General Re
Certificate and the General Re By-laws, only the Board of Directors may call a
special meeting of common stockholders.
Action by Written Consent. The General Re Certificate prohibits action by
written consent except for action that may be taken solely upon the vote or
consent in writing of holders of any series of preferred stock of General Re.
The New Berkshire Certificate permits action by the written consent of
stockholders who would be entitled to vote upon such action if such meeting
were held having not less than the percentage of the total number of votes
which would have been required to take such action at such a meeting.
Provisions Affecting Business Combinations. The General Re Certificate
requires that any "business combination" (as defined in the General Re
Certificate) with an "interested stockholder" shall require the affirmative
vote of the holders of 60% in interest of the outstanding voting shares of
General Re unless certain specified conditions are satisfied. This provision
shall not apply if such "business combination" (i) has been approved prior to
consummation by two-thirds of the "continuing directors" (as defined in the
General Re Certificate) of General Re, or (ii) constitutes a merger or
consolidation with any corporation of which a majority of the outstanding
voting shares is owned of record by General Re (unless any affiliate of an
"interested stockholder" is a party to such "business combination"). The New
Berkshire Certificate specifies that any director individually, or any firm of
which such director may be a member, may be a party to or have a pecuniary
interest in any contract or transaction of the New Berkshire, provided that
such fact or interest shall have been known to the New Berkshire Board, or a
majority thereof, at the meeting at which the New Berkshire Board authorized
such contract or transaction.
Stockholder Rights Plan. General Re has entered into the Rights Plan
pursuant to which each share of General Re Common Stock is issued a General Re
Stockholder Right. Berkshire does not have a stockholder rights plan.
77
<PAGE>
EXPERTS
The consolidated financial statements and schedules of Berkshire as of
December 31, 1997 and 1996, and for each of the years in the three-year period
ended December 31, 1997, included in the 1997 Berkshire Annual Report and Form
10-K, have been incorporated by reference herein, in reliance upon the reports
(also incorporated by reference herein) of Deloitte and Touche LLP,
independent certified public accountants, given upon the authority of said
firm as experts in accounting and auditing.
The consolidated financial statements and schedules of General Re and its
subsidiaries as of December 31, 1997 and 1996, and for each of the years in
the three-year period ended December 31, 1997, included in the 1997 General Re
Annual Report and Form 10-K, have been incorporated by reference herein, in
reliance upon the reports (also incorporated by reference herein) of
PricewaterhouseCoopers LLP, independent certified public accountants, and upon
the authority of said firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters with respect to the validity of the New Berkshire (or
Berkshire) Common Stock to be issued pursuant to the Mergers and certain
federal income tax consequences of the Transactions will be passed upon by
Munger, Tolles & Olson LLP for Berkshire. Ronald L. Olson, a partner of
Munger, Tolles & Olson LLP, is a director of Berkshire and will be a director
of New Berkshire. He and other attorneys in such firm beneficially own an
aggregate of less than 1% of the outstanding Berkshire Common Stock. Certain
legal matters with respect to certain federal income tax consequences of the
Transactions will be passed upon by Wachtell, Rosen, Lipton & Katz for General
Re and, in the event of the Alternative Transaction, for Berkshire.
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1999 Annual Meeting of
Stockholders of New Berkshire must be received by the Secretary of New
Berkshire not later than November 18, 1998 for inclusion in the proxy
materials for such meeting. The proposal must be in accordance with the
provisions of Rule 4a-8 promulgated by the Commission under the Exchange Act.
It is suggested the proposal be submitted by certified mail, return receipt
requested.
Due to the contemplated consummation of the General Re Merger, General Re
does not currently expect to hold a 1999 Annual Meeting of Stockholders
because General Re will be a wholly owned subsidiary of Berkshire or New
Berkshire. In the event that the General Re Merger is not consummated and such
a meeting is held, to be eligible for inclusion in General Re's proxy
statement and form of proxy relating to that meeting, proposals of
stockholders intended to be presented at such meeting must be received by
General Re either (i) within a reasonable time after General Re announces
publicly the date of the meeting and before General Re mails its proxy
statement to stockholders in connection with such meeting, or (ii) no later
than December 1, 1998, if General Re shall have announced publicly its
intention not to consummate the General Re Merger prior to such date.
WHERE YOU CAN FIND MORE INFORMATION
Berkshire and General Re file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information that the companies file at the SEC's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Berkshire and General Re public filings are also
available to the public from commercial document retrieval services and at the
Internet World Wide Web site maintained by the SEC at "http://www.sec.gov."
Reports, proxy statement and other information concerning Berkshire and
General Re also may be inspected at the offices of the NYSE, 20 Broad Street,
New York, New York 10005.
78
<PAGE>
New Berkshire and Berkshire have jointly filed the Registration Statement to
register with the SEC the shares of New Berkshire Common Stock to be issued in
the Mergers or the shares of Berkshire Common Stock to be issued in the
Alternative Transaction. This Joint Proxy Statement/Prospectus is a part of
the Registration Statement and constitutes a prospectus of New Berkshire or
Berkshire, a proxy statement of Berkshire for the Berkshire Special Meeting
and a proxy statement of General Re for the General Re Special Meeting.
As allowed by SEC rules, this Joint Proxy Statement/Prospectus does not
contain all the information that stockholders can find in the Registration
Statement or the exhibits to the Registration Statement.
The SEC allows Berkshire and General Re to "incorporate by reference"
information into this Joint Proxy Statement/Prospectus, which means that the
companies can disclose important information to you by referring you to
another document filed separately with the SEC. The information incorporated
by reference is deemed to be part of this Joint Proxy Statement/Prospectus,
except for any information superseded by information contained directly in the
Joint Proxy Statement/Prospectus. This Joint Proxy Statement/Prospectus
incorporates by reference the documents set forth below that Berkshire and
General Re have previously filed with the SEC. These documents contain
important information about the companies and their financial condition.
<TABLE>
<CAPTION>
BERKSHIRE SEC FILINGS (FILE NO. 1-
10125) PERIOD
---------------------------------- ------
<C> <S>
Annual Report on Form 10-K....... Year ended December 31, 1997
Quarterly Reports on Form 10-Q... Quarters ended March 31, 1998 and June
30, 1998
Current Reports on Form 8-K...... Dated June 25, 1998
Registration Statements on Form Dated October 26, 1988, setting forth a
8-A............................. description of the Berkshire Class A
Common Stock and dated April 2, 1996,
setting forth a descriptions of the
Berkshire Class B Common Stock (including
any amendments or reports filed for the
purpose of updating such description)
<CAPTION>
GENERAL RE FILINGS (FILE NO. 1-
8026) PERIOD
------------------------------- ------
<C> <S>
Annual Report on Form 10-K....... Year ended December 31, 1997
Quarterly Reports on Form 10-Q... Quarters ended March 31, 1998 and June
30, 1998
Current Reports on Form 8-K...... Dated June 25, 1998
</TABLE>
Berkshire and General Re incorporate by reference additional documents that
either company may file with the SEC between the date of this Joint Proxy
Statement/Prospectus and the date of the Special Meetings. These include
periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K, as well as proxy statements.
Berkshire has supplied all information contained or incorporated by
reference in this Joint Proxy Statement/Prospectus relating to Berkshire and
New Berkshire, and General Re has supplied all such information relating to
General Re.
79
<PAGE>
If you are a stockholder of Berkshire or General Re, Berkshire or General
Re, as the case may be, may have sent you some of the documents incorporated
by reference, but you can obtain any of them through Berkshire or General Re,
as the case may be, or the SEC or the SEC's Internet World Wide Web site
described above. Documents incorporated by reference are available from the
companies without charge, excluding all exhibits unless specifically
incorporated by reference as an exhibit to this Joint Proxy
Statement/Prospectus. Stockholders of Berkshire or General Re may obtain
documents incorporated by reference in this Joint Proxy Statement/Prospectus
by requesting them in writing or by telephone from the appropriate company at
the following addresses and phone numbers:
BERKSHIRE HATHAWAY INC.
1440 Kiewit Plaza
Omaha, Nebraska 68131
Attention Forrest N. Krutter, Secretary
(402) 346-1400
GENERAL RE CORPORATION
695 East Main Street
Stamford, Connecticut 06904
Attention: Charles F. Barr, Secretary
(203) 328-5000
If you would like to request documents from either company, please do so by
September 10, 1998 to receive them before the Berkshire Special Meeting and by
September 14, 1998 to receive them before the General Re Special Meeting. If
you request any incorporated documents from us we will mail them to you by
first-class mail, or other equally prompt means, within one business day of
our receipt of your request.
You should rely only on the information contained or incorporated by
reference in this Joint Proxy Statement/Prospectus to vote your shares at the
Berkshire Special Meeting and/or General Re Special Meeting. Berkshire and
General Re have not authorized anyone to provide you with information that is
different from what is contained in this Joint Proxy Statement/Prospectus.
This Joint Proxy Statement/Prospectus is dated August 13, 1998. You should not
assume that the information contained in the Joint Proxy Statement/Prospectus
is accurate as of any date other than that date, and neither the mailing of
this Joint Proxy Statement/Prospectus to stockholders nor the issuance of New
Berkshire's securities in the Mergers or Berkshire's securities in the
Alternative Transactions shall create any implication to the contrary.
80
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNEX I
AGREEMENT AND PLAN OF MERGERS
DATED AS OF JUNE 19, 1998
BY AND BETWEEN
BERKSHIRE HATHAWAY INC.
AND
GENERAL RE CORPORATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Annex I-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
RECITALS................................................................. 5
ARTICLE 1 FORMATION OF HOLDING COMPANY AND MERGER SUBSIDIARIES.......... 6
1.1 Holding Company............................................... 6
1.2 Organization of Merger Subsidiaries........................... 6
1.3 Actions of Directors and Officers of the Merger Subsidiaries.. 6
1.4 Actions of Holding Company.................................... 6
Board of Directors of Holding Company; Name of Holding
1.5 Company....................................................... 6
ARTICLE 2 THE MERGERS; DIRECTORS AND OFFICERS OF THE MERGER
SUBSIDIARIES; CLOSING......................................... 7
2.1 The Mergers................................................... 7
2.2 Effects of the Mergers........................................ 7
2.3 Certificates of Incorporation; Bylaws......................... 7
2.4 Directors..................................................... 7
2.5 Officers...................................................... 7
2.6 Closing....................................................... 8
ARTICLE 3 EFFECT OF THE MERGERS ON SECURITIES OF BERKSHIRE, GENERAL,
HOLDING COMPANY AND THE MERGER SUBSIDIARIES................... 8
3.1 Merger Subsidiary Stock....................................... 8
3.2 Holding Company Capital Stock................................. 8
3.3 Effect on Berkshire Common Stock.............................. 8
(a)Cancellation of Treasury Stock............................. 8
(b)Conversion of Berkshire Common Stock....................... 8
(c)Cancellation and Retirement of Berkshire Common Stock...... 8
(d)Stock Plans................................................ 8
3.4 Effect on General Stock....................................... 9
(a)Cancellation of Treasury Stock and Berkshire-Owned General
Stock......................................................... 9
(b)Conversion of General Stock................................ 9
(c)Cancellation and Retirement of General Stock............... 9
(d)Stock Plans................................................ 9
3.5 Exchange of General Certificates.............................. 10
(a)Exchange Agent............................................. 10
(b)Exchange Procedures........................................ 10
(c)Distributions with Respect to Unexchanged Shares........... 11
(d)No Further Ownership Rights in General Common Stock........ 11
(e)No Fractional Shares....................................... 11
(f)Termination of Exchange Fund............................... 11
(g)No Liability............................................... 12
(h)Investment of Exchange Fund................................ 12
3.6 General Preferred Stock....................................... 12
3.7 Partial Cash Election......................................... 12
3.8 Dissenting Shares............................................. 13
ARTICLE 4 REPRESENTATIONS AND WARRANTIES................................ 14
4.1 Disclosure Schedules.......................................... 14
4.2 Representations and Warranties of General..................... 14
(a)Organization, Standing and Corporate Power................. 14
(b)Subsidiaries............................................... 14
(c)Capital Structure.......................................... 14
(d)Authority; Noncontravention................................ 15
</TABLE>
Annex I-2
<PAGE>
TABLE OF CONTENTS--(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
(e)SEC Documents; Undisclosed Liabilities..................... 16
(f)Information Supplied....................................... 16
(g)Absence of Certain Changes or Events....................... 16
(h)Litigation; Labor Matters; Compliance with Laws............ 17
(i)Employee Matters........................................... 17
(j)Tax Returns and Tax Payments............................... 18
(k)State Antitakeover Laws Not Applicable; No Other
Restrictions.................................................. 18
(l)Environmental Matters...................................... 18
(m)Properties................................................. 19
(n)Insurance Matters.......................................... 19
(o)Liabilities and Reserves................................... 20
(p)Investment Advisory and Investment Company Matters......... 20
(q)Brokers.................................................... 20
(r)Opinion of Financial Advisor............................... 20
(s)Board Recommendation....................................... 20
(t)Rights Agreement........................................... 21
(u)Required General Vote...................................... 21
4.3 Representations and Warranties of Berkshire................... 21
(a)Organization, Standing and Corporate Power................. 21
(b)Subsidiaries............................................... 21
(c)Capital Structure.......................................... 21
(d)Authority; Noncontravention................................ 22
(e)SEC Documents; Undisclosed Liabilities..................... 22
(f)Information Supplied....................................... 23
(g)Absence of Certain Changes or Events....................... 23
(h)Compliance with Laws....................................... 23
(i)State Antitakeover Laws Not Applicable; No Other
Restrictions.................................................. 23
(j)Interim Operations of Holding Company and the Merger
Subsidiaries.................................................. 24
(k)Brokers.................................................... 24
(l)Board Recommendation....................................... 24
(m)Required Berkshire Vote.................................... 24
ARTICLE 5 COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER..... 25
5.1 Conduct of Business of General................................ 25
ARTICLE 6 ADDITIONAL AGREEMENTS......................................... 27
Preparation of Form S-4 and the Proxy Statement/Prospectus;
6.1 Stockholder Meetings.......................................... 27
6.2 Letter of General's Accountants............................... 27
6.3 Berkshire Access to Information............................... 27
6.4 Best Efforts.................................................. 28
6.5 Indemnification............................................... 28
6.6 Expenses...................................................... 29
6.7 Public Announcements.......................................... 29
6.8 Affiliates.................................................... 29
6.9 Stock Exchange Listing........................................ 29
6.10 Takeover Statutes............................................. 29
6.11 No Solicitation............................................... 29
6.12 Certain Agreements............................................ 31
6.13 Employee Benefits............................................. 31
6.14 Tax Matters................................................... 31
</TABLE>
Annex I-3
<PAGE>
TABLE OF CONTENTS--(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE 7 CONDITIONS PRECEDENT.......................................... 32
Conditions to Each Party's Obligation To Effect the
7.1 Transactions.................................................. 32
(a)General Stockholder Approval............................... 32
(b)Berkshire Stockholder Approval............................. 32
(c)NYSE Listing............................................... 32
(d)HSR Act.................................................... 32
(e)No Injunctions or Restraints............................... 32
(f)Form S-4................................................... 32
(g)Rulings.................................................... 32
(h)Consents, etc. ............................................ 32
7.2 Conditions to Obligation of Berkshire......................... 32
(a)Representations and Warranties............................. 32
(b)Performance of Obligations of General...................... 33
(c)Tax Matters................................................ 33
(d)Redemption of General Preferred Stock...................... 33
7.3 Conditions to Obligation of General........................... 33
(a)Representations and Warranties............................. 33
(b)Performance of Obligations of Berkshire.................... 33
(c)Tax Opinion................................................ 34
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER............................. 34
8.1 Termination................................................... 34
8.2 Effect of Termination......................................... 35
8.3 Amendment..................................................... 35
8.4 Extension; Waiver............................................. 35
ARTICLE 9 GENERAL PROVISIONS............................................ 36
9.1 Nonsurvival of Representations and Warranties................. 36
9.2 Notices....................................................... 36
9.3 Definitions................................................... 36
9.4 Interpretation................................................ 37
9.5 Counterparts.................................................. 37
9.6 Entire Agreement; No Third-Party Beneficiaries................ 37
9.7 Governing Law................................................. 37
9.8 Assignment.................................................... 37
9.9 Enforcement................................................... 37
9.10 Severability.................................................. 37
</TABLE>
Annex I-4
<PAGE>
AGREEMENT AND PLAN OF MERGERS
THIS AGREEMENT AND PLAN OF MERGERS (the "Agreement") is entered into as of
June 19, 1998 by and between Berkshire Hathaway Inc., a Delaware corporation
("Berkshire"), and General Re Corporation, a Delaware corporation ("General").
RECITALS
WHEREAS, the Boards of Directors of Berkshire and General have each
determined that it is in the best interests of their respective companies and
stockholders to combine their businesses pursuant to the terms and conditions
set forth herein (the "Transactions");
WHEREAS, the Boards of Directors of Berkshire and General have further
determined that it is in the best interests of their respective companies and
stockholders to accomplish such combination by their respective stockholders
exchanging their shares for shares of a new holding company, and to accomplish
such exchanges by Berkshire and General merging into subsidiaries of such
holding company;
WHEREAS, in furtherance of such determination, Berkshire and General have
caused NBH, Inc., a Delaware corporation ("Holding Company"), to be formed and
Holding Company has formed two wholly owned subsidiaries, Wyllis Merger Sub
Inc., a Delaware corporation ("Merger Sub A"), and Steven Merger Sub Inc., a
Delaware corporation ("Merger Sub B");
WHEREAS, the Board of Directors of each of Berkshire, General, and Holding
Company have approved, and deem it advisable, that Merger Sub A merge with and
into Berkshire and Merger Sub B merge with and into General, pursuant to the
Merger Agreements (as defined below), with the result that Holding Company
will acquire through mergers, upon the terms and subject to the conditions set
forth in this Agreement, (A) each share of Common Stock, par value $0.50 per
share, of General ("General Common Stock") issued and outstanding immediately
prior to the Effective Time (as defined in Section 2.1(b)), and (B) each share
of Class A Common Stock, $5.00 par value per share, of Berkshire ("Berkshire
Class A Common Stock") and each share of Class B Common Stock, $0.1667 par
value per share, of Berkshire ("Berkshire Class B Common Stock" and, together
with Berkshire Class A Common Stock, "Berkshire Common Stock") issued and
outstanding immediately prior to the Effective Time;
WHEREAS, the Transactions and this Agreement require the approval thereof by
a majority of the votes entitled to be cast thereon by holders of the
outstanding shares of General Common Stock and the Series A ESOP Convertible
Preferred Stock, no par value, of General ("General Preferred Stock" and,
together with General Common Stock, "General Stock") entitled to vote thereon,
voting together as a single class, for the approval thereof (the "General
Stockholder Approval");
WHEREAS, the Transactions and this Agreement require the approval thereof by
a majority of the votes entitled to be cast thereon by holders of the
outstanding shares of Berkshire Class A Common Stock and Berkshire Class B
Common Stock entitled to vote thereon, voting together as a single class, for
approval thereof (the "Berkshire Stockholder Approval");
WHEREAS, in order to induce Berkshire to enter into this Agreement, as a
condition to, and concurrently with the execution of, this Agreement,
Berkshire and General are entering into a stock option agreement (the "Stock
Option Agreement") in the form attached hereto as Exhibit A;
WHEREAS, in order to induce General to enter into this Agreement, as a
condition to, and concurrently with the execution of, this Agreement, Warren
E. Buffett and Charles T. Munger, the beneficial owners of approximately 40%
and 1.5%, respectively, of the voting power of Berkshire Common Stock, are
entering into a voting agreement (the "Voting Agreement") with General in the
form attached hereto as Exhibit B; and
Annex I-5
<PAGE>
WHEREAS, for United States Federal income tax purposes, it is intended that
the Transactions structured as described above will qualify as an exchange
under Section 351 of the Internal Revenue Code of 1986, as amended (the
"Code").
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE 1
FORMATION OF HOLDING COMPANY AND MERGER SUBSIDIARIES
1.1 Holding Company. At the Effective Time, the Certificate of Incorporation
and Bylaws of Holding Company shall be substantially in the form of the
Certificate of Incorporation and Bylaws of Berkshire as of the date of this
Agreement, provided, that the Certificate of Incorporation of Holding Company
will provide that the authorized capital stock of Holding Company shall
consist initially of 1,650,000 shares of Class A common stock, $5.00 par value
("Holding Company Class A Common Stock"), 55,000,000 shares of Class B common
stock, $0.1667 par value ("Holding Company Class B Common Stock" and, together
with Holding Company Class A Common Stock, "Holding Company Common Stock") and
1,000,000 shares of preferred stock, no par value.
1.2 Organization of Merger Subsidiaries. Merger Sub A and Merger Sub B have
been organized for the sole purpose of effectuating the Berkshire Merger (as
defined in Section 2.1(a)) and the General Merger (as defined in Section
2.1(a)). The authorized capital stock of Merger Sub A initially consists of
1,000 shares of common stock, par value $.01 per share, which shall be issued
to Holding Company at a price of $1.00 per share. The authorized capital stock
of Merger Sub B initially consists of 1,000 shares of common stock, par value
$.01 per share, which shall be issued to Holding Company at a price of $1.00
per share.
1.3 Actions of Directors and Officers of the Merger Subsidiaries. As
promptly as practicable following the execution of this Agreement, (a) Holding
Company shall elect the directors of the Merger Subsidiaries, (b) the
directors of the Merger Subsidiaries shall elect their respective officers,
(c) the directors of Holding Company shall ratify and approve this Agreement
and approve the forms of the Merger Agreements (as defined in Section 2.1),
(d) the directors and officers of the Merger Subsidiaries shall take such
steps as may be necessary or appropriate to complete the organization of the
Merger Subsidiaries and to approve the Merger Agreements, and (e) the Merger
Agreements shall be executed on behalf of the parties thereto.
1.4 Actions of Holding Company. As promptly as practicable following the
execution of this Agreement, Holding Company shall ratify and approve this
Agreement, and shall, as the sole shareholder of each of the Merger
Subsidiaries, adopt the Merger Agreements. The parties shall cause Holding
Company and the Merger Subsidiaries to perform their respective obligations
under this Agreement and the Merger Agreements.
1.5 Board of Directors of Holding Company; Name of Holding
Company. Immediately after the Effective Time, Ronald E. Ferguson, Chairman
and Chief Executive Officer of General, shall be duly appointed as a director
of Holding Company, and the other directors of Holding Company shall be the
directors of Berkshire immediately prior to the Effective Time. Immediately
after the Effective Time, Holding Company shall change its name to "Berkshire
Hathaway Inc."
Annex I-6
<PAGE>
ARTICLE 2
THE MERGERS; DIRECTORS AND OFFICERS OF THE MERGER SUBSIDIARIES; CLOSING
2.1 The Mergers.
(a) Pursuant to Plans of Merger, in forms to be mutually agreed upon by
Berkshire and General (sometimes hereinafter referred to individually as the
"Berkshire Merger Agreement" and the "General Merger Agreement", respectively,
and collectively as the "Merger Agreements"), upon the terms and subject to
the conditions set forth in this Agreement and in the Merger Agreements and in
accordance with the Delaware General Corporation Law (the "DGCL"), at the
Effective Time:
(i) Merger Sub A shall be merged with and into Berkshire (the "Berkshire
Merger") and Berkshire shall be the surviving corporation in the Berkshire
Merger and shall continue its corporate existence under the laws of the
State of Delaware. As a result of the Berkshire Merger, Berkshire shall
become a wholly owned subsidiary of Holding Company.
(ii) Merger Sub B will be merged with and into General (the "General
Merger" and, together with the Berkshire Merger, the "Mergers"), and
General shall be the surviving corporation in the General Merger and shall
continue its corporate existence under the laws of the State of Delaware.
As a result of the General Merger, General shall become a wholly owned
subsidiary of Holding Company.
(b) The term "Effective Time" shall mean the time and date which is (i) the
later of (A) the date and time of the filing of the certificate of merger
relating to the Berkshire Merger with the Secretary of State of the State of
Delaware (or such other date and time as may be specified in such certificate
and permitted by law) and (B) the date and time of the filing of a certificate
of merger relating to the General Merger with the Secretary of State of the
State of Delaware (or such other date and time as may be specified in such
certificate and permitted by law) or (ii) such other time and date as is
permissible in accordance with the DGCL and as Berkshire and General may
agree; provided that, in any event, (I) the Effective Time shall not be prior
to the Closing (as defined in Section 2.6) and shall be as soon as practicable
thereafter and (II) the parties shall use their best efforts to cause the
Berkshire Merger and the General Merger to occur contemporaneously or as close
thereto as is practicable.
2.2 Effects of the Mergers. The Mergers shall have the effects set forth in
the DGCL.
2.3 Certificates of Incorporation; Bylaws.
(a) The Certificate of Incorporation and Bylaws of Merger Sub A as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation and Bylaws of the surviving corporation of the Berkshire Merger
until thereafter changed or amended as provided therein or by applicable law.
(b) The Certificate of Incorporation and Bylaws of Merger Sub B as in effect
at the Effective Time shall be the Certificate of Incorporation and Bylaws of
the surviving corporation of the General Merger until thereafter changed or
amended as provided therein or by applicable law.
2.4 Directors. The directors of Merger Sub A immediately prior to the
Effective Time shall be the directors of the surviving corporation of the
Berkshire Merger as of the Effective Time until the earlier of their
resignation or removal or until their respective successors are duly appointed
or elected in accordance with applicable law. The directors of Merger Sub B
immediately prior to the Effective Time shall be the directors of the
surviving corporation of the General Merger as of the Effective Time until the
earlier of their resignation or removal or until their respective successors
are duly appointed or elected in accordance with applicable law.
2.5 Officers. The officers of Berkshire and General immediately prior to the
Effective Time shall be the officers of the surviving corporations of the
Berkshire Merger and the General Merger, respectively, as of the Effective
Time until the earlier of their resignation or removal or until their
respective successors are duly appointed or elected in accordance with
applicable law.
Annex I-7
<PAGE>
2.6 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
8.1, and subject to the satisfaction or waiver of the conditions set forth in
Article 7, the closing (the "Closing") of the Transactions will take place at
10:00 a.m. local time on the second business day after satisfaction of the
conditions set forth in Section 7.1 (or, if not satisfied or waived at that
time, as soon as practicable thereafter following satisfaction or waiver of
the conditions set forth in Sections 7.2 and 7.3) (the "Closing Date"), at the
offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New
York, unless another date, time or place is agreed to in writing by the
parties hereto.
ARTICLE 3
EFFECT OF THE MERGERS ON SECURITIES OF BERKSHIRE, GENERAL, HOLDING COMPANY AND
THE MERGER SUBSIDIARIES
3.1 Merger Subsidiary Stock. At the Effective Time, by virtue of the
Berkshire Merger, each share of the common stock of Merger Sub A outstanding
immediately prior to the Effective Time shall be converted into and shall
become one share of common stock of the surviving corporation of the Berkshire
Merger. At the Effective Time, by virtue of the General Merger, each share of
the common stock of Merger Sub B outstanding immediately prior to the
Effective Time shall be converted into and shall become one share of common
stock of the surviving corporation of the General Merger.
3.2 Holding Company Capital Stock. At the Effective Time, each share of the
capital stock of Holding Company issued and outstanding immediately prior to
the Effective Time shall be cancelled without payment therefor.
3.3 Effect on Berkshire Common Stock. At the Effective Time, by virtue of
the Berkshire Merger and without any action on the part of the holder of any
shares of Berkshire Common Stock:
(a) Cancellation of Treasury Stock. Each share of Berkshire Common Stock
that is owned by Berkshire or any subsidiary of Berkshire shall automatically
be cancelled and retired and shall cease to exist, and no cash, Holding
Company Common Stock or other consideration shall be delivered or deliverable
in exchange therefor.
(b) Conversion of Berkshire Common Stock. Except as provided in Section
3.3(a), each issued and outstanding share of Berkshire Common Stock shall be
converted into the following:
(i) for each such share of Berkshire Class A Common Stock, one fully paid
and nonassessable share of Holding Company Class A Common Stock; or
(ii) for each such share of Berkshire Class B Common Stock, one fully
paid and nonassessable share of Holding Company Class B Common Stock.
(c) Cancellation and Retirement of Berkshire Common Stock. (i) All shares of
Berkshire Class A Common Stock issued and outstanding immediately prior to the
Effective Time shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each certificate
theretofore representing any such shares shall, without any action on the part
of the holder thereof, be deemed to represent an equivalent number of shares
of Holding Company Class A Common Stock and (ii) all shares of Berkshire Class
B Common Stock issued and outstanding immediately prior to the Effective Time,
shall no longer be outstanding and shall automatically be cancelled and
retired and shall cease to exist, and each such certificate theretofore
representing any such shares shall, without any action on the part of the
holder thereof, be deemed to represent an equivalent number of shares of
Holding Company Class B Common Stock.
(d) Stock Plans. Each outstanding option or right to purchase shares of
Berkshire Class B Common Stock (a "Berkshire Option") shall, if agreed by the
holder of any such Berkshire Option to the extent such agreement is required,
be assumed by Holding Company in such manner that it is converted into an
option to purchase shares of Holding Company Class B Common Stock, with each
such Berkshire Option to otherwise be
Annex I-8
<PAGE>
exercisable upon the same terms and conditions as then are applicable to such
Berkshire Option, including the number of shares and exercise price provided
thereby. Holding Company shall assume all rights and obligations of Berkshire
under Berkshire's stock option plans as in effect at the Effective Time and
shall continue such plans in accordance with their terms.
3.4 Effect on General Stock. At the Effective Time, by virtue of the General
Merger and without any action on the part of the holder of any shares of
General Stock:
(a) Cancellation of Treasury Stock and Berkshire-Owned General Stock. Each
share of General Common Stock, together with the rights (the "Rights")
attached thereto to purchase Series A Junior Participating Preferred Stock of
General (the "General Junior Preferred Stock") issued pursuant to the Rights
Agreement (the "Rights Agreement") dated as of September 11, 1991 between
General and Bank of New York, as Rights Agent (as it may be amended), that is
owned by General or any subsidiary of General and each share of General Common
Stock (with the associated Rights) that is owned by Berkshire or any
subsidiary of Berkshire shall automatically be cancelled and retired and shall
cease to exist, and no cash, Holding Company Common Stock or other
consideration shall be delivered or deliverable in exchange therefor.
(b) Conversion of General Stock. Except as otherwise provided herein and
subject to Sections 3.5, 3.7 and 3.8, each issued and outstanding share of
General Common Stock (with the associated Rights) shall be converted into
either (i) the right to receive from the Holding Company 0.0035 of a fully
paid and nonassessable share of Holding Company Class A Common Stock or (ii)
the right to receive from the Holding Company 0.105 of a fully paid and
nonassessable share of Holding Company Class B Common Stock, as determined
pursuant to the election procedures set forth in Section 3.5(b) (the "Merger
Consideration"). In the event that, between the date of this Agreement and the
Effective Time, the issued and outstanding shares of Berkshire Common Stock
shall have been changed into a different number or class of shares as a result
of a stock split, reverse stock split, stock dividend, spin-off, extraordinary
dividend, recapitalization, reclassification or other similar transaction with
a record date within such period, the Merger Consideration shall be
appropriately adjusted.
(c) Cancellation and Retirement of General Stock. All shares of General
Common Stock (with the associated Rights), other than shares referred to in
Section 3.4(a), issued and outstanding immediately prior to the Effective Time
shall no longer be outstanding and shall automatically be cancelled and
retired and shall cease to exist, and each holder of a certificate
representing any such shares of General Common Stock (with the associated
Rights) shall cease to have any rights with respect thereto, except the right
to receive the Merger Consideration in accordance with Section 3.4(b) and any
cash in lieu of fractional shares of Holding Company Class B Common Stock to
be issued or paid in consideration therefor upon surrender of such certificate
in accordance with Section 3.5.
(d) Stock Plans. Prior to the mailing of the Proxy Statement/Prospectus (as
defined in Section 6.1(a)) to General's or Berkshire's stockholders, the Board
of Directors of General (or, if appropriate, any committee administering the
Stock Plans (as defined below)) shall adopt such resolutions or take such
other actions as may be required to effect the following:
(i) Adjust the terms of all outstanding employee stock options to
purchase shares of General Common Stock ("General Stock Options") granted
under any of General's 1995 Long Term Compensation Plan, Long Term
Compensation Plan, 1996 Employee Stock Award Plan or 1989 Long Term
Compensation Plan (collectively, the "Option Plans"), to provide that, at
the Effective Time, each General Stock Option outstanding immediately prior
to the Effective Time shall (except to the extent that Berkshire and the
holder of a General Stock Option otherwise agree in writing prior to the
Effective Time) be deemed to constitute an option to acquire, on the same
terms and conditions as were applicable under such General Stock Option,
the number of shares of Holding Company Class B Common Stock equal to the
product of (1) the number of shares of General Common Stock issuable upon
exercise of such General Stock Option and (2) 0.105, provided that any
fractional shares of Holding Company Class B Stock resulting from such
multiplication shall be rounded up or down to the nearest one one-hundredth
of a share (provided that, notwithstanding
Annex I-9
<PAGE>
the foregoing, the terms of such General Stock Option shall provide for the
payment of cash in lieu of any fractional share of Holding Company Class B
Common Stock upon exercise thereof in an amount equal to such fraction
multiplied by the last sale price of Holding Company Class B Common Stock
as reported on the New York Stock Exchange ("NYSE") Composite Tape on the
date of exercise), at a price per share equal to (x) the exercise price for
the shares of General Common Stock otherwise purchasable pursuant to such
General Stock Option divided by (y) 0.105, provided, that such exercise
price shall be rounded up or down to the nearest cent.
(ii) Except as provided in Section 6.13 or as otherwise agreed to in
writing by the parties, (A) the Option Plans, the 1998 Employee Stock
Purchase Plan and the Stock Unit Plan for Directors, the Employee Stock
Savings and Ownership Plan, Cologne Reinsurance Company 401K Profit Sharing
Plan and the Retirement Plan for Directors, and any other plan, program or
arrangement providing for the issuance or grant of any interest in respect
of the capital stock of General or any subsidiary (collectively, the "Stock
Plans") shall terminate as of the Effective Time, and (B) General shall
ensure that following the Effective Time no holder of a General Stock
Option nor any participant in any of the Stock Plans shall have any right
thereunder to acquire equity securities of General or the Holding Company.
3.5 Exchange of General Certificates.
(a) Exchange Agent. Prior to the mailing of the Proxy Statement/Prospectus
to General's stockholders and Berkshire's stockholders, Berkshire shall
designate and appoint a bank or trust company reasonably satisfactory to
General to act as exchange agent (the "Exchange Agent") for the payment of the
Merger Consideration. As soon as reasonably practicable as of or after the
Effective Time, Holding Company shall deposit the Merger Consideration with
the Exchange Agent for the benefit of the holders of shares of General Stock,
for exchange in accordance with this Article 3.
(b) Exchange Procedures. As soon as practicable after the Effective Time,
the Exchange Agent shall mail to each holder of an outstanding certificate or
certificates which prior thereto represented shares of General Common Stock
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to such certificate shall pass, only upon
delivery of such certificates to such Exchange Agent), and (ii) instructions
for use in effecting the surrender of the certificates for the Merger
Consideration. The letter of transmittal shall permit each such holder to
elect (a "Class A Election") the aggregate number of shares of General Common
Stock represented by the certificate(s) surrendered therewith to be converted
into shares of Holding Company Class A Common Stock pursuant to Section
3.4(b)(i) or Section 3.7(c)(i), as the case may be, and shall provide that all
shares of General Common Stock represented thereby with respect to which a
Class A Election has not been made shall be converted into Holding Company
Class B Common Stock pursuant to Section 3.4(b)(ii) or Section 3.7(c)(ii), as
the case may be. Upon proper surrender to the Exchange Agent of such
certificates for cancellation, the holder of such certificates shall after the
Effective Time be entitled only to a certificate or certificates representing
the number of full shares of Holding Company Common Stock into which the
aggregate number of shares of General Common Stock previously represented by
such certificate or certificates surrendered shall have been converted
pursuant to this Agreement and any cash constituting Merger Consideration,
cash in lieu of fractional shares and cash dividends or distributions to which
such holder is entitled. The Exchange Agent shall accept such certificates
upon compliance with such reasonable terms and conditions as the Exchange
Agent may impose to effect an orderly exchange thereof in accordance with
normal exchange practices. After the Effective Time, there shall be no further
transfer on the records of General or its transfer agent of certificates
representing shares of General Common Stock and if such certificates are
presented to General for transfer, they shall be cancelled against delivery of
certificates for Holding Company Common Stock and cash in lieu of fractional
shares as provided herein. If any certificate for such Holding Company Common
Stock is to be issued in, or if cash is to be remitted to, a name other than
that in which the certificate for General Common Stock surrendered for
exchange is registered, it shall be a condition of such exchange that the
certificate so surrendered shall be properly endorsed, with signature
guaranteed, or otherwise in proper form for transfer and that the person
requesting such exchange shall pay to Holding Company or its transfer agent
any transfer or other taxes required by reason of the issuance of certificates
for such Holding Company Common
Annex I-10
<PAGE>
Stock in a name other than that of the registered holder of the certificate
surrendered, or establish to the satisfaction of Holding Company or its
transfer agent that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 3.5(b), each certificate for
shares of General Common Stock shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the Merger
Consideration and any cash payable hereunder. No interest will be paid or will
accrue on the Merger Consideration, any dividends or distributions or any cash
payable in lieu of any fractional shares of Holding Company Common Stock.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to Holding Company Common Stock with a record date
after the Effective Time shall be paid to the holder of any unsurrendered
certificate for shares of General Common Stock with respect to the shares of
Holding Company Common Stock represented thereby and no cash payment as Merger
Consideration, for dividends or distributions on Holding Company Stock with a
record date on or following the Effective Time or in lieu of fractional shares
shall be paid to any such holder pursuant to Section 3.5(e) until the
surrender of such certificate in accordance with this Section 3.5. Subject to
the effect of applicable laws, following surrender of any such certificate,
there shall be paid to the holder of the certificate representing whole shares
of Holding Company Common Stock issued in exchange therefor, without interest,
(i) at the time of such surrender the amount of any cash payable in lieu of a
fractional share of Holding Company Class B Common Stock to which such holder
is entitled hereunder and the amount of dividends or other distributions with
a record date after the Effective Time theretofore paid with respect to such
whole shares of Holding Company Common Stock, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record
date after the Effective Time but prior to such surrender and a payment date
subsequent to such surrender payable with respect to such whole shares of
Holding Company Common Stock.
(d) No Further Ownership Rights in General Common Stock. All shares of
Holding Company Common Stock issued and cash paid pursuant to Section 3.5(e)
upon the surrender for exchange of certificates representing shares of General
Common Stock in accordance with the terms of this Article 3 shall be deemed to
have been issued and paid in full satisfaction of all rights pertaining to the
shares of General Common Stock (and the associated Rights) theretofore
represented by such certificates.
(e) No Fractional Shares. Each holder of shares of General Common Stock
exchanged pursuant to the General Merger who would have otherwise been
entitled to receive a fraction of a share of Holding Company Class A Common
Stock shall receive, in lieu thereof, such number of shares of Holding Company
Class B Common Stock in the amount of such fraction multiplied by 30. No
certificates or scrip representing fractional shares of Holding Company Class
B Common Stock shall be issued upon the surrender for exchange of certificates
representing shares of General Common Stock, and such fractional share
interests will not entitle the owner thereof to vote or to any rights of a
stockholder of Holding Company. Notwithstanding any other provision of this
Agreement, (A) each holder of shares of General Common Stock exchanged
pursuant to the General Merger who would have otherwise been entitled to
receive a fraction of a share of Holding Company Class B Common Stock shall
receive, in lieu thereof, a cash payment (without interest) equal to the
product of (x) such fraction and (y) the Average Trading Price for one share
of Berkshire Class B Common Stock. For purposes of this Agreement, "Average
Trading Price" shall mean the average of the high and low trading prices of
Berkshire Class A Common Stock or Bentwood Class B Common Stock, as the case
may be, as reported on the NYSE Composite Tape for each of the five
consecutive trading days ending on the last full trading day immediately prior
to the date on which the Effective Time occurs.
(f) Termination of Exchange Fund. Any portion of the Merger Consideration
deposited with the Exchange Agent pursuant to this Section 3.5 (the "Exchange
Fund") which remains undistributed to the holders of the certificates
representing shares of General Common Stock for nine months after the
Effective Time shall be delivered to Holding Company, upon demand, and any
holders of shares of General Common Stock who have not theretofore complied
with this Article 3 shall thereafter look only to Holding Company and only as
general creditors thereof for payment of their claim for Merger Consideration,
any cash in lieu of fractional shares of
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<PAGE>
Holding Company Class B Common Stock and any dividends or distributions with
respect to whole shares of Holding Company Common Stock to which such holders
may be entitled.
(g) No Liability. None of Holding Company, Berkshire, General or the
Exchange Agent shall be liable to any person in respect of any shares of
Holding Company Common Stock (or dividends or distributions with respect
thereto) or cash from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
certificates representing shares of General Common Stock shall not have been
surrendered prior to five years after the Effective Time (or immediately prior
to such earlier date on which any shares of Holding Company Common Stock, any
cash payable as Merger Consideration or in lieu of fractional shares of
Holding Company Class B Common Stock or any dividends or distributions with
respect to Holding Company Common Stock in respect of such certificate would
otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 4.1(d)), any such shares, cash, dividends or distributions
in respect of such certificate shall, to the extent permitted by applicable
law, become the property of Holding Company, free and clear of all claims or
interest of any person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by Berkshire (or Holding Company
after the Effective Time), on a daily basis. Any interest and other income
resulting from such investments shall be paid to Berkshire (or Holding Company
after the Effective Time).
3.6 General Preferred Stock. General agrees to take all actions necessary to
call for redemption, and to redeem, all of the shares of General Preferred
Stock as of immediately prior to the Effective Time pursuant to the terms
thereof.
3.7 Partial Cash Election.
(a) Subject only to Berkshire's compliance in all material respects with
Section 6.14, Berkshire shall be permitted to elect (the "Partial Cash
Election"), but may decline to elect, to pay a portion of the Merger
Consideration in cash as provided under Section 3.7(c). Berkshire may make the
Partial Cash Election by giving written notice to General indicating that it
is making the Partial Cash Election within ten business days following the
earlier of (x) Berkshire being informed by the Internal Revenue Service of the
United States ("IRS") that it will not grant the 351(e) Ruling (as defined in
Section 6.14) (and, if the IRS will not grant the 351(e) Ruling as a result of
the United States Treasury Department (the "Treasury Department") withdrawing
or announcing its intention to withdraw Proposed Treasury Regulation Sections
1.351-1(c)(1)(ii)(d) and 1.368-4 (the "Proposed Regulations"), Berkshire also
being informed by the IRS that it will not grant the 368(c) Ruling (as defined
in Section 6.14)), or (y) February 19, 1999. Notwithstanding the prior
sentence, Berkshire may not make the Partial Cash Election if Berkshire has
received written notice of the issuance of either (I) the 351(e) Ruling and
the No Gain or Loss Ruling or (II), if the Treasury Department has withdrawn
the Proposed Regulations, the No Gain or Loss Ruling or the 368(c) Ruling by
the IRS on or prior to the date Berkshire makes the election. In the event
Berkshire is entitled to make the Partial Cash Election and does not give any
written notice declining to make the Partial Cash Election to General, as of
the expiration of such ten business days, Berkshire shall be deemed to have
made the Partial Cash Election. Berkshire shall not be permitted to make the
Partial Cash Election except to the extent provided in this Section 3.7.
Notwithstanding any provision to the contrary contained in this Agreement,
none of the failure to receive one or more of the Rulings, the making of the
Partial Cash Election or the effects of any of the foregoing shall be deemed a
material adverse effect to any party hereunder or constitute a basis for any
party not to consummate the transactions contemplated hereby.
(b) If the Partial Cash Election has been made, then, notwithstanding any
other provision of this Agreement, at the Effective Time: (i) the Berkshire
Merger shall not be consummated, (ii) the outstanding Holding Company Stock
shall not be cancelled nor will any additional Holding Company stock be
issued, (iii) the Transactions will have no effect on Berkshire Common Stock
or any Berkshire Option, the Berkshire Certificate of Incorporation and
Bylaws, or the Berkshire Board of Directors and officers, except that Ronald
E. Ferguson, Chairman and Chief Executive Officer of General, shall be duly
appointed as a director of Berkshire (rather than Holding
Annex I-12
<PAGE>
Company) immediately after the Effective Time, (iv) all of the rights and
obligations of Holding Company shall enure to, or be obligations of,
Berkshire, (v) as appropriate, references herein to Holding Company Class A
Common Stock and Holding Company Class B Common Stock shall instead refer to
Berkshire Class A Common Stock and Berkshire Class B Common Stock,
respectively, and (vi) Berkshire shall take any action required so that Merger
Sub B is a direct subsidiary of a direct subsidiary of Berkshire.
(c) If the Partial Cash Election has been made, then, notwithstanding
Section 3.4(b), for each issued and outstanding share of General Common Stock
(with the associated Rights), the Merger Consideration shall consist of either
(i) the right to receive from Berkshire (A) 0.003395 of a fully paid and
nonassessable share of Berkshire Class A Common Stock and (B) an amount in
cash equal to the product of .000105 and the Average Trading Price of one
share of Berkshire Class A Common Stock, or (ii) the right to receive from
Berkshire (x) 0.10185 of a fully paid and nonassessable share of Berkshire
Class B Common Stock and (y) an amount in cash equal to the product of .00315
and the Average Trading Price of one share of Berkshire Class B Common Stock,
as determined pursuant to the election procedures set forth in Section 3.5(b).
(d) As promptly as practicable after the date hereof, and in any event prior
to the filing of the Ruling Request (as defined in Section 6.14(a)), Berkshire
shall issue to General shares of a new class of non-voting, non- participating
cumulative preferred stock of Berkshire, which shares shall have an aggregate
face amount of $1,000,000, shall pay dividends at a market rate and shall be
redeemable for their aggregate face amount (plus accrued but unpaid dividends)
at Berkshire's option after five years from the date of issuance, and in
exchange General shall issue to Berkshire an equal number of shares of a new
class of preferred stock of General having equivalent value and substantially
identical terms. The preferred stock issued pursuant to this Section 3.7(d)
shall not be converted in the Berkshire Merger or the General Merger and shall
remain outstanding following the Effective Time.
3.8 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, General Common Stock outstanding immediately prior to the Effective
Time and held by a holder who has delivered a written demand for appraisal of
such shares in accordance with Section 262 of the DGCL, if such Section 262
provides for appraisal rights for such General Common Stock in the General
Merger ("Dissenting Shares"), shall not be converted as provided in Section
3.7(c) hereof, unless and until such holder fails to perfect or effectively
withdraws or otherwise loses his right to appraisal and payment under the
DGCL. If, after the Effective Time, any such holder fails to perfect or
effectively withdraws or loses his right to appraisal, such Dissenting Shares
shall thereupon be treated as if they had been converted as of the Effective
Time into the right to receive the Merger Consideration as provided in Section
3.4(b) or Section 3.7(c) hereof, as appropriate, together with any dividends
or distributions payable thereon or cash in lieu of fractional shares, and to
which such holder is entitled, without interest thereon. General shall give
Berkshire prompt notice of any demands received by General for appraisal of
General Common Stock, and, prior to the Effective Time, Berkshire shall have
the right to participate in all negotiations and proceedings with respect to
such demands. Prior to the Effective Time, General shall not, except with the
prior written consent of Berkshire, make any payment with respect to, or offer
to settle, any such demands.
Annex I-13
<PAGE>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 Disclosure Schedules. On or prior to the date hereof, General has
delivered to Berkshire and Berkshire has delivered to General a schedule
(each, a "Disclosure Schedule" and respectively the "General Disclosure
Schedule" and the "Berkshire Disclosure Schedule") setting forth, among other
things, items the disclosure of which is necessary or appropriate either in
response to an express disclosure requirement contained in a provision hereof
or as an exception to one or more representations or warranties contained in
Section 4.2 or 4.3, respectively, or to one or more of its covenants contained
herein; provided, that the mere inclusion of an item in a Disclosure Schedule
as an exception to a representation or warranty shall not be deemed an
admission by a party that such item represents a material exception or fact,
event or circumstance or that such item is reasonably likely to result in a
material adverse effect with respect to any party hereto. For purposes of this
Agreement, "Previously Disclosed" by a party shall mean information set forth
in such party's Disclosure Schedule and specifically designated as information
"Previously Disclosed" pursuant to this Agreement.
4.2 Representations and Warranties of General. General represents and
warrants to Berkshire, except as otherwise Previously Disclosed, as follows:
(a) Organization, Standing and Corporate Power. Each of General and each of
its subsidiaries (as defined in Section 9.3) is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it
is incorporated and has the requisite corporate power and authority to carry
on its business as now being conducted. Each of General and each of its
subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so
qualified or licensed (individually or in the aggregate) would not have a
material adverse effect (as defined in Section 9.3) with respect to General.
General has Previously Disclosed complete and correct copies of the
Certificate of Incorporation and Bylaws of General.
(b) Subsidiaries. The only direct or indirect subsidiaries of General and
other ownership interests held by General in any other person are those listed
in Section 4.2(b) of the Disclosure Schedule or in Exhibit 21 to General's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997. Except
as set forth in Section 4.2(b) of the Disclosure Schedule or such Exhibit 21,
all the outstanding shares of capital stock or other ownership interests of
each such subsidiary have been validly issued and are fully paid and
nonassessable and are owned (of record and beneficially) by General, by
another subsidiary (wholly owned) of General or by General and another such
subsidiary (wholly owned), free and clear of all pledges, claims, liens,
charges, encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens").
(c) Capital Structure. The authorized capital stock of General consists of
250,000,000 shares of General Common Stock and 20,000,000 shares of preferred
stock, of which 1,754,386 shares have been designated as General Preferred
Stock. Subject to any Permitted Changes (as defined in Section 5.1(b))
following the date of this Agreement, there are approximately (i) 75,750,000
shares of General Common Stock issued and outstanding, (ii) 1,700,000 shares
of General Preferred Stock issued and outstanding, (iii) 27,150,000 shares of
General Common Stock and 60,000 shares of General Preferred Stock held in the
treasury of General or held by any subsidiary of General; (iv) 1,000,000
shares of General Common Stock reserved for issuance upon exercise of
authorized but unissued General Stock Options pursuant to the Option Plans;
and (v) 5,500,000 shares of General Common Stock issuable upon exercise of
outstanding General Stock Options. As of the date hereof there were no amounts
withheld from General's employees' salaries to purchase shares of General
Common Stock pursuant to and issuable under the Stock Purchase Plan. Except as
set forth in this Section 4.2(c), no shares of capital stock or other equity
securities of General are issued, reserved for issuance or outstanding. All
outstanding shares of capital stock of General are, and all shares which may
be issued pursuant to the Stock Plans will be when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. Except as set forth in this Section 4.2(c) or in the Stock Option
Agreement, there are no outstanding bonds, debentures, notes or other
indebtedness or other securities of General having the right to vote (or
convertible into, or
Annex I-14
<PAGE>
exchangeable for, securities having the right to vote) on any matters on which
stockholders of General may vote. Except as set forth in this Section 4.2(c)
or in the Stock Option Agreement, there are no outstanding securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which General or any of its subsidiaries is a
party or by which any of them is bound obligating General or any of its
subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other equity or voting securities
of General or of any of its subsidiaries or obligating General or any of its
subsidiaries to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. Other
than General Stock Options and the Stock Option Agreement, (i) there are no
outstanding contractual obligations, commitments, understandings or
arrangements of General or any of its subsidiaries to repurchase, redeem or
otherwise acquire or make any payment in respect of or measured or determined
based on the value or market price of any shares of capital stock of General
or any of its subsidiaries and (ii) to the knowledge of General, there are no
irrevocable proxies with respect to shares of capital stock of General or any
subsidiary of General. Other than pursuant to the Stock Option Agreement,
there are no agreements or arrangements pursuant to which General is or could
be required to register shares of General Stock or other securities under the
Securities Act of 1933, as amended (the "Securities Act").
(d) Authority; Noncontravention. General has the requisite corporate power
and authority to enter into this Agreement and the Stock Option Agreement and,
subject to General Stockholder Approval with respect to the consummation of
the Transactions and the General Merger, to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Stock Option Agreement by General and the consummation by General of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of General, subject, in the case of
the Transactions and the General Merger, to General Stockholder Approval. This
Agreement and the Stock Option Agreement have been duly executed and delivered
by General and each constitutes a valid and binding obligation of General,
enforceable against General in accordance with its terms. Except as disclosed
in Section 4.2(d) of the Disclosure Schedule, the execution and delivery of
this Agreement or the Stock Option Agreement does not, and the consummation of
the transactions contemplated hereby and thereby and compliance with the
provisions hereof and thereof will not, conflict with, or result in any breach
or violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
or "put" right with respect to any obligation or to loss of a material benefit
under, or result in the creation of any Lien upon any of the properties or
assets of General or any of its subsidiaries under, (i) the Certificate of
Incorporation or Bylaws of General or the comparable charter or organizational
documents of any of its subsidiaries, (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease, contract or other agreement, instrument,
permit, concession, franchise or license applicable to General or any of its
subsidiaries or their respective properties or assets or (iii) subject to the
governmental filings and other matters referred to in the following sentence,
any judgment, order, decree, statute, law, ordinance, rule, regulation or
arbitration award applicable to General or any of its subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii) and
(iii), any such conflicts, breaches, violations, defaults, rights, losses or
Liens that individually or in the aggregate could not have a material adverse
effect with respect to General or could not prevent, hinder or materially
delay the ability of General to consummate the transactions contemplated by
this Agreement or the Stock Option Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, or notice to,
any Federal, state or local government or any court, administrative agency or
commission or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), is required by or with respect to General or any of
its subsidiaries in connection with the execution and delivery of this
Agreement or the Stock Option Agreement by General or the consummation by
General of the transactions contemplated hereby and thereby, except for (i)
the filing of a premerger notification and report form by General under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) the filing with the Securities and Exchange Commission (the "SEC")
of (y) the Proxy Statement/Prospectus, and (z) such reports or schedules under
the Exchange Act as may be required in connection with this Agreement or the
Stock Option Agreement and the transactions contemplated by this Agreement and
the Stock Option Agreement, (iii) the filing of the Certificates of Merger for
the Mergers with the Secretary of State of the State of Delaware, and
appropriate documents with the relevant authorities of other states in which
General is qualified to do business, (iv) the filing of appropriate
Annex I-15
<PAGE>
documents with, and approval of, the respective commissioners of insurance of
the states of Delaware, Ohio, Connecticut and North Dakota, and of such
notices as may be required under the insurance laws of other jurisdictions in
which General or any of its subsidiaries is domiciled or does business or is
licensed or authorized as an insurance company, and (v) such other consents,
approvals, orders, authorizations, registrations, declarations, filings or
notices as are set forth in Section 4.2(d) of the Disclosure Schedule.
(e) SEC Documents; Undisclosed Liabilities. General has filed all required
reports, schedules, forms, statements and other documents with the SEC since
January 1, 1996 (collectively, and in each case including all exhibits and
schedules thereto and documents incorporated by reference therein, the
"General SEC Documents"). As of their respective dates, General SEC Documents
complied in all material respects with the requirements of the Securities Act
or the Exchange Act, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such General SEC Documents, and none
of General SEC Documents (including any and all financial statements included
therein) as of such dates contained any untrue statement of a material fact or
omitted 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. The consolidated financial statements of
General included in General SEC Documents (the "General SEC Financial
Statements") comply as to form 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 generally accepted
accounting principles (except, in the case of unaudited consolidated quarterly
statements, as permitted by Form 10-Q of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present the consolidated financial position of General and
its consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended
(subject, in the case of unaudited quarterly statements, to normal year-end
audit adjustments). Since December 31, 1997, neither General nor any of its
subsidiaries has incurred any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) except (i) as and to the
extent set forth on the audited balance sheet of General and its subsidiaries
as of December 31, 1997 (including the notes thereto), (ii) as incurred in
connection with the transactions contemplated by this Agreement or the Stock
Option Agreement, (iii) as incurred after December 31, 1997 in the ordinary
course of business and consistent with past practice, (iv) as described in
General SEC Documents filed since December 31, 1997 (the "Recent General SEC
Documents"), or (v) as would not, individually or in the aggregate, have a
material adverse effect with respect to General.
(f) Information Supplied. None of the information supplied or to be supplied
by General for inclusion or incorporation by reference in (i) the registration
statement on Form S-4 to be filed with the SEC by Holding Company in
connection with the issuance of Holding Company Common Stock in the
Transactions (the "Form S-4") will, at the time the Form S-4 is filed with the
SEC, and at any time it is amended or supplemented or at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and (ii) the Proxy
Statement/Prospectus will, at the date it is first mailed to General's
stockholders and the Berkshire's stockholders or at the time of General
Stockholders Meeting (as defined in Section 6.1(b)) and the Berkshire
Stockholders Meeting (as defined in Section 6.1(c)), 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. The Proxy
Statement/Prospectus will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations promulgated
thereunder, except that no representation is made by General with respect to
statements made or incorporated by reference therein based on information
supplied by Berkshire or Holding Company for inclusion or incorporation by
reference therein.
(g) Absence of Certain Changes or Events. Except as disclosed in the Recent
General SEC Documents or in Section 4.2(g) of the Disclosure Schedule, since
December 31, 1997, General has conducted its business only in the ordinary
course consistent with past practice, and there is not and has not been: (i)
any material adverse change with respect to General; (ii) any condition, event
or occurrence which, individually or in the aggregate, could reasonably be
expected to have a material adverse effect or give rise to a material adverse
change with
Annex I-16
<PAGE>
respect to General; (iii) any event which, if it had taken place following the
execution of this Agreement, would not have been permitted by Section 5.1
without the prior consent of Berkshire; or (iv) any condition, event or
occurrence which would prevent, hinder or materially delay the ability of
General to consummate the transactions contemplated by this Agreement or the
Stock Option Agreement.
(h) Litigation; Labor Matters; Compliance with Laws.
(i) Except as disclosed in the Recent General SEC Documents, there is no
suit, action or proceeding or investigation pending or, to the knowledge of
General, threatened against or affecting General or any of its subsidiaries
or any basis for any such suit, action, proceeding or investigation that,
individually or in the aggregate, could reasonably be expected to have a
material adverse effect with respect to General or prevent, hinder or
materially delay the ability of General to consummate the transactions
contemplated by this Agreement or the Stock Option Agreement, nor is there
any judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against General or any of its subsidiaries
having, or which, insofar as reasonably could be foreseen by General, in
the future could have, any such effect.
(ii) Neither General nor any of its subsidiaries is a party to, or bound
by, any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization, nor is it or any of
its subsidiaries the subject of any proceeding asserting that it or any
subsidiary has committed an unfair labor practice or seeking to compel it
to bargain with any labor organization as to wages or conditions of
employment nor is there any strike, work stoppage or other labor dispute
involving it or any of its subsidiaries pending or, to its knowledge,
threatened, any of which could have a material adverse effect with respect
to General.
(iii) The conduct of the business of each of General and each of its
subsidiaries complies with all statutes, laws, regulations, ordinances,
rules, judgments, orders, decrees or arbitration awards applicable thereto,
except for violations or failures so to comply, if any, that, individually
or in the aggregate, could not reasonably be expected to have a material
adverse effect with respect to General.
(i) Employee Matters. General has delivered or made available to Berkshire
full and complete copies or descriptions of each material employment,
severance, bonus, profit sharing, compensation, termination, stock option,
stock appreciation right, restricted stock, phantom stock, performance unit,
pension, retirement, deferred compensation, welfare or other employee benefit
agreement, trust fund or other arrangement and any union, guild or collective
bargaining agreement maintained or contributed to or required to be
contributed to by General or any of its ERISA Affiliates, for the benefit or
welfare of any director, officer, employee or former employee of General or
any of its ERISA Affiliates (such plans and arrangements being collectively
the "General Benefit Plans"). Each of General Benefit Plans is in material
compliance with all applicable laws including ERISA and the Code. The Internal
Revenue Service has determined that each General Benefit Plan that is intended
to be a qualified plan under Section 401(a) of the Code is so qualified and
General is aware of no event occurring after the date of such determination
that would adversely affect such determination. The liabilities accrued under
each such plan are reflected on the latest balance sheet of General included
in the Recent SEC Reports in accordance with generally accepted accounting
principles applied on a consistent basis. No condition exists that is
reasonably likely to subject General or any of its subsidiaries to any direct
or indirect liability under Title IV of ERISA or to a civil penalty under
Section 502(j) of ERISA or liability under Section 4069 of ERISA or 4975,
4976, or 4980B of the Code or the loss of a federal tax deduction under
Section 280G of the Code or other liability with respect to General Benefit
Plans that would have a material adverse effect on General and that is not
reflected on such balance sheet. No General Benefit Plan (other than any
General Benefit Plan that is a "multiemployer plan" as such term is defined in
Section 4001(a)(3) of ERISA) is subject to Title IV of ERISA. There are no
pending, threatened, or anticipated claims (other than routine claims for
benefits or immaterial claims) by, on behalf of or against any of General
Benefit Plans or any trusts related thereto. "ERISA Affiliate" means, with
respect to any person, any trade or business, whether or not incorporated,
that together with such person would be deemed a "single employer" within the
meaning of Section 4001(a)(15) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA").
Annex I-17
<PAGE>
(j) Tax Returns and Tax Payments. General and each of its subsidiaries has
timely filed (or, as to subsidiaries, General has filed on its behalf) all Tax
Returns (as defined below) required to be filed by it, has paid (or, as to
subsidiaries, General has paid on its behalf) all Taxes (as defined below)
shown thereon to be due and has provided (or, as to subsidiaries, General has
made provision on its behalf of) reserves in accordance with generally
accepted accounting principles in its financial statements for any Taxes that
have not been paid, whether or not shown as being due on any Tax Returns.
Except as set forth in Section 4.2(j) of the Disclosure Schedule: (i) no
material claim for unpaid Taxes has been asserted against General or any of
its subsidiaries in writing by a Tax authority or has become a lien (except
for liens for Taxes not yet due and payable or for Taxes that are being
disputed in good faith by appropriate proceedings and that have been reserved
against in accordance with generally accepted accounting principles) against
the property of General or any of its subsidiaries, (ii) no audit of any Tax
Return of General or any of its subsidiaries is being conducted by a Tax
authority, and (iii) no extension of the statute of limitations on the
assessment of any Taxes has been granted by General or any of its subsidiaries
and is currently in effect. Neither General nor any of its Subsidiaries is or
has been a member of any consolidated, combined, unitary or aggregate group
for Tax purposes except such a group consisting only of General and its
subsidiaries. As used herein, "Taxes" shall mean all taxes of any kind,
including, without limitation, those on or measured by or referred to as
income, gross receipts, sales, use, ad valorem, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation,
premium, value added, property or windfall profits taxes, customs, duties or
similar fees, assessments or charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts imposed by
any governmental authority, domestic or foreign. As used herein, "Tax Return"
shall mean any return, report or statement required to be filed with any
governmental authority with respect to Taxes.
(k) State Antitakeover Laws Not Applicable; No Other Restrictions. The Board
of Directors of General has approved this Agreement and the Stock Option
Agreement and the transactions contemplated hereby and thereby and such
approval constitutes approval of the Transactions and the General Merger and
the Stock Option Agreement and the other transactions contemplated hereby and
thereby by the Board of Directors of General under the provisions of Section
203 of the DGCL and Article VIII of General's Certificate of Incorporation
such that Section 203 of the DGCL and such Article VIII do not apply to this
Agreement or the Stock Option Agreement or the transactions contemplated
hereby or thereby. No other state takeover statute or similar statute or
regulation of the State of Delaware (or, to the knowledge of General after due
inquiry, of any other state or jurisdiction) applies or purports to apply to
this Agreement or the Stock Option Agreement or the transactions contemplated
hereby or thereby. No provision of the Certificate of Incorporation, Bylaws or
other governing instruments of General or any of its subsidiaries or the terms
of any rights plan or agreement of General (including the Rights Agreement)
would, directly or indirectly, restrict or impair (i) the ability of Berkshire
or Holding Company to vote, or otherwise to exercise the rights of a
stockholder with respect to, securities of General and its subsidiaries that
may be acquired or controlled by Berkshire or Holding Company by virtue of
this Agreement or the Stock Option Agreement, the transactions contemplated
hereby or thereby or (ii) the rights granted hereunder and thereunder,
including without limitation, the right to cause General to repurchase options
or equity securities pursuant to the Stock Option Agreement, or permit any
stockholder to acquire securities of General, Berkshire or Holding Company, or
any of their respective subsidiaries on a basis not available to Berkshire or
Holding Company in the event that Berkshire or Holding Company were to acquire
securities of General.
(l) Environmental Matters. There are no legal, administrative, arbitral or
other proceedings, claims, actions, causes of action, private environmental
investigations or remediation activities or governmental investigations of any
nature seeking to impose, or that reasonably could be expected to result in
the imposition, on General or any of its subsidiaries of any liability or
obligations arising under common law standards relating to environmental
protection, human health or safety, or under any local, state, federal,
national or supernational environmental statute, regulation or ordinance,
including the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended (collectively, "Environmental Laws"), pending or, to
the knowledge of General, threatened, against General or any of its
subsidiaries, which liability or obligation would have or would reasonably be
expected to have a material adverse effect on General or any of its
subsidiaries. To
Annex I-18
<PAGE>
the knowledge of General or any of its subsidiaries, there is no reasonable
basis for any such proceeding, claim, action or governmental investigation
that would impose any liability or obligation that would have or would
reasonably be expected to have a material adverse effect on General or any of
its subsidiaries. To the knowledge of General, during or prior to the period
of (i) its or any of its subsidiaries' ownership or operation of any of their
respective current properties, (ii) its or any of its subsidiaries'
participation in the management of any property, or (iii) its or any of its
subsidiaries' holding of a security interest or other interest in any
property, there was no release or threatened release of hazardous, toxic,
radioactive or dangerous materials or other materials regulated under
Environmental Laws in, on, under or affecting any such property which would
reasonably be expected to have a material adverse effect on General or any of
its subsidiaries. Neither General nor any of its subsidiaries is subject to
any agreement, order, judgment, decree, letter or memorandum by or with any
court, governmental authority, regulatory agency or third party imposing any
material liability or obligations pursuant to or under any Environmental Law
that would have or would reasonably be expected to have a material adverse
effect on General or any of its subsidiaries.
(m) Properties. Except as disclosed in the Recent General SEC Documents,
each of General and its subsidiaries (i) has good, clear and marketable title
to all the properties and assets reflected in the latest audited balance sheet
included in such Recent General SEC Documents as being owned by General or one
of its subsidiaries or acquired after the date thereof which are, individually
or in the aggregate, material to General's business on a consolidated basis
(except properties and assets sold or otherwise disposed of since the date
thereof in the ordinary course of business), free and clear of (A) all Liens
except (1) statutory liens securing payments not yet due and (2) such
imperfections or irregularities of title or other Liens (other than real
property mortgages or deeds of trust) 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 (B) all real
property mortgages and deeds of trust and (ii) is the lessee of all leasehold
estates reflected in the latest audited financial statements included in such
Recent General SEC Documents or acquired after the date thereof which are
material to its business on a consolidated basis and is in possession of the
properties purported to be leased thereunder, and each such lease is valid
without default thereunder by the lessee or, to General's knowledge, the
lessor.
(n) Insurance Matters.
(i) Except as otherwise would not, individually or in the aggregate, be
reasonably likely to have a material adverse effect, all policies, binders,
slips, certificates, annuity contracts and participation agreements and
other agreements of insurance, whether individual or group, in effect as of
the date hereof (including all applications, supplements, endorsements,
riders and ancillary agreements in connection therewith) that are issued by
General or its subsidiaries (the "General Insurance Contracts") and any and
all marketing materials, are, to the extent required under applicable law,
on forms approved by applicable insurance regulatory authorities or which
have been filed and not objected to by such authorities within the period
provided for objection, and such forms comply in all material respects with
the insurance statutes, regulations and rules applicable thereto and, as to
premium rates established by General or any subsidiary which are required
to be filed with or approved by insurance regulatory authorities, the rates
have been so filed or approved, the premiums charged conform thereto in all
material respects, and such premiums comply in all material respects with
the insurance statutes, regulations and rules applicable thereto.
(ii) All reinsurance and coinsurance treaties or agreements, including
retrocessional agreements, to which General or any of its subsidiaries is a
party or under which General or any of its subsidiaries has any existing
rights, obligations or liabilities are in full force and effect except for
such treaties or agreements the failure to be in full force and effect as
individually or in the aggregate are not reasonably likely to have a
material adverse effect.
(iii) As of the date hereof, General has no reason to believe that any
rating presently held by General or any of its subsidiaries is likely to be
modified, qualified, lowered or placed under surveillance for a possible
downgrade for any reason other than as a result of the transactions
contemplated hereby.
Annex I-19
<PAGE>
(o) Liabilities and Reserves.
(i) The reserves carried on General statutory accounting statements of
each of General and its subsidiaries for the year ended December 31, 1997
for losses, claims and similar purposes (including claims litigation) are
in compliance in all material respects with the requirements for reserves
established by the insurance departments of the state of domicile of
General or such subsidiary, as appropriate, were determined in all material
respects in accordance with generally accepted actuarial standards and
principles consistently applied, and are fairly stated in all material
respects in accordance with sound actuarial and statutory accounting
principles. Such reserves were adequate in the aggregate to cover the total
amount of all reasonably anticipated liabilities of General and each of its
Subsidiaries under all outstanding insurance, reinsurance and other
applicable agreements as of the respective dates of such General statutory
accounting statements. The admitted assets of General and each of its
subsidiaries as determined under applicable laws are in an amount at least
equal to the minimum amounts required by applicable laws.
(ii) Except for regular periodic assessments in the ordinary course of
business or assessments based on developments which are publicly known
within the insurance industry, to the knowledge of General, no claim or
assessment is pending or threatened against any subsidiary which is
peculiar or unique to such subsidiary by any state insurance guaranty
associations in connection with such association's fund relating to
insolvent insurers which if determined adversely, would, individually or in
the aggregate, be reasonably likely to have a material adverse effect.
(p) Investment Advisory and Investment Company Matters.
(i) Neither General nor any of its subsidiaries conducts activities of or
is otherwise deemed under law to control an "investment adviser," as such
term is defined in Section 2(a)(20) of the Investment Company Act of 1940,
as amended (the "Investment Company Act"), whether or not registered under
the Investment Advisers Act of 1940, as amended (the "Investment Advisers
Act"), of any person required to be registered as an investment company
under the Investment Company Act. Neither General nor any of its
subsidiaries is an "investment company" as defined in the Investment
Company Act, and neither General nor any of its subsidiaries is a promoter
(as such term is defined in Section 2(a)(30) of the Investment Company Act)
of any person that is such an investment company.
(ii) Neither General nor any of its subsidiaries conduct activities of,
controls, owns more than a 20% interest in, or is deemed under applicable
law to control, any person that is an investment adviser as defined in the
Investment Advisers Act, whether or not registered under such Act, other
than such an investment adviser whose only clients are "insurance
companies" as defined in Section 2(a)(17) of the Investment Company Act.
(q) Brokers. No broker, investment banker, financial advisor or other
person, other than Goldman, Sachs & Co., the fees and expenses of which will
be paid by General (pursuant to a fee agreement, a copy of which has been
provided to Berkshire), is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of General.
(r) Opinion of Financial Advisor. General has received the opinion of
Goldman, Sachs & Co., dated the date of this Agreement, to the effect that the
Merger Consideration to be received in the Transactions by General's
stockholders is fair to the holders of General Common Stock from a financial
point of view, a signed copy of which opinion will be delivered to Berkshire.
(s) Board Recommendation. The Board of Directors of General, at a meeting
duly called and held, has by unanimous vote of those directors present (who
constituted 100% of the directors then in office) (i) determined that this
Agreement and the Stock Option Agreement and the transactions contemplated
hereby and thereby, including the Transactions and the General Merger, are
fair to and in the best interests of the stockholders of General, and (ii)
resolved to recommend that the holders of General Stock approve this Agreement
and the transactions contemplated herein, including the Transactions and the
General Merger.
Annex I-20
<PAGE>
(t) Rights Agreement. General has taken all action required so that the
entering into of this Agreement and the Stock Option Agreement and the
consummation of the transactions contemplated hereby and thereby do not and
will not enable or require the Rights to be separated from the shares of
General Common Stock with which the Rights are associated, or to be
distributed, exercisable, exercised, or nonredeemable or result in the Rights
associated with any General Stock beneficially owned by Berkshire or any of
its Affiliates or Associates (as defined in the Rights Agreement) to be void
or voidable.
(u) Required General Vote. General Stockholder Approval, being the
affirmative vote of a majority of the votes entitled to be cast by holders of
the outstanding shares of General Common Stock and General Preferred Stock,
voting together as a single class, is the only vote of the holders of any
class or series of General's securities necessary to approve this Agreement,
the Transactions and the General Merger and the other transactions
contemplated hereby.
4.3 Representations and Warranties of Berkshire. Berkshire represents and
warrants to General, except as otherwise Previously Disclosed, as follows:
(a) Organization, Standing and Corporate Power. Each of Berkshire, Holding
Company and the subsidiaries of Berkshire is duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it is
incorporated and has the requisite corporate power and authority to carry on
its business as now being conducted. Each of Berkshire, Holding Company and
the other subsidiaries of Berkshire is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where
the failure to be so qualified or licensed (individually or in the aggregate)
would not have a material adverse effect with respect to Berkshire.
(b) Subsidiaries. The only direct or indirect subsidiaries of Berkshire
(other than Holding Company and the Merger Subsidiaries) are listed in Section
4.3(b) of the Berkshire Disclosure Schedule or on Exhibit 21 to Berkshire's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997. All
the outstanding shares of capital stock of each such listed subsidiary which
is a corporation have been validly issued and are fully paid and nonassessable
and, except as set forth in Section 4.3(b) of the Berkshire Disclosure
Schedule or such Exhibit 21, are owned (of record and beneficially) by
Berkshire, by another subsidiary (wholly owned) or by Berkshire and another
such subsidiary (wholly owned), free and clear of all Liens.
(c) Capital Structure. The authorized capital stock of Berkshire consists of
1,500,000 shares of Berkshire Class A Common Stock, 50,000,000 shares of
Berkshire Class B Common Stock, and 1,000,000 shares of preferred stock, no
par value per share ("Berkshire Preferred Stock"). Subject to such changes as
may occur after May 1, 1998, and subject in the case of clauses (i) and (iii)
to adjustment as a result of conversions of Berkshire Class A Common Stock
into Berkshire Class B Common Stock, there were, as of May 1, 1998:
(i) 1,192,905 shares of Berkshire Class A Common Stock, 1,448,918 shares of
Berkshire Class B Common Stock, and no shares of Berkshire Preferred Stock
issued and outstanding; (ii) 163,583 shares of Berkshire Class A Common Stock
held by Berkshire in its treasury; (iii) 35,787,150 shares of Berkshire Class
B Common Stock reserved for issuance upon conversion of Berkshire Class A
Common Stock; (iv) no shares of Berkshire Class B Common Stock reserved for
issuance upon exercise of authorized but unissued options under Berkshire's
1996 Stock Option Plan; and (v) 15,669 shares of Berkshire Class B Common
Stock issuable upon exercise of outstanding options under Berkshire's 1996
Stock Option Plan. Except as set forth in this Section 4.3(c), no shares of
capital stock or other equity securities of Berkshire are issued, reserved for
issuance or outstanding. All outstanding shares of capital stock of Berkshire
are, and all shares of Holding Company Common Stock which may be issued
pursuant to this Agreement will be when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. All
shares of Holding Company Common Stock issued pursuant to this Agreement will,
when so issued, be registered under the Securities Act for such issuance and
registered under the Exchange Act, be registered or exempt from registration
under any applicable state securities laws, and be listed on the NYSE, subject
to official notice of issuance. Except as set forth in this Section 4.3(c),
there are no outstanding bonds, debentures, notes or other indebtedness or
other securities of Berkshire having
Annex I-21
<PAGE>
the right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which stockholders of Berkshire may vote.
Except as set forth in this Section 4.3(c), and except as set forth in the
Agreement with respect to Holding Company and the Merger Subsidiaries, there
are no outstanding securities, options, warrants, calls, or rights obligating
Berkshire or any of its subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other equity
securities of Berkshire or any of its subsidiaries or obligating Berkshire or
any of its subsidiaries to issue, grant, extend or enter into any such
security, option, warrant, call, or right.
(d) Authority; Noncontravention. Berkshire has all requisite corporate power
and authority to enter into this Agreement and the Stock Option Agreement and,
subject to the Berkshire Stockholder Approval with respect to the consummation
of the Transactions and the Berkshire Merger, to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Stock Option Agreement by Berkshire and the consummation by Berkshire
of the transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate action on the part of Berkshire subject, in the
case of the Transactions and the Berkshire Merger, to the Berkshire
Stockholder Approval. This Agreement and the Stock Option Agreement have been
duly executed and delivered by, and each constitutes a valid and binding
obligation of, Berkshire, enforceable against it in accordance with its terms.
The execution and delivery of this Agreement and the Stock Option Agreement do
not, and the consummation of the transactions contemplated hereby and thereby
and compliance with the provisions hereof and thereof will not, conflict with,
or result in any breach or violation of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of or "put" right with respect to any obligation
or to loss of a material benefit under, or result in the creation of any Lien
upon any of the properties or assets of Berkshire or any of its subsidiaries
under, (i) the Certificate of Incorporation or Bylaws of Berkshire or the
comparable charter or organizational documents of any subsidiary of Berkshire,
(ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or license
applicable to Berkshire or any subsidiary of Berkshire or their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule, regulation or arbitration award applicable to
Berkshire or any subsidiary of Berkshire or their respective properties or
assets, other than, in the case of clauses (ii) and (iii), any such conflicts,
breaches, violations, defaults, rights, losses or Liens that individually or
in the aggregate could not have a material adverse effect with respect to
Berkshire or could not prevent, hinder or materially delay the ability of
Berkshire to consummate the transactions contemplated by this Agreement. No
consent, approval, order or authorization of, or registration, declaration or
filing with, or notice to, any Governmental Entity is required by or with
respect to Berkshire or any subsidiary of Berkshire in connection with the
execution and delivery of this Agreement and the Stock Option Agreement by
Berkshire or the consummation by Berkshire of any of the transactions
contemplated hereby and thereby, except for (i) the filing of a premerger
notification and report form under the HSR Act, (ii) the filing with the SEC
of (y) the Form S-4 and the Proxy Statement/Prospectus and (z) such reports or
schedules under the Exchange Act as may be required in connection with this
Agreement and the Stock Option Agreement and the transactions contemplated
hereby and thereby, (iii) the filing of the Certificates of Merger for the
Mergers with the Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of other states in which the Berkshire
is qualified to do business, (iv) the filing of appropriate documents with,
and approval of, the respective commissioners of insurance of the states of
Delaware, Ohio, Connecticut, and North Dakota, and of such notices as may be
required under the insurance laws of other jurisdictions in which Berkshire or
any of its subsidiaries is domiciled or does business or is licensed or
authorized as an insurance company, and (v) such other consents, approvals,
orders, authorizations, registrations, declarations, filings or notices as may
be required under the "takeover" or "blue sky" laws of various states.
(e) SEC Documents; Undisclosed Liabilities. Berkshire has filed all required
reports, schedules, forms, statements and other documents with the SEC since
January 1, 1996 (collectively, and in each case, including all exhibits and
schedules thereto and documents incorporated by reference therein, the
"Berkshire SEC Documents"). As of their respective dates, the Berkshire SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of
Annex I-22
<PAGE>
the SEC promulgated thereunder applicable to such Berkshire SEC Documents, and
none of the Berkshire SEC Documents (including any and all financial
statements included therein) as of such date contained any untrue statement of
a material fact or omitted 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. The consolidated
financial statements of Berkshire included in the Berkshire SEC Documents
comply as to form 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 generally accepted accounting
principles (except, in the case of unaudited consolidated quarterly
statements, as permitted by Form 10-Q of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present the consolidated financial position of Berkshire
and its consolidated subsidiaries as of the dates thereof and the consolidated
results of operations and changes in cash flows for the periods then ended
(subject, in the case of unaudited quarterly statements, to normal year-end
audit adjustments). Since December 31, 1997, neither Berkshire nor any of its
subsidiaries has incurred any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) except (i) as and to the
extent set forth on the audited balance sheet of Berkshire and its
subsidiaries as of December 31, 1997 (including the notes thereto), (ii) as
incurred in connection with the transactions contemplated by this Agreement or
the Stock Option Agreement, (iii) as incurred after December 31, 1997 in the
ordinary course of business and consistent with past practice, (iv) as
described in the SEC Documents filed since December 31, 1997 (the "Recent
Berkshire SEC Documents"), or (v) as would not, individually or in the
aggregate, have a material adverse effect with respect to Berkshire.
(f) Information Supplied. None of the information supplied or to be supplied
by Berkshire or Holding Company for inclusion or incorporation by reference in
(i) the Form S-4 will, at the time the Form S-4 is filed with the SEC, and at
any time it is amended or supplemented or at the time it becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and (ii) the Proxy
Statement/Prospectus will, at the date the Proxy Statement/Prospectus is first
mailed to General's stockholders and the Berkshire's stockholders or at the
time of General Stockholders Meeting and the Berkshire Stockholders Meeting,
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. The Form S-4 and Proxy Statement/Prospectus will comply as to
form in all material respects with the requirements of the Securities Act and
Exchange Act and the rules and regulations promulgated thereunder, except that
no representation or warranty is made by Berkshire or Holding Company with
respect to statements made or incorporated by reference therein based on
information supplied by General for inclusion or incorporation by reference
therein.
(g) Absence of Certain Changes or Events. Except as disclosed in the Recent
Berkshire SEC Documents, since December 31, 1997, Berkshire has conducted its
business only in the ordinary course consistent with past practice, and there
is not and has not been (i) any material adverse change with respect to
Berkshire; (ii) any condition, event or occurrence which, individually or in
the aggregate, could reasonably be expected to have a material adverse effect
or give rise to a material adverse change with respect to Berkshire; or (iii)
any condition, event or occurrence which could reasonably be expected to
prevent, hinder or materially delay the ability of Berkshire to consummate the
transactions contemplated by this Agreement or the Stock Option Agreement.
(h) Compliance with Laws. The conduct of the business of each of Berkshire
and each of its subsidiaries complies with all statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees or arbitration awards applicable
thereto, except for violations or failures so to comply, if any, that,
individually or in the aggregate, could not reasonably be expected to have a
material adverse effect with respect to Berkshire.
(i) State Antitakeover Laws Not Applicable; No Other Restrictions. No state
takeover statute or similar statute or regulation of the State of Delaware
(or, to the knowledge of Berkshire after due inquiry, of any other state or
jurisdiction) applies or purports to apply to this Agreement or the
transactions contemplated hereby. No provision of the Certificate of
Incorporation, Bylaws or other governing instruments of Berkshire or any of
its subsidiaries would, directly or indirectly, restrict or impair (i) the
ability of Holding Company to vote, or
Annex I-23
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otherwise to exercise the rights of a stockholder with respect to, securities
of Berkshire and its subsidiaries that may be acquired or controlled by
Holding Company by virtue of this Agreement or the transactions contemplated
hereby or (ii) the rights granted hereunder, or permit any stockholder to
acquire securities of Berkshire or any of its subsidiaries on a basis not
available to Holding Company in the event that Holding Company were to acquire
securities of Berkshire.
(j) Interim Operations of Holding Company and the Merger
Subsidiaries. Holding Company and the Merger Subsidiaries were formed on June
16, 1998 solely for the purposes of engaging in the transactions contemplated
hereby, have engaged in no other business activities and have conducted their
respective operations only as contemplated hereby.
(k) Brokers. No broker, investment banker, financial advisor or other person
is entitled to or may be paid any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Berkshire or Holding Company.
(l) Board Recommendation. The Board of Directors of Berkshire, at a meeting
duly called and held, has by unanimous vote of those directors present (who
constituted a quorum) (i) determined that this Agreement and the transactions
contemplated hereby, including the Transactions and the Berkshire Merger, are
fair to and in the best interests of the stockholders of Berkshire, and (ii)
resolved to recommend that the holders of the shares of Berkshire Common Stock
approve this Agreement and the transactions contemplated herein, including the
Transactions and the Berkshire Merger.
(m) Required Berkshire Vote. The Berkshire Stockholder Approval, being the
affirmative vote of a majority of the votes entitled to be cast by holders of
the outstanding shares of Berkshire Common Stock, voting together as a single
class, is the only vote of the holders of any class or series of Berkshire's
securities necessary to approve this Agreement, the Transactions and the
Berkshire Merger and the other transactions contemplated hereby.
Annex I-24
<PAGE>
ARTICLE 5
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER
5.1 Conduct of Business of General. From the date of this Agreement to the
Effective Time (except as otherwise specifically required by the terms of this
Agreement), General shall, and shall cause its subsidiaries to, act and carry
on their respective businesses in the usual, regular and ordinary course of
business consistent with past practice and, to the extent consistent
therewith, use its best efforts to preserve intact their current business
organizations, keep available the services of their current officers and
employees and preserve their relationships with insureds, reinsurers,
customers, suppliers, insurance brokers and agents, and others having business
dealings with them to the end that their goodwill and ongoing businesses shall
not be impaired in any material respect at the Effective Time. Without
limiting the generality of the foregoing, from the date of this Agreement to
the Effective Time and except as otherwise Previously Disclosed or expressly
contemplated by this Agreement, General shall not, and shall not permit any of
its subsidiaries to, without the prior written consent of Berkshire:
(a)(i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than (A)
dividends and distributions by a direct or indirect wholly owned subsidiary of
General to its parent, (B) regular quarterly cash dividends on General Common
Stock not in excess of $0.59 per share, with usual record and payment dates
for such dividends in accordance with General's past dividend practice, and
(C) regular annual cash dividends on General Preferred Stock not in excess of
$6.20 per share (or not in excess of the amount of the "Common Stock
Equivalent Dividend" (as defined in Section 2(A) of the Certificate of
Designations of General Preferred Stock (the "Certificate of Designations"))
if General is required to pay such amount pursuant to Section 2(A) of the
Certificate of Designations), with the usual record and payment date for such
dividends in accordance with the Certificate of Designations, (ii) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or (iii) purchase, redeem or otherwise
acquire any shares of capital stock of General or any of its subsidiaries or
any other securities thereof or any rights, warrants or options to acquire any
such shares or other securities, except, in the case of clause (iii), for (x)
the acquisition of shares of General Common Stock from holders of General
Stock Options in full or partial payment of the exercise price payable by such
holder or tax liability arising in connection therewith (including by way of
exercise of cash settlement rights pursuant to the terms of any General Stock
Option), upon exercise of General Stock Options outstanding on the date of
this Agreement in accordance with their present terms and (y) the redemption
of General Preferred Stock as contemplated by Section 3.6 hereof;
(b) authorize for issuance, issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock or the capital stock of any of its
subsidiaries, any other voting securities or any securities convertible into,
or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities or any other securities or equity
equivalents (including without limitation stock appreciation rights), or
contractual obligation valued or measured by the value or market price of
General Common Stock (other than the issuance of General Common Stock upon the
exercise of General Stock Options outstanding on the date of this Agreement
and in accordance with their present terms, such issuance, together with the
acquisitions of shares of General Common Stock permitted under clause (a)
above, being referred to herein as "Permitted Changes");
(c) amend its Certificate of Incorporation, Bylaws or other comparable
charter or organizational documents;
(d) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the stock or assets of, or by any other
manner, any business or any corporation, partnership, joint venture,
association, or other business organization or division thereof;
(e) sell, lease, license, mortgage or otherwise encumber or subject to any
Lien or otherwise dispose of any of its properties or assets that are
material, individually or in the aggregate, to General and its subsidiaries
taken as a whole, except in the ordinary course of business consistent with
past practice;
Annex I-25
<PAGE>
(f)(i) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or warrants
or other rights to acquire any debt securities of General or any of its
subsidiaries, guarantee any debt securities of another person, enter into any
"keep well" or other agreement to maintain any financial statement condition
of another person or enter into any arrangement having the economic effect of
any of the foregoing, except for short-term borrowings incurred in the
ordinary course of business consistent with past practice, or (ii) make any
loans, advances or capital contributions to, or investments in, any other
person, other than to General or any direct or indirect wholly owned
subsidiary of General;
(g) acquire or agree to acquire any assets that are material, individually
or in the aggregate, to General and its subsidiaries taken as a whole, or make
or agree to make any capital expenditures except in the ordinary course of
business consistent with past practice;
(h) pay, discharge or satisfy any claims (including claims of stockholders),
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), except for the payment, discharge or satisfaction,
of (i) liabilities or obligations in the ordinary course of business
consistent with past practice or in accordance with their terms as in effect
on the date hereof, (ii) liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated audited financial statements (or
the notes thereof) of General included in the Recent General SEC Documents, or
waive, release, grant, or transfer any rights of material value or modify or
change in any material respect any existing license, lease, contract or other
document, other than in the ordinary course of business consistent with past
practice;
(i) adopt or amend in any material respect (except as may be required by law
or by this Agreement) any bonus, profit sharing, compensation, stock option,
pension, retirement, deferred compensation, employment or other employee
benefit plan, agreement, trust, fund or other arrangement (including any
General Benefit Plan) for the benefit or welfare of any employee, director or
former director or employee or, other than increases for individuals in the
ordinary course of business consistent with past practice, increase the
compensation or fringe benefits of any director, employee or former director
or employee; pay any benefit not required by any existing plan, arrangement or
agreement, grant any new or modified severance or termination arrangement or
increase or accelerate any benefits payable under its severance or termination
pay policies in effect on the date hereof, other than any such increase or
acceleration provided for under such policies as in effect on the date of this
Agreement;
(j) change any material accounting principle used by it, except for such
changes as may be required to be implemented following the date of this
Agreement pursuant to generally accepted accounting principles or rules and
regulations of the SEC promulgated following the date hereof;
(k) take any action that would, or is reasonably likely to, result in any of
its representations and warranties in this Agreement becoming untrue, or in
any of the conditions to the Mergers set forth in Article 7 not being
satisfied;
(l) except in the ordinary course of business and consistent with past
practice, make any material tax election or settle or compromise any material
federal, state, local or foreign income tax liability; and
(m) authorize any of, or commit or agree to take any of, the foregoing
actions.
Annex I-26
<PAGE>
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 Preparation of Form S-4 and the Proxy Statement/Prospectus; Stockholder
Meetings.
(a) Promptly following the date of this Agreement, Berkshire and General
shall cooperate and prepare, and Berkshire shall cause Holding Company to file
with the SEC, the Form S-4, in which a proxy statement will be included as a
prospectus (the "Proxy Statement/Prospectus") and Berkshire and General shall
each file such Proxy Statement/Prospectus as a proxy statement with the SEC.
Each of General and Berkshire shall use its reasonable best efforts to have
the Form S-4 declared effective under the Securities Act as promptly as
practicable after such filing. Each of General and Berkshire will use its
respective reasonable best efforts to cause the Proxy Statement/Prospectus to
be mailed to their respective stockholders as promptly as practicable after
the Form S-4 is declared effective under the Securities Act. Berkshire shall
also cause Holding Company to take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified) required to
be taken under any applicable state securities laws in connection with the
issuance of Holding Company Common Stock in the Mergers, and General shall
furnish all information concerning General and the holders of General Common
Stock and rights to acquire General Common Stock pursuant to the Stock Plans
as may be reasonably requested in connection with any such action.
(b) General will, as promptly as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "General Stockholders Meeting") for the purpose of approving
this Agreement and the transactions contemplated by this Agreement. General
will, through its Board of Directors, recommend to its stockholders approval
of the foregoing matters, as set forth in Section 4.2(s). Such recommendation,
together with a copy of the opinion referred to in Section 4.2(r), shall be
included in the Proxy Statement/Prospectus. General will use reasonable
efforts to hold such meeting as soon as practicable after the date hereof.
(c) Berkshire will, as promptly as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Berkshire Stockholders Meeting") for the purpose of
approving this Agreement and the transactions contemplated by this Agreement.
Berkshire will, through its Board of Directors, recommend to its stockholders
approval of the foregoing matters, as set forth in Section 4.3(l). Such
recommendation shall be included in the Proxy Statement/Prospectus. Berkshire
will use reasonable efforts to hold such meeting as soon as practicable after
the date hereof.
(d) General will cause its transfer agent to make stock transfer records
relating to General available to the extent reasonably necessary to effectuate
the intent of this Agreement.
6.2 Letter of General's Accountants. General shall use its best efforts to
cause to be delivered to Berkshire and Holding Company a letter from Coopers &
Lybrand L.L.P., General's independent public accountants, dated a date within
two business days before the date on which the Form S-4 shall become effective
and addressed to Berkshire and Holding Company, in form and substance
reasonably satisfactory to Berkshire and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
6.3 Berkshire Access to Information.
(a) General shall, and shall cause its subsidiaries, officers, employees,
counsel, financial advisors and other representatives to, afford to Berkshire
and its representatives reasonable access during normal business hours during
the period prior to the Effective Time to its properties, books, contracts,
commitments, personnel and records and, during such period, shall, and shall
cause its subsidiaries, officers, employees and representatives to, furnish
promptly to Berkshire (i) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of Federal or state securities laws and (ii) all other
information concerning its business, properties, financial condition,
operations and personnel as Berkshire may
Annex I-27
<PAGE>
from time to time reasonably request. No investigation pursuant to this
Section 6.3 shall affect any representations or warranties of General herein
or the conditions to the obligations of the parties hereto.
(b) General shall report on operational matters and promptly advise
Berkshire 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 General and its subsidiaries taken as a whole.
6.4 Best Efforts. Each of the parties agrees to use its best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Transactions, the Mergers and the other transactions
contemplated by this Agreement and the Stock Option Agreement. Berkshire and
General will use their best efforts and cooperate with one another (i) in
promptly determining whether any filings are required to be made or consents,
approvals, waivers, permits or authorizations are required to be obtained
under any applicable law or regulation or from any governmental authorities or
third parties in connection with the transactions contemplated by this
Agreement and the Stock Option Agreement and (ii) in promptly making any such
filings, in furnishing information required in connection therewith and in
timely seeking to obtain any such consents, approvals, waivers, permits or
authorizations.
6.5 Indemnification.
(a) General shall, and from and after the Effective Time Holding Company
shall, indemnify, defend, protect 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 or director of General 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 or
officer of General 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,
the Stock Option Agreement or the transactions contemplated hereby and
thereby; provided, however, that, in the case of General, such indemnification
shall only be to the fullest extent a corporation is permitted under the DGCL
to indemnify its own directors and officers, and in the case of Holding
Company, such indemnification shall not be limited by the DGCL but such
indemnification shall not be applicable to any claims made against any
Indemnified Party if a judgment or other final adjudication established that
(A) his or her acts or omissions were committed in bad faith or were the
result of active and deliberate dishonesty and were material to the cause of
action so deliberated or (B) arising out of, based upon or attributable to the
gaining in fact of any financial profit or other advantage to which he or she
was not legally entitled. General or Holding Company, as the case may be, will
pay all expenses of each Indemnified Party in advance of the final disposition
of any such action or proceeding, 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 General (or them, General and Holding Company
after the Effective Time), (ii) General (or, after the Effective Time, the
Holding Company) shall pay all reasonable fees and expenses of such counsel
for the Indemnified Parties promptly as statements therefor are received, and
(iii) General (or, after the Effective Time, Holding Company) will use all
reasonable efforts to assist in the vigorous defense of any such matter,
provided that neither General nor Holding Company 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 6.5, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify General and Holding
Company (but the failure so to notify an indemnifying party shall not relieve
it from any liability which it may have under this Section 6.5 except to the
extent such failure prejudices such party), and shall deliver to General (or
after the Effective Time, Holding Company) the undertaking contemplated by
Annex I-28
<PAGE>
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 6.5 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his or her heirs and
representatives.
6.6 Expenses. Whether or not the Transactions 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 expenses, except
that the expenses in connection with printing and mailing the Proxy
Statement/Prospectus and the Form S-4, as well as all SEC filing fees relating
to the transactions contemplated herein, shall be shared equally between
Berkshire and General.
6.7 Public Announcements. Berkshire and General will consult with each other
before issuing, and provide each other the opportunity to review and comment
upon, any press release or other public statements with respect to the
transactions contemplated by this Agreement, including the Transactions and
the Mergers, and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange or as are agreed upon in
advance. The parties agree that the initial press release or releases to be
issued with respect to the transactions contemplated by this Agreement shall
be mutually agreed upon prior to the issuance thereof.
6.8 Affiliates. Prior to the Closing Date, General shall deliver to Holding
Company a letter identifying all persons who are, at the time this Agreement
is submitted for approval to the stockholders of General, "affiliates" of
General for purposes of Rule 145 under the Securities Act. General shall use
its best efforts to cause each such person to deliver to Holding Company on or
prior to the Closing Date a written agreement substantially in the form
attached as Exhibit E hereto.
6.9 Stock Exchange Listing. Berkshire shall use its best efforts to cause
the shares of Holding Company Common Stock to be issued in the Transactions to
be approved for listing on the NYSE, subject to notice of issuance, prior to
the Closing Date.
6.10 Takeover Statutes. If any "fair price," "moratorium," "control share
acquisition" or other form of antitakeover statute or regulation shall become
applicable to the transactions contemplated hereby, the parties hereto and the
members of their respective Boards of Directors shall grant such approvals and
take such actions as are reasonably necessary so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate or minimize the effects of
such statute or regulation on the transactions contemplated hereby.
6.11 No Solicitation.
(a) General shall not, nor shall it permit any of its subsidiaries to, nor
shall it authorize or permit any of its directors, officers or employees or
any investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries to, directly or
indirectly through another person, (i) solicit, initiate or encourage
(including by way of furnishing information), or take any other action
designed to facilitate, any inquiries or the making of any proposal which
constitutes a General Takeover Proposal (as defined in Section 6.11(e)) or
(ii) participate in any discussions or negotiations regarding any General
Takeover Proposal; provided, however, that if the Board of Directors of
General determines in good faith, after consultation with outside counsel,
that it is necessary to do so in order to act in a manner consistent with its
fiduciary duties to General's stockholders under applicable law, General may,
in response to any General Superior Proposal (as defined in Section 6.11(e))
made prior to the General Stockholder Approval, which proposal was not
solicited by it and which did not otherwise result from a breach of this
Section 6.11(a), and subject to providing prior written notice of its decision
to take such action to Berkshire and compliance with Section 6.11(c), (x)
furnish information with respect to General and its subsidiaries to any person
making a General Superior Proposal
Annex I-29
<PAGE>
pursuant to a customary confidentiality agreement (as determined by General
based on the advice of its outside counsel) and (y) participate in discussions
or negotiations regarding such General Superior Proposal.
(b) Except as expressly permitted by this Section 6.11, neither the Board of
Directors of General nor any committee thereof shall (i) withdraw or modify,
or propose publicly to withdraw or modify, in a manner adverse to Berkshire,
the approval or recommendation by such Board of Directors or such committee of
the Transactions or this Agreement, (ii) approve or recommend, or propose
publicly to approve or recommend, any General Takeover Proposal, or (iii)
cause General to enter into any General Acquisition Agreement (as defined in
Section 6.11(e)). Notwithstanding the foregoing, the Board of Directors of
General, to the extent that it determines in good faith, after consultation
with outside counsel, that in light of a General Superior Proposal it is
necessary to do so in order to act in a manner consistent with its fiduciary
duties to General's stockholders under applicable law, may terminate this
Agreement solely in order to concurrently enter into a General Acquisition
Agreement with respect to any General Superior Proposal, but only at a time
that is after the second business day following Berkshire's receipt of written
notice advising Berkshire that the Board of Directors of General is prepared
to accept a General Superior Proposal, specifying the material terms and
conditions of such General Superior Proposal and identifying the person making
such General Superior Proposal, all of which information will be kept
confidential by Berkshire.
(c) In addition to the obligations of General set forth in paragraphs (a)
and (b) of this Section 6.11, General shall immediately advise Berkshire
orally and in writing of any request for information or any General Takeover
Proposal, the material terms and conditions of such request or General
Takeover Proposal and the identity of the person making such request or
General Takeover Proposal. General will keep Berkshire reasonably informed of
the status and details (including amendments or proposed amendments) of any
such request or General Takeover Proposal.
(d) Nothing contained in this Section 6.11 shall prohibit General 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
General's stockholders if, in the good faith judgment of the Board of
Directors of General, after consultation with outside counsel, failure so to
disclose would be inconsistent with its obligations under applicable law;
provided, however, that, neither General nor its Board of Directors nor any
committee thereof shall withdraw or modify, or propose publicly to withdraw or
modify, its position with respect to this Agreement or the Transactions or
approve or recommend, or propose publicly to approve or recommend, a General
Takeover Proposal.
(e) For purposes of this Agreement:
(i) "General Takeover Proposal" means any inquiry, proposal or offer from
any person relating to any direct or indirect acquisition or purchase of a
business that constitutes 20% or more of the net revenues, net income or
assets of General and its subsidiaries, taken as a whole, or 20% or more of
any class of equity securities of General, any tender offer or exchange
offer that if consummated would result in any person beneficially owning
20% or more of any class of any equity securities of General, or any
merger, consolidation, business combination, recapitalization,
reorganization, liquidation, dissolution or similar transaction involving
General (or any General subsidiary whose business constitutes 20% or more
of the net revenues, net income or assets of General and its subsidiaries,
taken as a whole), other than the transactions contemplated by this
Agreement or the Stock Option Agreement.
(ii) "General Superior Proposal" means any proposal made by a third party
to acquire, directly or indirectly, including pursuant to a tender offer,
exchange offer, merger, consolidation, business combination,
recapitalization, reorganization, liquidation, dissolution or similar
transaction, for consideration to General's stockholders consisting of cash
and/or securities, all of the shares of General's capital stock then
outstanding or all or substantially all the assets of General, on terms
which the Board of Directors of General determines in its good faith
judgment to be more favorable to General's stockholders than the
Transactions and for which financing, to the extent required, is then
committed or which, in the good faith judgment of the Board of Directors of
General, is reasonably capable of being obtained by such third party.
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(iii) "General Acquisition Agreement" means any letter of intent,
agreement in principle, acquisition agreement or other similar agreement
related to any General Takeover Proposal.
6.12 Certain Agreements. Neither General nor any subsidiary of General will
waive or fail to enforce any provision of any confidentiality or standstill or
similar agreement to which it is a party without the prior written consent of
Berkshire.
6.13 Employee Benefits.
(a) Except as Previously Disclosed, Berkshire and General agree that General
Benefit Plans shall, to the extent practicable, remain in effect without
material amendment until the Effective Time and that thereafter the Holding
Company will maintain, subject to such changes and modifications as may be
necessary or desirable to facilitate compliance by Holding Company and its
subsidiaries with applicable statutory and regulatory requirements and the
terms thereof, substantially similar plans (other than the Stock Plans) for a
period of at least three years after the Effective Time; provided, that none
of Berkshire, Holding Company nor General shall be required to issue any
shares of its equity securities (other than pursuant to Stock Options assumed
under Section 3.4(d)(i) or as otherwise Previously Disclosed) in connection
with such plans.
(b) Berkshire will and will cause the Holding Company to honor without
material modification for a period of at least three years after the Effective
Time all employee severance plans (or policies) and employment and severance
agreements of General or any of its subsidiaries in existence on the date
hereof.
(c) Except as Previously Disclosed, Berkshire and General will use their
reasonable best efforts to agree on compensation plans for the officers and
employees of General after the Effective Time to provide them incentive
compensation for a period of at least three years following the Effective Time
that in the aggregate is reasonably comparable (without giving any effect to
any payments to them resulting from the Transactions) to that historically
provided by the Stock Plans, except that none of Berkshire, Holding Company
nor General shall be required to issue any shares of its equity securities
(other than pursuant to Stock Options assumed under Section 3.4(d)(i) or as
otherwise Previously Disclosed) in connection with such compensation plans.
6.14 Tax Matters.
(a) The parties hereto shall file as soon as practicable following the date
hereof a private letter ruling request (the "Ruling Request") with the IRS
seeking each of the three rulings set forth on Exhibit D hereto (the "351(e)
Ruling," the "No Gain or Loss Ruling," and the "368(c) Ruling," as further
described on Exhibit D, collectively the "Rulings"), and agree to cooperate
with each other in seeking, and use reasonable best efforts to obtain, such
Rulings by the IRS as soon as practicable thereafter.
(b) If the Partial Cash Election has not been made, the parties hereto shall
cooperate with each other to (i) cause the Mergers to be treated as transfers
of property to Holding Company by the holders of Berkshire Common Stock and
General Common Stock governed by Section 351(a) or 351(b) of the Code and (ii)
obtain the opinions of counsel required to be delivered pursuant to Sections
7.2(c)(i) and 7.3(c) hereof and the Rulings (other than a Ruling that the IRS
has informed Berkshire it will not grant). If the Partial Cash Election has
been made, the parties shall cooperate with each other to (i) cause the
General Merger not to qualify as a reorganization within the meaning of
Section 368 of the Code and (ii) obtain the opinions of counsel required to be
delivered pursuant to Section 7.2(c)(ii). If the Partial Cash Election has
been made and one or both of the opinions referred to in Section 7.2(c)(ii)
are not delivered, the parties shall cooperate with each other to seek to
restructure the transactions contemplated hereby in order to allow such
opinions to be delivered; provided, however, that in no event shall the cash
portion of the merger consideration for such restructured transaction exceed
3% of the total merger consideration. In connection with the foregoing
opinions, each of Berkshire, Holding Company, General and the Merger
Subsidiaries, as appropriate, shall (x) deliver to Munger, Tolles & Olson LLP
and Wachtell, Lipton, Rosen & Katz, as appropriate, customary representation
letters in form and substance reasonably satisfactory to such counsel and (y)
use its reasonable best efforts to obtain representation letters from
appropriate stockholders and deliver such letters to such counsel.
Annex I-31
<PAGE>
ARTICLE 7
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation To Effect the Transactions. The
respective obligation of each party to effect the Transactions is subject to
the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) General Stockholder Approval. General Stockholder Approval shall have
been obtained.
(b) Berkshire Stockholder Approval. The Berkshire Stockholder Approval shall
have been obtained.
(c) NYSE Listing. The shares of Holding Company Common Stock issuable to
General's and Berkshire's stockholders pursuant to this Agreement shall have
been approved for listing on the NYSE, subject to notice of issuance.
(d) HSR Act. The waiting period (and any extension thereof) applicable to
the Mergers under the HSR Act shall have been terminated or shall have
expired.
(e) 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 Transactions or any of the Mergers shall be in effect;
provided, however, that the parties hereto shall use their best efforts to
have any such injunction, order, restraint or prohibition vacated.
(f) Form S-4. The Form S-4 shall have become effective under the Securities
Act and shall not be the subject of any stop order or proceedings seeking a
stop order, and any material "blue sky" and other state securities laws
applicable to the issuance of the Holding Company Common Stock shall have been
complied with.
(g) Rulings. One of the following shall have occurred: (i) Berkshire shall
have received written notice of the issuance of the 351(e) Ruling and the No
Gain or Loss Ruling, or (ii) if the IRS will not grant the 351(e) Ruling as a
result of the Treasury Department having withdrawn the Proposed Regulations,
Berkshire shall have received written notice of the issuance of the No Gain or
Loss Ruling or the 368(c) Ruling, or (iii) Berkshire shall have made or be
deemed to have made the Partial Cash Election, or (iv) Berkshire shall have
declined to make the Partial Cash Election.
(h) Consents, etc. Berkshire and General shall have received evidence, in
form and substance reasonably satisfactory to each, that such licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and other third parties as are necessary in
connection with the transactions contemplated hereby have been obtained,
except such licenses, permits, consents, approvals, authorizations,
qualifications and orders which are not, individually or in the aggregate,
material to Berkshire or General or the failure of which to have been received
would not (as compared to the situation in which such license, permit,
consent, approval, authorization, qualification or order had been obtained)
materially dilute the aggregate benefits to the parties of the Transactions.
7.2 Conditions to Obligation of Berkshire. The obligation of Berkshire to
effect the Transactions is further subject to the following conditions:
(a) Representations and Warranties. The representations and warranties of
General set forth in this Agreement shall be true and correct, in each case as
of the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date (except that representations and warranties that speak
as of a specified date shall be true and correct as of such date); provided
that for purposes of determining the satisfaction of the foregoing, such
representations and warranties shall be deemed true and correct if the failure
or failures of such representations and warranties to be so true and correct
(excluding the effect of any qualification set forth therein relating to
"materiality", "material adverse change" or "material adverse effect") have
not had and could not
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reasonably be expected to have, individually or in the aggregate, a material
adverse effect on General or on the ability of General to consummate the
transactions herein contemplated or to perform its obligations hereunder.
Berkshire shall have received a certificate signed on behalf of General by the
chief executive officer and the chief financial officer of General to such
effect.
(b) Performance of Obligations of General. General shall have performed the
obligations required to be performed by it under this Agreement at or prior to
the Closing Date (except for such failures to perform as have not had or could
not reasonably be expected, either individually or in the aggregate, to have a
material adverse effect with respect to General or the ability of General to
consummate the transactions herein contemplated or perform its obligations
hereunder), and Berkshire shall have received a certificate signed on behalf
of General by the chief executive officer and the chief financial officer of
General to such effect.
(c) Tax Matters.
(i) If there has been no Partial Cash Election, (I) Treasury Regulation
Section 1.351-1(c) as in effect on the date hereof (or as may be amended
prior to the Closing Date either (x) in a manner effecting only the
diversification test of Treasury Regulation Section 1.351-1(c)(1)(i) and
not the test of Treasury Regulation Section 1.351-1(c)(1)(ii) or (y) solely
to conform the Final Regulations to the amendments made to Section
351(e)(1) of the Code by the Taxpayer Relief Act of 1997) (the "Final
Regulations") shall be in effect, (II) either (A) Berkshire shall have
received the 351(e) Ruling and the No Gain or Loss Ruling or (B) the
Proposed Regulations shall have been withdrawn and Berkshire shall have
received either the No Gain or Loss Ruling or the 368(c) Ruling, and (III)
Berkshire shall have received the opinion of Munger, Tolles & Olson LLP,
counsel to Berkshire, based upon reasonably requested representation
letters and dated the Closing Date, to the effect that the Berkshire Merger
will be treated as a transfer of property to Holding Company by the holders
of Berkshire Common Stock governed by Section 351(a) or 351(b) of the Code.
(ii) If there has been a Partial Cash Election, Berkshire shall have
received the opinions of Munger, Tolles & Olson LLP, counsel to Berkshire,
and Wachtell, Lipton Rosen & Katz, counsel to General, based upon
reasonably requested representation letters and dated the Closing Date,
that the transactions will not qualify as a reorganization within the
meaning of Section 368 of the Code, the Merger Consideration will be
taxable to the stockholders of General, and the Transactions will not be a
taxable transaction to either Berkshire or its stockholders.
(d) Redemption of General Preferred Stock. All shares of General Preferred
Stock shall have been redeemed in accordance with the terms of the Certificate
of Designations, the DGCL and applicable state and federal securities laws.
7.3 Conditions to Obligation of General. The obligation of General to effect
the Transactions is further subjected to the following conditions:
(a) Representations and Warranties. The representations and warranties of
Berkshire set forth in this Agreement shall be true and correct, in each case
as of the date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date (except that representations and warranties that
speak as of a specified date shall be true and correct as of such date);
provided that for purposes of determining the satisfaction of the foregoing,
such representations and warranties shall be deemed true and correct if the
failure or failures of such representations and warranties to be so true are
correct (excluding the effect of any qualification set forth therein relating
to "materiality", "material adverse change" or "material adverse effect") have
not had and could not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on Berkshire or on the ability of
Berkshire to consummate the transaction herein contemplated or to perform its
obligations hereunder. General shall have received a certificate signed on
behalf of Berkshire by the chief executive officer and the chief financial
officer of Berkshire to such effect.
(b) Performance of Obligations of Berkshire. Berkshire shall have performed
the obligations required to be performed by it under this Agreement at or
prior to the Closing Date (except for such failures to perform as
Annex I-33
<PAGE>
have not had or could not reasonably be expected, either individually or in
the aggregate, to have a material adverse effect with respect to Berkshire or
the ability of Berkshire to consummate the transactions herein contemplated or
perform its obligations hereunder), and General shall have received a
certificate signed on behalf of Berkshire by the chief executive officer and
the chief financial officer of Berkshire to such effect.
(c) Tax Opinion. If there has been no Partial Cash Election and Berkshire
shall have received any of the Rulings, General shall have received the
opinion of Wachtell, Lipton, Rosen & Katz, counsel to General, based upon
reasonably requested representation letters and dated the Closing Date, to the
effect that the General Merger will be treated as a transfer of property to
Holding Company by the holders of General Common Stock governed by Section
351(a) or 351(b) of the Code.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated and abandoned at any time
prior to the Effective Time, whether before or after approval of the
Transactions by the stockholders of General and Berkshire:
(a) by mutual written consent of Berkshire and General; or
(b) by either Berkshire or General if any Governmental Entity shall have
issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting one or both of the Mergers or
the Transactions and such order, decree, ruling or other action shall have
become final and nonappealable; or
(c) by either Berkshire or General if the Transactions shall not have been
consummated on or before June 1, 1999 (other than due to the failure of the
party seeking to terminate this Agreement to perform its obligations under
this Agreement required to be performed at or prior to the Effective Time); or
(d) by either Berkshire or General, if any required approval of the
stockholders of General shall not have been obtained by reason of the failure
to obtain the required vote upon a vote held at a duly held meeting of
stockholders or at any adjournment thereof; or
(e) by either General or Berkshire, if any required approval of the
stockholders of Berkshire shall not have been obtained by reason of the
failure to obtain the required vote upon a vote held at a duly held meeting of
stockholders or at any adjournment thereof; or
(f) by Berkshire, (i) if General shall have (A) withdrawn, modified or
amended in any respect adverse to Berkshire or Holding Company its approval or
recommendation of this Agreement or the Transactions, (B) failed as soon as
practicable to mail the Proxy Statement to its stockholders or failed to
include in such statement such recommendation, (C) recommended any General
Takeover Proposal from a person other than Berkshire or (D) resolved to do any
of the foregoing, or (ii) if (A) General shall have exercised a right
specified in the proviso to Section 6.11(a) with respect to any General
Superior Proposal and shall, directly or through agents or representatives,
continue discussions with any third party concerning such General Superior
Proposal for more than 10 business days after the date of receipt of such
General Superior Proposal, or (B) (x) a General Takeover Proposal that is
publicly disclosed shall have been commenced, publicly proposed or
communicated to General which contains a proposal as to price (without regard
to whether such proposal specifies a specific price or a range of potential
prices) and (y) General shall not have rejected such proposal within 10
business days of its receipt or, if sooner, the date its existence first
becomes publicly disclosed; or
(g) by General, if General exercises the right of termination specified in
Section 6.11(b) with respect to a General Superior Proposal; or
(h) by Berkshire, if General fails to perform any of its material
obligations under this Agreement and such failure has not been cured within
thirty days after receipt by General of written notice of such failure from
Berkshire; or
Annex I-34
<PAGE>
(i) by General, if Berkshire fails to perform any of its material
obligations under this Agreement and such failure has not been cured within
thirty days after receipt by Berkshire of written notice of such failure from
General.
8.2 Effect of Termination.
(a) In the event of termination of this Agreement by either General or
Berkshire as provided in Section 8.1, this Agreement shall forthwith become
void and have no effect, without any liability or obligation on the part of
Berkshire or General, other than pursuant to the provisions of Section 6.6 and
this Section 8.2. Nothing contained in this Section shall, however, relieve
any party for any breach of the representations, warranties, covenants or
agreements set forth in this Agreement prior to any such termination.
(b) In the event that this Agreement is terminated by General pursuant to
Section 8.1(g) or, after the date hereof but prior to any termination of this
Agreement, General or General's Board of Directors or any committee thereof
shall have taken any action to make the Rights Agreement inapplicable (through
termination or otherwise) to any person other than Berkshire or Holding
Company, then, concurrently with any such termination or action, General shall
pay Berkshire a fee equal to $400 million by wire transfer of same day funds,
and General shall reimburse Berkshire its out-of-pocket expenses related to
this Agreement and the transactions contemplated hereby promptly upon request
therefor.
(c) In the event that (A) this Agreement is terminated by Berkshire pursuant
to Section 8.1(f) or (B) a General Takeover Proposal shall have been made to
General or any of its subsidiaries or stockholders or any person shall have
publicly announced an intention (whether or not conditional) to make a General
Takeover Proposal and thereafter this Agreement is terminated by either
Berkshire or General pursuant to Section 8.1(d), and, in the case of either
clause (A) or clause (B), within 18 months after the date of such termination
General enters into any General Acquisition Agreement relating to any General
Takeover Proposal, then General shall promptly, but in no event later than two
business days after the date such is entered into, pay Berkshire a fee equal
to $400 million by wire transfer of same day funds, and General shall
reimburse Berkshire its out-of-pocket expenses related to this Agreement and
the transactions contemplated hereby promptly upon request therefor.
(d) General acknowledges that the agreements contained in Section 8.2(b) and
(c) are an integral part of the transactions contemplated by this Agreement,
and that the amounts to be paid pursuant to Section 8.2(b) and (c) constitute
liquidated damages and not a penalty.
8.3 Amendment. This Agreement may be amended by the parties at any time
before or after required approval of the Transactions by the stockholders of
General and of Berkshire; provided, however, that after such approvals, there
shall be made no amendment that by law requires further approval by such
stockholders without the further approval of such stockholders. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties.
8.4 Extension; Waiver. At any time prior to the Effective Time, the parties
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties, (b) waive any inaccuracies in the representations
and warranties contained in this Agreement or in any document delivered
pursuant to this Agreement or (c) subject to the proviso of Section 8.3, waive
compliance with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver
of such rights.
Annex I-35
<PAGE>
ARTICLE 9
GENERAL PROVISIONS
9.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 9.1 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
9.2 Notices. All notices, requests, claims, demands and other communications
under this Agreement shall be in writing and shall be deemed given if
delivered personally or sent by overnight courier (providing proof of
delivery) 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 Berkshire, to:
Berkshire Hathaway Inc.
1440 Kiewit Plaza
Omaha, NE 68131
Attn: Warren E. Buffett
with a copy to:
Munger, Tolles & Olson LLP
355 South Grand Avenue, 35th Floor
Los Angeles, California 90071-1560
Attn: R. Gregory Morgan
(b) if to General, to:
General Re Corporation
695 East Main Street
Stamford, CT 06904
Attn: Charles F. Barr, General Counsel
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attn: Edward D. Herlihy
9.3 Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(b) "material adverse change" or "material adverse effect" means, when used
in connection with General or Berkshire, any change or effect that either
individually or in the aggregate with all other such changes or effects is
materially adverse to the business, assets, properties, condition (financial
or otherwise) or results of operations of such party and its subsidiaries
taken as a whole; provided, however, that, (i) a decline in general economic
conditions affecting General or Berkshire or events or conditions, including
property catastrophe losses, generally affecting the industry in which General
or Berkshire operate shall not be deemed to be a "material adverse change" or
to have a "material adverse effect" with respect to either such party or its
subsidiaries; and (ii) in no event shall changes in the market prices of
portfolio securities owned by Berkshire or its subsidiaries or General or its
subsidiaries be deemed to be a "material adverse change" or to have a
"material adverse effect" with respect to Berkshire or its subsidiaries or
General or its subsidiaries, respectively;
Annex I-36
<PAGE>
(c) "person" means an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity; and
(d) a "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its board of directors or
other governing body (or, if there are no such voting interests, 50% or more
of the equity interest of which) is owned directly or indirectly by such first
person; provided that General's Employee Stock Savings and Ownership Plan,
shall not be considered a subsidiary of General for purposes of this
Agreement.
9.4 Interpretation. A reference made in this Agreement to an Article,
Section, Exhibit or Schedule, shall be to an Article or Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
9.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties.
9.6 Entire Agreement; No Third-Party Beneficiaries. This Agreement and the
Stock Option Agreement together constitute the entire agreement between the
parties, and supersede all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter of such
agreements. Except as provided in Section 6.5, this Agreement is not intended
to confer upon any person other than the parties any rights or remedies.
9.7 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws
thereof.
9.8 Assignment. Except as stated herein with respect to Holding Company and
the Merger Subsidiaries, neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or
in part, by operation of law or otherwise, by any of the parties without the
prior written consent of the other parties; provided, however, that the rights
and obligations of Holding Company may be assigned under this agreement to any
direct wholly owned subsidiary of Berkshire. Any assignment in violation of
the preceding sentence shall be void. Subject to the preceding two sentences,
this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
9.9 Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement or the Stock Option
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and the Stock Option Agreement and to enforce specifically the terms and
provisions of this Agreement or the Stock Option Agreement in any court of the
State of Delaware or of the United States located in the State of Delaware in
the event any dispute arises out of this Agreement or the Stock Option
Agreement or any of the transactions contemplated by this Agreement or the
Stock Option Agreement, and each party agrees (a) it will not attempt to deny
or defeat personal jurisdiction or venue in any such court by motion or other
request for leave from any such court and (b) it will not bring any action
relating to this Agreement or the Stock Option Agreement or any of the
transactions contemplated by this Agreement or the Stock Option Agreement in
any court other than any such court.
9.10 Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in
Annex I-37
<PAGE>
such jurisdiction as if such invalid, illegal or unenforceable provision or
portion of any provision had never been contained herein, so long as the
economic and legal substance of the transactions contemplated hereby are not
affected in a manner materially adverse to any party hereto.
IN WITNESS WHEREOF, Berkshire and General have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
BERKSHIRE HATHAWAY INC.
/s/ Warren E. Buffett
By: _________________________________
Warren E. Buffett
Its: Chairman and Chief Executive
Officer
GENERAL RE CORPORATION
/s/ Ronald E. Ferguson
By: _________________________________
Ronald E. Ferguson
Its: Chairman and Chief Executive
Officer
Annex I-38
<PAGE>
ANNEX II
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement") is entered into as of June 19,
1998 by and between General Re Corporation, a Delaware corporation (the
"Grantor"), and Berkshire Hathaway Inc., a Delaware corporation (the
"Grantee").
WHEREAS, the Grantee and the Grantor are entering into an Agreement and Plan
of Mergers, dated as of the date hereof (the "Merger Agreement"), which
provides, among other things, for the merger of a subsidiary of NBH, Inc., a
Delaware corporation, into Grantor (such merger, along with the other
transactions contemplated by the Merger Agreement, the "Transactions");
WHEREAS, as a condition and inducement to Grantee's willingness to enter
into the Merger Agreement, the Grantee has requested that the Grantor grant to
the Grantee an option to purchase up to 15,000,000 shares of Common Stock, par
value $0.50 per share, of the Grantor (the "Common Stock"), upon the terms and
subject to the conditions hereof; and
WHEREAS, in order to induce the Grantee to enter into the Merger Agreement,
the Grantor is willing to grant the Grantee the requested option.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. The Option; Exercise; Adjustments; Payment of Spread.
(a) Contemporaneously herewith the Grantee and the Grantor are entering
into the Merger Agreement. Subject to the other terms and conditions set
forth herein, the Grantor hereby grants to the Grantee an irrevocable
option (the "Option") to purchase up to 15,000,000 (as may be adjusted as
provided herein) shares of Common Stock (together with rights attached
thereto to purchase Series A Junior Participating Preferred Stock of the
Company issued pursuant to the Rights Agreement (the "Rights Agreement")
dated as of September 11, 1991 between the Company and Bank of New York, as
rights agent) (the "Shares") at a cash purchase price equal to $283.71 per
share (the "Purchase Price"). The Option may be exercised by the Grantee,
in whole or in part, at any time, or from time to time, following the
occurrence of one of the events set forth in Section 2(d) hereof, and prior
to the termination of the Option in accordance with the terms of this
Agreement.
(b) In the event the Grantee wishes to exercise the Option, the Grantee
shall send a written notice to the Grantor (the "Stock Exercise Notice")
specifying a date for the closing of such purchases (subject to the HSR Act
(as defined below) and applicable insurance regulatory approvals) not later
than 10 business days and not earlier than three business days following
the date such notice is given. In the event of any change in the number of
issued and outstanding shares of Common Stock by reason of any stock
dividend, stock split, split-up, recapitalization, reorganization or other
change in the corporate or capital structure of the Grantor, the number
and/or kind of Shares subject to this Option and the purchase price per
Share shall be appropriately adjusted to restore the Grantee to its rights
hereunder, including its right to purchase Shares representing 19.9% of the
capital stock of the Grantor entitled to vote generally for the election of
the directors of the Grantor which is issued and outstanding immediately
prior to the exercise of the Option at an aggregate purchase price equal to
the Purchase Price multiplied by 15,000,000. In the event that any
additional shares of Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the preceding
sentence), the number of Shares subject to this Option shall be increased
by 19.9% of the number of the additional shares of Common Stock so issued
(and such additional Shares shall have a purchase price per share equal to
the Purchase Price). Notwithstanding anything in this Agreement, the number
of shares subject to this Option shall never exceed 19.9% of the
outstanding shares of the Grantor.
Annex II-1
<PAGE>
(c) At any time when the Option is exercisable pursuant to the terms of
Section 1(a) hereof, the Grantee may elect, in lieu of exercising the
Option to purchase Shares as provided in Section 1(a) hereof, to send a
written notice to the Grantor (the "Cash Exercise Notice") specifying a
date not later than 20 business days and not earlier than 10 business days
following the date such notice is given on which date the Grantor shall pay
to the Grantee an amount in cash equal to the Spread (as hereinafter
defined) multiplied by all or such portion of the Shares subject to the
Option as Grantee shall specify in such notice. As used herein "Spread"
shall mean the excess, if any, over the Purchase Price of the higher of (y)
if applicable, the highest price per share of Common Stock (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid or
proposed to be paid by any person pursuant to any General Takeover Proposal
(as defined in the Merger Agreement) (the "Alternative Purchase Price") or
(z) the closing price of the shares of Common Stock on the NYSE Composite
Tape on the last trading day immediately prior to the date of the Cash
Exercise Notice (the "Closing Price"). If the Alternative Purchase Price
includes any property other than cash, the Alternative Purchase Price shall
be the sum of (i) the fixed cash amount, if any, included in the
Alternative Purchase Price plus (ii) the fair market value of such other
property. If such other property consists of securities with an existing
public trading market, the average of the closing prices (or the average of
the closing bid and asked prices if closing prices are unavailable) for
such securities in their principal public trading market on the five
trading days ending five days prior to the date of the Cash Exercise Notice
shall be deemed to equal the fair market value of such property. If such
other property consists of something other than cash or securities with an
existing public trading market and, as of the payment date for the Spread,
agreement on the value of such other property has not been reached, the
Alternative Purchase Price shall be deemed to equal the Closing Price. Upon
the Grantee's exercise of its right to receive cash pursuant to this
Section 1(c), the obligations of the Grantor to deliver Shares pursuant to
Section 3 shall be terminated with respect to such number of Shares for
which the Grantee shall have been paid the Spread.
2. Conditions to Delivery of Shares. The Grantor's obligation to deliver
Shares upon exercise of the Option is subject only to the conditions that:
(a) No preliminary or permanent injunction or other order issued by any
federal or state court of competent jurisdiction in the United States
prohibiting the delivery of the Shares shall be in effect; and
(b) Any applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") shall have expired or been
terminated; and
(c) Any other consent, approval, order, notification, or authorization,
the failure of which to obtain or make would make the issuance of the
Shares illegal, shall have been obtained or made and be in full force and
effect; and
(d) (i) any person (other than Grantee or any of its subsidiaries) shall
have acquired beneficial ownership (as such term is defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
or the right to acquire beneficial ownership of, or any "group" (as such
term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of,
shares of Common Stock aggregating 20% or more of the then outstanding
Common Stock; (ii) the Merger Agreement shall have been terminated by
Grantor pursuant to Section 8.1(g) of the Merger Agreement; or (iii) either
(A) a General Takeover Proposal shall have been made to Grantor or any of
its subsidiaries or any of its stockholders or any person shall have
publicly announced an intention (whether or not conditional) to make a
General Takeover Proposal with respect to Grantor or any of its
subsidiaries and thereafter the Merger Agreement shall have been terminated
by either Grantee or Grantor pursuant to Section 8.1(d) of the Merger
Agreement, or (B) the Merger Agreement shall have been terminated by
Grantee pursuant to Section 8.1(f) of the Merger Agreement, and, in the
case of either clause (A) or clause (B), within 18 months of the date of
such termination Grantee enters into any General Acquisition Agreement (as
defined in the Merger Agreement). As used in this Agreement, "person" shall
have the meaning specified in Sections 3(a)(9) and 13(d)(3) of the Exchange
Act.
Annex II-2
<PAGE>
3. The Closing.
(a) Any closing hereunder shall take place on the date specified by the
Grantee in its Stock Exercise Notice or Cash Exercise Notice, as the case
may be, at 9:00 A.M., local time, at the offices of Wachtell, Lipton, Rosen
& Katz, 51 West 52nd Street, New York, New York, or, if the conditions set
forth in Section 2(a), (b) or (c) have not then been satisfied, on the
second business day following the satisfaction of such conditions, or at
such other time and place as the parties hereto may agree (the "Closing
Date"). On the Closing Date, (i) in the event of a closing pursuant to
Section 1(b) hereof, the Grantor will deliver to the Grantee a certificate
or certificates, representing the Shares in the denominations designated by
the Grantee in its Stock Exercise Notice and the Grantee will purchase such
Shares from the Grantor at the price per Share equal to the Purchase Price
or (ii) in the event of a closing pursuant to Section 1(c) hereof, the
Grantor will deliver to the Grantee cash in an amount determined pursuant
to Section 1(c) hereof. Any payment made by the Grantee to the Grantor, or
by the Grantor to the Grantee, pursuant to this Agreement shall be made by
wire transfer to a bank designated by the party receiving such funds.
(b) The certificates representing the Shares shall bear an appropriate
legend relating to the fact that such Shares have not been registered under
the Securities Act of 1933, as amended (the "Securities Act").
4. Representations and Warranties of the Grantor. The Grantor represents and
warrants to the Grantee that (a) the Grantor is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power and authority to enter into and perform
this Agreement; (b) the execution and delivery of this Agreement by the
Grantor and the consummation by it of the transactions contemplated hereby
have been duly authorized by the Board of Directors of the Grantor and this
Agreement has been duly executed and delivered by a duly authorized officer of
the Grantor and constitutes a valid and binding obligation of the Grantor,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity; (c) the Grantor has taken all necessary corporate action
to authorize and reserve the Shares issuable upon exercise of the Option and
the Shares, when issued and delivered by the Grantor upon exercise of the
Option and paid for by Grantee as contemplated hereby, will be duly
authorized, validly issued, fully paid and non-assessable and free of
preemptive rights; (d) the execution and delivery of this Agreement by the
Grantor and, except as otherwise required by the HSR Act and applicable
insurance laws and for such filings as are required by the New York Stock
Exchange, Inc. ("NYSE"), the consummation by it of the transactions
contemplated hereby do not require the consent, waiver, approval or
authorization of or any filing with any person or public authority and will
not violate, result in a breach of or the acceleration of any obligation
under, or constitute a default under, any provision of Grantor's certificate
of incorporation or bylaws, or any material indenture, mortgage, lien, lease,
agreement, contract, instrument, order, law, rule, regulation, judgment,
ordinance, or decree, or restriction by which the Grantor or any of its
subsidiaries or any of their respective properties or assets is bound; (e) no
"fair price," "moratorium," "control share acquisition," "interested
shareholder" or other form of antitakeover statute or regulation, including
without limitation, Section 203 of the Delaware General Corporation Law, or
similar provision contained in the certificate of incorporation or bylaws of
Grantor, is or shall be applicable to any of the transactions contemplated by
this Agreement, and the Board of Directors of the Company has taken all action
to approve the transactions contemplated hereby to the extent necessary to
avoid any such application (including, without limitation, the Board of
Directors of the Company having determined pursuant to Article IX of the
Company's Restated Certification of Incorporation that the purchase price
under Sections 7 and 8 hereof will not violate or require any shareholder vote
under Article X thereof); and (f) the Grantor has taken all corporate action
necessary so that the grant and any subsequent exercise of the Option by the
Grantee or other exercise by the Grantee of any its rights hereunder will not
result in the separation or exercisability of the rights under the Rights
Agreement or in any nullification of rights under the Rights Agreement held by
the Grantee or any of its Affiliates or Associates (as defined in the Rights
Agreement).
5. Representations And Warranties of The Grantee. The Grantee represents and
warrants to the Grantor that (a) the execution and delivery of this Agreement
by the Grantee and the consummation by it of the
Annex II-3
<PAGE>
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Grantee and this Agreement has been duly
executed and delivered by a duly authorized officer of the Grantee and
constitutes a valid and binding obligation of Grantee; and (b) the Grantee is
acquiring the Option and, if and when it exercises the Option, will be
acquiring the Shares issuable upon the exercise thereof for its own account
and not with a view to distribution or resale in any manner which would be in
violation of the Securities Act.
6. Listing of Shares; Filings; Governmental Consents. Subject to applicable
law and the rules and regulations of the NYSE, when the Option becomes
exercisable hereunder, the Grantor will promptly file an application to list
the Shares on the NYSE and will use all reasonable best efforts to obtain
approval of such listing and to effect all necessary filings by the Grantor
under the HSR Act and the applicable insurance laws of each state and foreign
jurisdiction; provided, however, that if the Grantor is unable to effect such
listing on the NYSE by the Closing Date, the Grantor will nevertheless be
obligated to deliver the Shares upon the Closing Date. Each of the parties
hereto will use its reasonable best efforts to obtain consents of all third
parties and governmental authorities, if any, necessary to the consummation of
the transactions contemplated.
7. Repurchase of Shares. If within 18 months after the date the Merger
Agreement was terminated pursuant to the terms thereof (the "Merger
Termination Date"), neither the Grantee nor any other person has acquired more
than fifty percent (excluding the Shares) of the shares of outstanding Common
Stock, the Grantor will then have the right to purchase (the "Repurchase
Right") all, but not less than all, of the Shares acquired upon exercise of
this Option of which the Grantee is the beneficial owner on the date the
Grantor gives written notice of its intention to exercise the Repurchase
Right, at the greater of (i) the Purchase Price or (ii) the average of the
last sales prices for shares of Common Stock on the 30 trading days ending on
the date the Grantor gives written notice of its intention to exercise the
Repurchase Right. If the Grantor does not exercise the Repurchase Right within
thirty days following the date the Repurchase Right becomes exercisable, the
Repurchase Right will expire and cannot thereafter be exercised. In the event
the Grantor wishes to exercise the Repurchase Right, the Grantor shall send a
written notice to the Grantee specifying a date (not later than 20 business
days and not earlier than 10 business days following the date such notice is
given) for the closing of such purchase.
8. Sale of Shares. At any time prior to the date that is 18 months after the
Merger Termination Date, the Grantee shall have the right to sell (the "Sale
Right") to the Grantor all, but not less than all, of the Shares acquired upon
exercise of this Option of which the Grantee is the beneficial owner on the
date the Grantee gives written notice of its intention to exercise the Sale
Right, at the greater of (i) the Purchase Price, or (ii) the average of the
last sales prices for shares of Common Stock on the 30 trading days ending on
the date the Grantee gives written notice of its intention to exercise the
Sale Right. If the Grantee does not exercise the Sale Right within thirty days
following the date the Sale Right becomes exercisable, the Sale Right will
expire and cannot thereafter be exercised. In the event the Grantee wishes to
exercise the Sale Right, the Grantee shall send a written notice to the
Grantor specifying a date not later than 20 business days and not earlier than
10 business days following the date such notice is given for the closing of
such sale.
9. Registration Rights.
(a) In the event that the Grantee shall desire to sell any of the Shares
within three years after the purchase of such Shares pursuant hereto, and
such sale requires, in the opinion of counsel to the Grantee, which opinion
shall be reasonably satisfactory to the Grantor and its counsel,
registration of such Shares under the Securities Act, the Grantor will
cooperate with the Grantee and any underwriters in registering such Shares
for resale, including, without limitation, promptly filing a registration
statement which complies with the requirements of applicable federal and
state securities laws, and entering into an underwriting agreement with
such underwriters upon such terms and conditions as are customarily
contained in underwriting agreements with respect to secondary
distributions; provided that the Grantor shall not be required to have
declared effective more than two registration statements hereunder and
shall be entitled to delay the filing or effectiveness of any registration
statement for up to 90 days if the offering would, in the judgment of the
Board of Directors of the Grantor, require premature disclosure of any
material corporate development or material transaction involving the
Grantor or interfere with any previously planned securities offering by the
Grantor.
Annex II-4
<PAGE>
(b) If the Common Stock is registered pursuant to the provisions of this
Section 9, the Grantor agrees (i) to furnish copies of the registration
statement and the prospectus relating to the Shares covered thereby in such
numbers as the Grantee may from time to time reasonably request and (ii) if
any event shall occur as a result of which it becomes necessary to amend or
supplement any registration statement or prospectus, to prepare and file
under the applicable securities laws such amendments and supplements as may
be necessary to keep available for at least 90 days a prospectus covering
the Common Stock meeting the requirements of such securities laws, and to
furnish the Grantee such numbers of copies of the registration statement
and prospectus as amended or supplemented as may reasonably be requested.
The Grantor shall bear the cost of the registration, including, but not
limited to, all registration and filing fees, printing expenses, and fees
and disbursements of counsel and accountants for the Grantor, except that
the Grantee shall pay the fees and disbursements of its counsel, and the
underwriting fees and selling commissions applicable to the shares of
Common Stock sold by the Grantee. The Grantor shall indemnify and hold
harmless (i) Grantee, its affiliates and its officers and directors and
each person who controls Grantee within the meaning of the Securities Act
or Exchange Act and (ii) each underwriter and each person who controls any
underwriter within the meaning of the Securities Act or the Exchange Act
(collectively, the "Underwriters") ((i) and (ii) being referred to as
"Indemnified Parties") against any losses, claims, damages, liabilities or
expenses, to which the Indemnified Parties may become subject, insofar as
such losses, claims, damages, liabilities (or actions in respect thereof)
and expenses arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained or incorporated by
reference in any registration statement or prospectus filed pursuant to
this paragraph, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however,
that the Grantor will not be liable in any such case to the extent that any
such loss, liability, claim, damage or expense arises out of or is based
upon an untrue statement or alleged untrue statement in or omission or
alleged omission from any such documents in reliance upon and in conformity
with written information furnished to the Grantor by the Indemnified
Parties expressly for use or incorporation by reference therein.
(c) The Grantee and the Underwriters shall indemnify and hold harmless
the Grantor, its affiliates and its officers and directors and each person
who controls Grantee within the meaning of the Securities Act or Exchange
Act against any losses, claims, damages, liabilities or expenses to which
the Grantor, its affiliates and its officers and directors may become
subject, insofar as such losses, claims, damages, liabilities (or actions
in respect thereof) and expenses arise out of or are based upon any untrue
statement of any material fact contained or incorporated by reference in
any registration statement filed pursuant to this paragraph, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity
with written information furnished to the Grantor by the Grantee or the
Underwriters, as applicable, specifically for use or incorporation by
reference therein.
10. Expenses. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided
herein.
11. Specific Performance. The Grantor acknowledges that if the Grantor fails
to perform any of its obligations under this Agreement immediate and
irreparable harm or injury would be caused to the Grantee for which money
damages would not be an adequate remedy. In such event, the Grantor agrees
that the Grantee shall have the right, in addition to any other rights it may
have, to specific performance of this Agreement. Accordingly, if the Grantee
should institute an action or proceeding seeking specific enforcement of the
provisions hereof, the Grantor hereby waives the claim or defense that the
Grantee has an adequate remedy at law and hereby agrees not to assert in any
such action or proceeding the claim or defense that such a remedy at law
exists. The Grantor further agrees to waive any requirements for the securing
or posting of any bond in connection with obtaining any such equitable relief.
Annex II-5
<PAGE>
12. Notice. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given and made if in writing and
if served by personal delivery upon the party for whom it is intended or
delivered by registered or certified mail, return receipt requested, or if
sent by facsimile transmission, upon receipt of oral confirmation that such
transmission has been received, to the person at the address set forth below,
or such other address as may be designated in writing hereafter, in the same
manner, by such person:
If to the Grantee:
Berkshire Hathaway Inc.
1440 Kiewit Plaza
Omaha, NE 68131
Attn: Warren E. Buffett
Fax: (402) 346-3375
With a copy to:
Munger, Tolles & Olson LLP
355 South Grand Avenue
Los Angeles, CA 90071
Attn: R. Gregory Morgan, Esq.
Fax: (213) 687-3702
If to the Grantor:
General Re Corporation
695 East Main Street
Stamford, CT 06904
Attn: Charles F. Barr, General Counsel
Fax: (203) 328-5090
With a copy to:
Wachtell Lipton Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attn: Edward D. Herlihy
Fax: (212) 403-2000
13. Parties in Interest. This Agreement shall inure to the benefit of and be
binding upon the parties named herein and their respective successors and
assigns. Nothing in this Agreement, express or implied, is intended to confer
upon any person other than the Grantor or the Grantee, or their successors or
assigns, any rights or remedies under or by reason of this Agreement.
14. Entire Agreement; Amendments. This Agreement, together with the Merger
Agreement and the other documents referred to therein, contains the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior and contemporaneous agreements and understandings,
oral or written, with respect to such transactions. This Agreement may not be
changed, amended or modified orally, but may be changed only by an agreement
in writing signed by the party against whom any waiver, change, amendment,
modification or discharge may be sought.
15. Assignment. No party to this Agreement may assign any of its rights or
obligations under this Agreement without the prior written consent of the
other party hereto, except that the Grantee may assign its rights and
obligations hereunder to any of its direct or indirect wholly owned
subsidiaries, but no such transfer shall relieve the Grantee of its
obligations hereunder if such transferee does not perform such obligations.
16. Headings. The section headings herein are for convenience only and shall
not affect the construction of this Agreement.
Annex II-6
<PAGE>
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (without regard to
principles of conflicts of law).
19. Termination. The right to exercise the Option granted pursuant to this
Agreement shall terminate at the earliest of (i) the Effective Time (as
defined in the Merger Agreement) (ii) if the Option is not exercised within
120 days after first becoming exercisable and (iii) if not then exercisable,
30 days after termination of the Merger Agreement in accordance with its terms
(the dates referred to in clause (ii) and (iii) being hereinafter referred to
as the "Termination Date"); provided that, if the Option cannot be exercised
or the Shares cannot be delivered to Grantee upon such exercise because the
conditions set forth in Section 2(a), (b) or (c) hereof have not yet been
satisfied, the Termination Date shall be extended until 30 days after such
impediment to exercise or delivery has been removed. All representations and
warranties contained in this Agreement shall survive delivery of and payment
for the Shares.
20. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement or the Merger
Agreement, in no event shall the Grantee's Total Profit (as hereinafter
defined) exceed $600 million and, if it otherwise would exceed such amount,
the Grantee shall repay such excess amount to Grantor in cash (or the
purchase price for purposes of Section 7 or 8, as applicable, shall be
reduced) so that Grantee's Total Profit shall not exceed $600 million after
taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this Option
may not be exercised for a number of Shares as would, as of the date of the
Stock Exercise Notice, result in a Notional Total Profit (as defined below)
of more than $600 million and, if exercise of the Option otherwise would
exceed such amount, the Grantee, at its discretion, may increase the
Purchase Price for that number of Shares set forth in the Stock Exercise
Notice so that the Notional Total Profit shall not exceed $600 million;
provided, that nothing in this sentence shall restrict any exercise of the
Option permitted hereby on any subsequent date at the Purchase Price set
forth in Section 1(a) hereof.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) (x) the amount of cash received
by Grantee pursuant to Section 8.2 of the Merger Agreement and Section 1(c)
hereof, less (y) any repayment of such cash to Grantor, (ii) (x) the amount
received by Grantee pursuant to the Grantor's repurchase of Shares pursuant
to Sections 7 or 8 hereof, less (y) the Grantee's purchase price for such
Shares, and (iii) (x) the net cash amounts received by Grantee pursuant to
the sale of Shares (or any other securities into or for which such Shares
are converted or exchanged) to any unaffiliated party, less (y) the
Grantee's purchase price for such Shares.
(d) As used herein, the term "Notional Total Profit" with respect to any
number of Shares as to which Grantee may propose to exercise this Option
shall be the Total Profit determined as of the date of the Stock Exercise
Notice assuming that this Option were exercised on such date for such
number of Shares and assuming that such Shares, together with all other
Shares acquired upon exercise of the Option and held by Grantee and its
affiliates as of such date, were sold for cash at the closing market price
for the Common Stock as of the close of business on the preceding trading
day (less customary brokerage commissions).
21. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
Annex II-7
<PAGE>
IN WITNESS WHEREOF, the Grantee and the Grantor have caused this Agreement
to be duly executed and delivered on the day and year first above written.
GENERAL RE CORPORATION
/s/ Ronald E. Ferguson
By: _________________________________
Ronald E. Ferguson
Chairman and Chief Executive
Officer
BERKSHIRE HATHAWAY INC.
/s/ Warren E. Buffett
By: _________________________________
Warren E. Buffett
Chairman and Chief Executive
Officer
Annex II-8
<PAGE>
ANNEX III
FORM OF VOTING AGREEMENT
THIS VOTING AGREEMENT (the "Agreement") is entered into as of June 19, 1998,
by and between General Re Corporation, a Delaware corporation (the "Company"),
and ("Shareholder").
WHEREAS, as of the date hereof Shareholder owns beneficially and of record
shares of Class A Common Stock, par value $5.00 per share
("Berkshire Common Stock"), of Berkshire Hathaway Inc., a Delaware corporation
("Berkshire") (all such shares and any shares hereafter acquired by
Shareholder prior to the termination of this Agreement, but excluding any such
shares hereafter given as gifts to family members or charities, being referred
to herein as the "Shares");
WHEREAS, concurrently herewith, Berkshire and the Company are entering into
an Agreement and Plan of Mergers (as such Agreement may hereafter be amended
from time to time, the "Merger Agreement"), pursuant to which, upon the terms
and subject to the conditions thereof, each of Berkshire and the Company will
merge with separate subsidiaries of NBH, Inc., a Delaware corporation (the
"Holding Company"), with the result that Berkshire and the Company will
become, by virtue of such mergers, wholly owned subsidiaries of Holding
Company; and
WHEREAS, as a condition to the willingness of the Company to enter into the
Merger Agreement, the Company has requested that Shareholder agree, and, in
order to induce the Company to enter into the Merger Agreement, Shareholder
has agreed, to vote the Shares as set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations warranties, covenants and agreements set forth herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
1.1 Transfer of Shares. Until the close of business on the date of the
special meeting of shareholders of Berkshire (including any adjournments
thereof, the "Berkshire Special Meeting") called to consider and vote upon the
transactions contemplated by the Merger Agreement (the "Transactions"),
including the Berkshire Merger (as defined in the Merger Agreement),
Shareholder will not (a) sell, pledge or otherwise dispose of any of the
Shares, (b) deposit the Shares into a voting trust or enter into a voting
agreement or arrangement with respect to the Shares (other than this
Agreement), or grant any proxy with respect thereto (other than a proxy naming
Shareholder as one of the proxyholders), (c) enter into any contact, option or
other arrangement or undertaking with respect to the direct or indirect sale,
assignment, transfer or other disposition of any of the Shares, or (d) convert
any of the Shares into shares of Class B Common Stock, par value $.1667 per
share, of Berkshire.
1.2 Voting of Shares; Further Assurances. Shareholder will vote the Shares
(i) in favor of the adoption of the Merger Agreement and approval of the
Berkshire Merger and the Transactions and (ii) in favor of any other matter
necessary to the consummation of the transactions contemplated by the Merger
Agreement and considered and voted upon at the Berkshire Special Meeting.
Annex III-1
<PAGE>
ARTICLE II
2.1 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered, mailed or transmitted, and shall be effective upon
receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the fax number
specified below:
(a) If to the Company:
General Re Corporation
695 East Main Street
Stamford Connecticut
Attn: Charles F. Barr, General Counsel
Fax: (203) 328-5090
with a copy to:
Wachtell Lipton Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attn: Edward D. Herlihy
Fax: (212) 403-2000
(b) If to Shareholder:
-------------------------
-------------------------
-------------------------
-------------------------
Fax:
with a copy to:
Munger, Tolles & Olson LLP
355 South Grand Avenue
Los Angeles, CA 90071
Attn: R. Gregory Morgan
Fax: (213) 687-3702
2.2 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
2.3 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the
fullest extent permitted by applicable law in an acceptable manner to the end
that the provisions hereof are fulfilled to the extent possible.
Annex III-2
<PAGE>
2.4 Entire Agreement. This Agreement, together with the Merger Agreement and
the other agreements contemplated thereby, constitute the entire agreement of
the parties and supersedes all prior agreements and undertakings, both written
and oral, between the parties, or any of them, with respect to the subject
matter hereof.
2.5 Certain Events. Shareholder agrees that this Agreement and the
obligations hereunder shall be binding upon any person to which legal or
beneficial ownership (as such term is applied under Rule 13d-3 of the
Securities Exchange Act of 1934, as amended) of the Shares shall pass, whether
by operation of law or otherwise. Notwithstanding any transfer of Shares, the
transferor shall remain liable for the performance of all obligations under
this Agreement of the transferor.
2.6 Assignment. This Agreement shall not be assigned by operation of law or
otherwise.
2.7 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, intended to or shall confer upon any person any right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
2.8 Specific Performance. The parties hereto agree that irreparable damages
would occur in the event any provision of this Agreement was not performed in
accordance with the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at
law or in equity.
2.9 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without giving effect to
principles of conflicts of laws.
2.10 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of
which, taken together, shall constitute one and the same agreement.
2.11 Termination. This Agreement shall terminate automatically immediately
upon termination of the Merger Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
GENERAL RE CORPORATION
By: _________________________________
Ronald E. Ferguson
Chairman and Chief Executive
Officer
-------------------------------------
[Shareholder]
Annex III-3
<PAGE>
ANNEX IV
OPINION OF GOLDMAN, SACHS & CO.
June 19, 1998
Board of Directors
General Re Corporation
Financial Center
695 East Main Street
Stamford, CT 06904
Gentlemen and Mesdames:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of common stock, par value $0.50
per share (the "Company Common Stock"), of General Re Corporation (the
"Company") of the Merger Consideration to be received by such holders in the
proposed Transactions (as each such term is defined herein) pursuant to the
Agreement and Plan of Mergers, dated June 19, 1998 (the "Agreement"), by and
between Berkshire Hathaway Inc. ("Berkshire") and the Company.
The Agreement contemplates, subject to the right of Berkshire to elect to
effect the Alternative Company Merger Transaction (as defined below), two
contemporaneous merger transactions pursuant to which each of the Company and
Berkshire would become a subsidiary of NBH, Inc., a holding company which will
be renamed Berkshire Hathaway ("New Berkshire"). Pursuant to the Company
merger transaction (the "Company Merger Transaction"), each issued and
outstanding share of Company Common Stock (other than shares owned by
Berkshire) will be converted into the following (the consideration described
in (i) and (ii) immediately below being the "Company Merger Transaction
Consideration"): (i) the right to receive either (A) 0.0035 of a share of the
Class A common stock, par value $5.00 per share, of New Berkshire ("New
Berkshire Class A Common Stock"), or (B) 0.105 of a share of the Class B
common stock, par value $0.1667 per share, of New Berkshire ("New Berkshire
Class B Common Stock"), as determined pursuant to the election procedures set
forth in the Agreement. Pursuant to the Berkshire merger transaction (the
"Berkshire Merger Transaction"), each issued and outstanding share of the
Class A common stock, par value $5.00 per share, of Berkshire (the "Berkshire
Class A Common Stock") will be converted into one share of New Berkshire Class
A Common Stock and each issued and outstanding share of Class B common stock,
par value $0.1667 per share, of Berkshire (the "Berkshire Class B Common
Stock" and, together with the Berkshire Class A Common Stock, the "Berkshire
Common Stock") will be converted into one share of New Berkshire Class B
Common Stock. Alternatively, if Berkshire elects, under the circumstances
described in the Agreement, to pay 3% of the aggregate merger consideration in
cash and to consummate an alternative merger transaction (the "Alternative
Company Merger Transaction", and collectively with the Company Merger
Transaction, the "Transactions"), neither the Company Merger Transaction nor
the Berkshire Merger Transaction shall occur and, pursuant to the Alternative
Company Merger Transaction, the Company would become a subsidiary of
Berkshire. Pursuant to the Alternative Company Merger Transaction, each issued
and outstanding share of Company Common Stock (other than shares owned by
Berkshire) will be converted into the following (the consideration described
in (i) and (ii) immediately below being the "Alternative Company Merger
Transaction Consideration", and collectively with the Company Merger
Transaction Consideration, the "Merger Consideration"): the right to receive
either (A) (x) 0.003395 of a share of Berkshire Class A Common Stock and (y)
an amount in cash equal to the product of 0.000105 and the Average Trading
Price (as defined in the Agreement), or (B) (x) 0.10185 of a share of
Berkshire Class B Common Stock and (y) an amount in cash equal to the product
of 0.00315 and the Average Trading Price, as determined pursuant to the
election procedures set forth in the Agreement. Pursuant to the Agreement, in
the Transactions, holders of shares of Company Common Stock may elect (a
"Class A Election") to have their shares converted into New Berkshire Class A
Common Stock or Berkshire Class A Common Stock, as the case
Annex IV-1
<PAGE>
may be, to the extent that they would receive a whole number of shares of such
Class A Common Stock, with any excess consideration being paid in the form of
shares of New Berkshire Class B Common Stock or Berkshire Class B Common
Stock, as the case may be (subject to a cash payment for any fractional shares
of such Class B Common Stock). Holders of shares of Company Common Stock who
do not make a Class A Election will receive shares of New Berkshire Class B
Common Stock or Berkshire Class B Common Stock, as the case may be (subject to
a cash payment for any fractional shares of such Class B Common Stock).
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. We are familiar with the Company, having acted as its financial
advisor in connection with, and having participated in certain of the
negotiations leading to, the Agreement. We are familiar with Berkshire, having
acted in 1996 as co-manager of Berkshire's public offering of $500 million
principal amount of 1.00% Senior Exchangeable Notes due December 2, 2001.
Goldman, Sachs & Co. provides a full range of financial, advisory and
brokerage services and, in the course of its normal trading activities, may
from time to time effect transactions and hold positions in the securities or
options on securities of the Company and/or Berkshire for its own account
and/or for the accounts of customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Shareholders and Annual Reports on Form 10-K for
the five years ended December 31, 1997 of the Company and Berkshire; certain
interim reports to shareholders and Quarterly Reports on Form 10-Q of the
Company and Berkshire; Statutory Annual Statements filed by certain insurance
subsidiaries of the Company and Berkshire with the Insurance Departments of
the States under the laws of which they are respectively organized for the
five years ended December 31, 1997; certain interim statutory financial
information filed by such subsidiaries with such Insurance Departments;
certain other communications from the Company and Berkshire to their
respective shareholders; and certain internal financial analyses and forecasts
for the Company prepared by its management. We also have held discussions with
members of the senior management of the Company and Berkshire regarding the
strategic, financial and operating rationale for, and expected benefits of,
the transactions contemplated by the Agreement and the past and current
business operations, financial condition and future prospects of their
respective companies. In addition, we have reviewed the reported price and
trading activity for shares of Company Common Stock and shares of Berkshire
Common Stock, compared certain financial and stock market information for the
Company and Berkshire with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations in the reinsurance industry specifically
and in other industries generally and performed such other studies and
analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. We are not actuaries and
our services did not include actuarial determinations or evaluations by us or
an attempt to evaluate actuarial assumptions. In addition, we have not made an
independent evaluation or appraisal of the assets and liabilities (including
the loss and loss adjustment expense reserves) of the Company or Berkshire or
any of their subsidiaries and we have not been furnished with any such
evaluation or appraisal. In that regard, we have made no analyses of, and
express no opinion as to, the adequacy of the loss and loss adjustment expense
reserves of the Company or Berkshire. We were advised by the management of
Berkshire that Berkshire does not prepare financial forecasts. Our review of
Berkshire was limited to publicly available information and discussions with
the management of Berkshire. We were not requested to, and did not, solicit
from third parties indications of interest in acquiring all or part of the
Company or in engaging in a business combination or any other strategic
transaction with the Company.
Our advisory services and the opinion expressed herein are provided for the
information and assistance of the Board of Directors of the Company in
connection with its consideration of the transactions contemplated by the
Agreement and such opinion does not constitute a recommendation as to how any
holder of shares of Company Common Stock should vote with respect to such
transactions. In addition, we have not been requested
Annex IV-2
<PAGE>
to make, and we are not making, a recommendation as to whether any holder of
Company Common Stock who is entitled to make a Class A Election should make
such a Class A Election. We note that it is expected that the Company Merger
Transaction will be tax-free to the holders of Company Common Stock but that,
in the event that the Alternative Company Merger Transaction occurs, holders
of Company Common Stock will recognize gain or loss for federal income tax
purposes. In rendering this opinion, we have not taken into account the
particular tax consequences of the Company Merger Transaction or the
Alternative Company Merger Transaction to the holders of Company Common Stock.
Our opinion is necessarily based upon financial, economic, market and other
conditions as they exist and can be evaluated on the date hereof.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that, as of the date hereof, the
Merger Consideration to be received in the Transactions by holders of shares
of Company Common Stock pursuant to the Agreement is fair from a financial
point of view to such holders.
Very truly yours,
GOLDMAN, SACHS & CO.
Annex IV-3
<PAGE>
ANNEX V
PLAN OF BERKSHIRE MERGER
PLAN OF BERKSHIRE MERGER, dated as of , 1998 (the "Agreement"), by and
among Berkshire Hathaway Inc., a Delaware corporation ("Berkshire"), NBH,
Inc., a Delaware corporation ("Holding Company") and Wyllis Merger Sub Inc., a
Delaware corporation ("Merger Sub A").
WITNESSETH
WHEREAS, General Re Corporation, a Delaware corporation ("General Re") and
Berkshire have entered into an Agreement and Plan of Mergers dated as of June
19, 1998 (the "Merger Agreement"), pursuant to which (i) General Re and
Berkshire have caused Holding Company to be formed and Holding Company has
formed two wholly owned subsidiaries, Merger Sub A and Steven Merger Sub Inc.,
a Delaware corporation ("Merger Sub B"), (ii) the parties have agreed that
Merger Sub A shall merge with and into Berkshire (the "Berkshire Merger"), and
(iii) the parties have agreed that Merger Sub B shall merge with and into
General Re (the "General Re Merger");
WHEREAS, the Boards of Directors of Berkshire, Holding Company and Merger
Sub A have approved and adopted this Agreement and submitted it to their
respective stockholders for approval.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
Except as otherwise provided herein or as set forth below, all capitalized
terms shall have the meaning set forth in the Merger Agreement. The
capitalized term set forth below shall have the following meanings:
1.1 "Surviving Entity" shall refer to Berkshire as the surviving entity in
the Berkshire Merger.
ARTICLE 2
TERMS OF THE BERKSHIRE MERGER
2.1 The Berkshire Merger
(a) Pursuant to this Agreement, and in accordance with the General
Corporation Law of the State of Delaware (the "DGCL"), at the Effective Time
(as defined below), Merger Sub A will be merged with and into Berkshire.
Berkshire shall be the Surviving Entity in the Berkshire Merger and shall
continue its corporate existence under the laws of the State of Delaware.
(b) The term "Effective Time" shall mean the time and date which is (i) the
later of (A) the date and time of the filing of the certificate of merger
relating to the Berkshire Merger with the Secretary of State of the State of
Delaware (or such other date and time as may be specified in such certificate
and permitted by law) and (B) the date and time of the filing of a certificate
of merger relating to the General Re Merger with the Secretary of State of the
State of Delaware (or such other date and time as may be specified in such
certificate and permitted by law) or (ii) such other time and date as is
permissible in accordance with the DGCL and as Berkshire and General Re may
agree.
Annex V-1
<PAGE>
2.2 Effect on Berkshire Common Stock. At the Effective Time, without any
action on the part of the holder of any shares of Berkshire Common Stock (as
defined):
(a) Cancellation of Treasury Stock. Each share of Berkshire Common Stock
that is owned by Berkshire or any subsidiary of Berkshire shall automatically
be cancelled and retired and shall cease to exist, and no cash, Holding
Company Common Stock or other consideration shall be delivered or deliverable
in exchange therefor.
(b) Conversion of Berkshire Common Stock. Except as provided in Section 2.2,
each issued and outstanding share of Berkshire Common Stock shall be converted
into the following:
(i) for each such share of Berkshire Class A Common Stock, $5.00 par
value ("Berkshire Class A Common Stock"), one fully paid and nonassessable
share of Holding Company Class A Common Stock, $5.00 par value ("Holding
Company Class A Common Stock"); or
(ii) for each such share of Berkshire Class B Common Stock, $0.1667 par
value ("Berkshire Class B Common Stock," and together with Berkshire Class
A Common Stock, "Berkshire Common Stock"), one fully paid and nonassessable
share of Holding Company Class B Common Stock, $0.1667 par value ("Holding
Company Class B Common Stock).
(c) Cancellation and Retirement of Berkshire Common Stock. (i) All shares of
Berkshire Class A Common Stock issued and outstanding immediately prior to the
Effective Time shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each certificate
theretofore representing any such shares shall, without any action on the part
of the holder thereof, be deemed to represent an equivalent number of shares
of Holding Company Class A Common Stock and (ii) all shares of Berkshire Class
B Common Stock issued and outstanding immediately prior to the Effective Time,
shall no longer be outstanding and shall automatically be cancelled and
retired and shall cease to exist, and each such certificate theretofore
representing any such shares shall, without any action on the part of the
holder thereof, be deemed to represent an equivalent number of shares of
Holding Company Class B Common Stock.
2.3 Effect on Merger Sub A Stock. At the Effective Time, each share of the
common stock of Merger Sub A outstanding immediately prior to the Effective
Time shall be converted into and shall become one share of common stock of the
Surviving Entity.
2.4 Effects of the Merger. The Merger shall have the effects set forth in
the DGCL.
2.5 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation and Bylaws of Merger Sub A as in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation and Bylaws of the
Surviving Entity until thereafter changed or amended as provided therein or by
applicable law.
2.6 Directors. The directors of Merger Sub A immediately prior to the
Effective Time shall be the directors of the Surviving Entity as of the
Effective Time until the earlier of their resignation or removal or until
their respective successors are duly appointed or elected in accordance with
applicable law.
2.7 Officers. The officers of Berkshire immediately prior to the Effective
Time shall be the officers of the Surviving Entity until the earlier of their
resignation or removal or until their respective successors are duly appointed
or elected in accordance with applicable law.
ARTICLE 3
MISCELLANEOUS
3.1 Amendments
To the extent permitted by law, this Agreement may be amended by a
subsequent writing signed by the parties hereto upon the approval of the board
of directors of each of the parties hereto.
Annex V-2
<PAGE>
3.2 Successors
This Agreement shall be binding on the successors of Berkshire, Holding
Company and Merger Sub A.
3.3 Counterparts
This Agreement may be executed in counterparts, and each such counterpart
shall be deemed to be an original instrument, but both such counterparts
together shall constitute but one agreement.
In witness whereof, Berkshire, Holding Company and Merger Sub A have caused
this Agreement to be executed by their duly authorized representatives on the
date indicated.
ATTEST:
BERKSHIRE HATHAWAY INC.
By: ________________________________
By: ___________________________________
Name: ______________________________
Name: _________________________________
Title: _____________________________
Title: ________________________________
ATTEST:
NBH, INC.
By: ________________________________
By: ___________________________________
Name: ______________________________
Name: _________________________________
Title: _____________________________
Title: ________________________________
ATTEST:
WYLLIS MERGER SUB INC.
By: ________________________________
By: ___________________________________
Name: ______________________________
Name: _________________________________
Title: _____________________________ Title: ________________________________
Annex V-3
<PAGE>
ANNEX VI
PLAN OF GENERAL RE MERGER
PLAN OF GENERAL RE MERGER, dated as of , 1998 (the "Agreement"), by and
among General Re Corporation., a Delaware corporation ("General Re"), NBH,
Inc., a Delaware corporation ("Holding Company") and Steven Merger Sub Inc., a
Delaware corporation ("Merger Sub B").
WITNESSETH
WHEREAS, General Re and Berkshire Hathaway Inc., a Delaware corporation
("Berkshire") have entered into an Agreement and Plan of Mergers dated as of
June 19, 1998 (the "Merger Agreement"), pursuant to which (i) General Re and
Berkshire have caused Holding Company to be formed and Holding Company has
formed two wholly owned subsidiaries, Merger Sub B and Wyllis Merger Sub Inc.,
a Delaware corporation ("Merger Sub A"), (ii) the parties have agreed that
Merger Sub B shall merge with and into General Re (the "General Re Merger"),
and (iii) the parties have agreed that Merger Sub A shall merge with and into
Berkshire (the "Berkshire Merger").
WHEREAS, the Boards of Directors of General Re, Holding Company and Merger
Sub B have approved and adopted this Agreement and submitted it to their
respective stockholders for approval.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
Except as otherwise provided herein or as set forth below, all capitalized
terms shall have the meaning set forth in the Merger Agreement. The
capitalized term set forth below shall have the following meanings:
1.1 "Surviving Entity" shall refer to General Re as the surviving entity in
the General Re Merger.
ARTICLE 2
TERMS OF THE GENERAL RE MERGER
2.1 The General Re Merger
(a) Pursuant to this Agreement, and in accordance with the General
Corporation Law of the State of Delaware (the "DGCL"), at the Effective Time
(as defined below), Merger Sub B will be merged with and into General Re.
General Re shall be the Surviving Entity in the General Re Merger and shall
continue its corporate existence under the laws of the State of Delaware.
(b) The term "Effective Time" shall mean the time and date which is (i) the
later of (A) the date and time of the filing of the certificate of merger
relating to the Berkshire Merger with the Secretary of State of the State of
Delaware (or such other date and time as may be specified in such certificate
and permitted by law) and (B) the date and time of the filing of a certificate
of merger relating to the General Re Merger with the Secretary of State of the
State of Delaware (or such other date and time as may be specified in such
certificate and permitted by law) or (ii) such other time and date as is
permissible in accordance with the DGCL and as Berkshire and General Re may
agree.
Annex VI-1
<PAGE>
2.2 Effect on General Re Common Stock. At the Effective Time, without any
action on the part of the holder of any shares of General Re Common Stock,
$0.50 par value ("General Re Common Stock"):
(a) Cancellation of Treasury Stock and Berkshire-Owned General Re
Stock. Each share of General Re Common Stock, together with the rights
attached thereto, that is owned by General Re or any subsidiary of General Re
and each share of General Re Common Stock (with the associated rights) that is
owned by Berkshire or any subsidiary of Berkshire shall automatically be
cancelled and retired and shall cease to exist, and no cash, Holding Company
Common Stock or other consideration shall be delivered or deliverable in
exchange therefor.
(b) Conversion of General Re Common Stock. Except as otherwise provided and
subject to Section 2.3, each issued and outstanding share of General Re Common
Stock (with the associated rights) shall be converted into the right to
receive, at the election of the holder, from the Holding Company either
(i) 0.0035 of a fully paid and nonassessable share of Holding Company Class A
Common Stock ("Holding Company Class A Common Stock") or (ii) 0.105 of a fully
paid and nonassessable share of Holding Company Class B Common Stock ("Holding
Company Class B Common Stock") (such shares, the "Merger Consideration").
(c) Cancellation and Retirement of General Re Common Stock. All shares of
General Re Common Stock (with the associated rights), other than shares
referred to in Section 2.2(a), issued and outstanding immediately prior to the
Effective Time shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a
certificate representing any such shares of General Re Common Stock (with the
associated rights) shall cease to have any rights with respect thereto, except
the right to receive the Merger Consideration in accordance with Section
2.2(b) and any cash in lieu of fractional shares of Holding Company Class B
Common Stock to be issued or paid in consideration therefor. No interest will
be paid or will accrue on the Merger Consideration, any dividends or
distributions or any cash payable in lieu of any fractional shares of Holding
Company Common Stock.
2.3 Fractional Shares.
No certificates or scrip representing fractional shares of Holding Company
Common Stock shall be issued upon the surrender for exchange of certificates
representing shares of General Re Common Stock, and such fractional share
interests will not entitle the owner thereof to vote or to any rights of a
stockholder of Holding Company. Each holder of shares of General Re Common
Stock exchanged pursuant to the General Re Merger who would have otherwise
been entitled to receive a fraction of a share of Holding Company Class A
Common Stock shall receive, in lieu thereof, such whole number of share of
Holding Company Class B Common stock equal to the product of (a) such fraction
multiplied by (b) 30. Each holder of shares of General Re Common Stock
exchanged pursuant to the General Re Merger who would have otherwise been
entitled to receive a fraction of a share of Holding Company Class B Common
Stock shall receive, in lieu thereof, a cash payment (without interest) equal
to the product of (x) such fraction and (y) the Average Trading Price for one
share of Berkshire Class B Common Stock. For purposes of this Agreement,
"Average Trading Price" shall mean the average of the high and low trading
prices of Berkshire Class A Common Stock or Berkshire Class B Common Stock, as
the case may be, as reported on the NYSE Composite Tape for each of the five
consecutive trading days ending on the last full trading day immediately prior
to the date on which the Effective Time occurs.
2.4 Effect on Merger Sub B Stock. At the Effective Time, each share of the
common stock of Merger Sub B outstanding immediately prior to the Effective
Time shall be converted into and shall become one share of common stock of the
Surviving Entity.
2.5 Effects of the Mergers. The Mergers shall have the effects set forth in
the DGCL.
2.6 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation and Bylaws of Merger Sub B as in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation and Bylaws of the
Surviving Entity.
Annex VI-2
<PAGE>
2.7 Directors. The directors of Merger Sub B immediately prior to the
Effective Time shall be the directors of the Surviving Entity as of the
Effective Time until the earlier of their resignation or removal or until their
respective successors are duly appointed or elected in accordance with
applicable law.
2.8 Officers. The officers of General Re immediately prior to the Effective
Time shall be the officers of the Surviving Entity until the earlier of their
resignation or removal or until their respective successors are duly appointed
or elected in accordance with applicable law.
ARTICLE 3
MISCELLANEOUS
3.1 Amendments
To the extent permitted by law, this Agreement may be amended by a subsequent
writing signed by the parties hereto upon the approval of the board of
directors of each of the parties hereto.
3.2 Successors
This Agreement shall be binding on the successors of General Re, Holding
Company and Merger Sub B.
3.3 Counterparts
This Agreement may be executed in counterparts, and each such counterpart
shall be deemed to be an original instrument, but both such counterparts
together shall constitute but one agreement.
In witness whereof, General Re, Holding Company and Merger Sub B have caused
this Agreement to be executed by their duly authorized representatives on the
date indicated.
GENERAL RE CORPORATION
ATTEST:
By: ___________________________________
By: ________________________________
Name: _________________________________
Name: ______________________________
Title: ________________________________
Title: _____________________________
NBH, INC.
ATTEST:
By: ___________________________________
By: ________________________________
Name: _________________________________
Name: ______________________________
Title: ________________________________
Title: _____________________________
STEVEN MERGER SUB INC.
ATTEST:
By: ___________________________________
By: ________________________________
Name: _________________________________
Name: ______________________________
Title: ________________________________
Title: _____________________________
Annex VI-3
<PAGE>
ANNEX VII
PLAN OF GENERAL RE MERGER (ALTERNATIVE TRANSACTION)
PLAN OF GENERAL RE MERGER, dated as of , 1998 (the "Agreement"), by and
among General Re Corporation., a Delaware corporation ("General Re"),
Berkshire Hathaway Inc., a Delaware corporation ("Berkshire"), and
Merger Sub Inc., a Delaware corporation ("Merger Sub").
WITNESSETH
WHEREAS, General Re and Berkshire Hathaway Inc., a Delaware corporation
("Berkshire") have entered into an Agreement and Plan of Mergers dated as of
June 19, 1998 (the "Merger Agreement"), pursuant to which (i) Berkshire has
caused the formation of Merger Sub, and (ii) Merger Sub will merge with and
into General Re (the "General Re Merger").
WHEREAS, the Boards of Directors of General Re, Holding Company and Merger
Sub B have approved and adopted this Agreement and submitted it to their
respective stockholders for approval.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
Except as otherwise provided herein or as set forth below, all capitalized
terms shall have the meaning set forth in the Merger Agreement. The
capitalized term set forth below shall have the following meanings:
1.1 "Surviving Entity" shall refer to General Re as the surviving entity in
the General Re Merger.
ARTICLE 2
TERMS OF THE GENERAL RE MERGER
2.1 The General Re Merger
(a) Pursuant to this Agreement, and in accordance with the General
Corporation Law of the State of Delaware (the "DGCL"), at the Effective Time
(as defined below), Merger Sub will be merged with and into General Re.
General Re shall be the Surviving Entity in the General Re Merger and shall
continue its corporate existence under the laws of the State of Delaware.
(b) The term "Effective Time" shall mean the time and date which is (i) the
date and time of the filing of a certificate of merger relating to the General
Re Merger with the Secretary of State of the State of Delaware (or such other
date and time as may be specified in such certificate and permitted by law) or
(ii) such other time and date as is permissible in accordance with the DGCL
and as Berkshire and General Re may agree.
2.2 Effect on General Re Common Stock. At the Effective Time, without any
action on the part of the holder of any shares of General Re Common Stock,
$0.50 par value ("General Re Common Stock"):
(a) Cancellation of Treasury Stock and Berkshire-Owned General Re
Stock. Each share of General Re Common Stock, together with the rights
attached thereto, that is owned by General Re or any subsidiary of General Re
and each share of General Re Common Stock (with the associated rights) that is
owned by Berkshire or any subsidiary of Berkshire shall automatically be
cancelled and retired and shall cease to exist, and no cash, Holding Company
Common Stock or other consideration shall be delivered or deliverable in
exchange therefor.
Annex VII-1
<PAGE>
(b) Conversion of General Re Common Stock. Except as otherwise provided and
subject to Sections 2.3 and 2.4, each issued and outstanding share of General
Re Common Stock (with the associated rights) shall be converted into the right
to receive, at the election of the holder, from Berkshire either (i) (A)
0.003395 of a fully paid and nonassessable share of Berkshire Class A Common
Stock and (B) an amount in cash equal to the product of 0.000105 and the
Average Trading Price of one share of Berkshire Class A Common Stock, or
(ii) (x) 0.10185 of a fully paid and nonassessable share of Berkshire Class B
Common Stock and (y) an amount in cash equal to the product of 0.00315 and the
Average Trading Price of one share of Berkshire Class B Common Stock.
(c) Cancellation and Retirement of General Re Common Stock. All shares of
General Re Common Stock (with the associated rights), other than shares
referred to in Section 2.2(a), issued and outstanding immediately prior to the
Effective Time shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a
certificate representing any such shares of General Re Common Stock (with the
associated rights) shall cease to have any rights with respect thereto, except
the right to receive the Merger Consideration in accordance with Section
2.2(b) and any cash in lieu of fractional shares of Berkshire Class B Common
Stock to be issued or paid in consideration therefor. No interest will be paid
or will accrue on the Merger Consideration, any dividends or distributions or
any cash payable in lieu of any fractional shares of Berkshire Common Stock.
2.3 Fractional Shares.
No certificates or scrip representing fractional shares of Holding Company
Common Stock shall be issued upon the surrender for exchange of certificates
representing shares of General Re Common Stock, and such fractional share
interests will not entitle the owner thereof to vote or to any rights of a
stockholder of Berkshire. Each holder of shares of General Re Common Stock
exchanged pursuant to the General Re Merger who would have otherwise been
entitled to receive a fraction of a share of Berkshire Class A Common Stock
shall receive, in lieu thereof, such whole number of share of Berkshire Class
B Common stock equal to the product of (a) such fraction multiplied by (b) 30.
Each holder of shares of General Re Common Stock exchanged pursuant to the
General Re Merger who would have otherwise been entitled to receive a fraction
of a share of Berkshire Class B Common Stock shall receive, in lieu thereof, a
cash payment (without interest) equal to the product of (x) such fraction and
(y) the Average Trading Price for one share of Berkshire Class B Common Stock.
For purposes of this Agreement, "Average Trading Price" shall mean the average
of the high and low trading prices of Berkshire Class A Common Stock or
Berkshire Class B Common Stock, as the case may be, as reported on the NYSE
Composite Tape for each of the five consecutive trading days ending on the
last full trading day immediately prior to the date on which the Effective
Time occurs.
2.4 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, General Common Stock outstanding immediately prior to the Effective
Time and held by a holder who has delivered a written demand for appraisal of
such shares in accordance with Section 262 of the DGCL, if such Section 262
provides for appraisal rights for such General Common Stock in the General
Merger ("Dissenting Shares"), shall not be converted as provided in Section
2.2(b) hereof, unless and until such holder fails to perfect or effectively
withdraws or otherwise loses his right to appraisal and payment under the
DGCL. If, after the Effective Time, any such holder fails to perfect or
effectively withdraws or loses his right to appraisal, such Dissenting Shares
shall thereupon be treated as if they had been converted as of the Effective
Time into the right to receive the Merger Consideration as provided in Section
2.2(b) hereof, together with any dividends or distributions payable thereon or
cash in lieu of fractional shares, and to which such holder is entitled,
without interest thereon.
2.5 Effect on Merger Sub Stock. At the Effective Time, each share of the
common stock of Merger Sub outstanding immediately prior to the Effective Time
shall be converted into and shall become one share of common stock of the
Surviving Entity.
2.6 Effects of the Mergers. The Mergers shall have the effects set forth in
the DGCL.
Annex VII-2
<PAGE>
2.7 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation and Bylaws of Merger Sub as in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation and Bylaws of the
Surviving Entity.
2.8 Directors. The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Entity as of the
Effective Time until the earlier of their resignation or removal or until
their respective successors are duly appointed or elected in accordance with
applicable law.
2.9 Officers. The officers of General Re immediately prior to the Effective
Time shall be the officers of the Surviving Entity until the earlier of their
resignation or removal or until their respective successors are duly appointed
or elected in accordance with applicable law.
ARTICLE 3
MISCELLANEOUS
3.1 Amendments
To the extent permitted by law, this Agreement may be amended by a
subsequent writing signed by the parties hereto upon the approval of the board
of directors of each of the parties hereto.
3.2 Successors
This Agreement shall be binding on the successors of General Re, Berkshire
and Merger Sub.
3.3 Counterparts
This Agreement may be executed in counterparts, and each such counterpart
shall be deemed to be an original instrument, but both such counterparts
together shall constitute but one agreement.
In witness whereof, General Re, Holding Company and Merger Sub have caused
this Agreement to be executed by their duly authorized representatives on the
date indicated.
GENERAL RE CORPORATION
ATTEST:
By: _________________________________
By: _________________________________
Name: _______________________________
Name: _______________________________
Title: ______________________________
Title: ______________________________
BERKSHIRE HATHAWAY INC.
ATTEST:
By: _________________________________
By: _________________________________
Name: _______________________________
Name: _______________________________
Title: ______________________________
Title: ______________________________
MERGER SUB INC.
ATTEST:
By: _________________________________
By: _________________________________
Name: _______________________________
Name: _______________________________
Title: ______________________________
Title: ______________________________
Annex VII-3
<PAGE>
ANNEX VIII
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
BERKSHIRE HATHAWAY, INC.
Berkshire Hathaway Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), hereby certifies as follows:
1. The Restated Certificate of Incorporation of the Corporation, as
heretofor filed and amended shall be further amended as follows:
The first paragraph of Article FOURTH of the Restated Certificate of
Incorporation of the Corporation shall be amended in its entirety to read
as follows:
FOURTH: The total number of shares of all classes of stock that the
Corporation is authorized to issue is 57,650,000, of which 1,650,000 shares
shall be Class A Common Stock, 55,000,000 shall be Class B Common Stock,
and 1,000,000 shares shall be Preferred Stock. Shares of Preferred Stock
shall have no par value. Each share of Class A Common Stock shall have a
par value of $5.00. Each share of Class B Common Stock shall have a par
value of $0.1667. The Class A Common Stock and the Class B Common Stock
shall sometimes hereinafter be referred to collectively as the "Common
Stock."
2. That a special meeting of the stockholders of the Corporation was duly
called and held on , 1998, upon notice in accordance with
Section 222 of the General Corporation Law of the State of Delaware, at which
meeting the necessary number of shares as required by statute were voted in
favor of the amendment.
3. That said amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this Certificate of Amendment has been signed by the
Company this day of , 199 .
BERKSHIRE HATHAWAY INC.
By: _________________________________
Marc D. Hamburg
Vice President and Chief
Financial Officer
Attest:
- -----------------------------------
Forrest N. Krutter
Secretary
Annex VIII-1
<PAGE>
ANNEX IX
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
(S) 262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing pursuant
to (S) 228 of this title shall be entitled to an appraisal by the Court of
Chancery of the fair value of the stockholder's shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S) 251 (other than a merger effected pursuant to
(S) 251(g) of this title), (S) 252, (S) 254, (S) 257, (S) 258, (S) 263 or
(S) 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of (S) 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
(S)(S) 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S) 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
Annex IX-1
<PAGE>
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsection (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to (S) 228 or
(S) 253 of this title, each consitutent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constitutent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constitutent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constitutent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which notice is given.
Annex IX-2
<PAGE>
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger
or consolidation, any stockholder shall have the right to withdraw his demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which
demands for appraisal have been received and the aggregate number of holders
of such shares. Such written statement shall be mailed to the stockholder
within 10 days after his written request for such a statement is received by
the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted his certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to
appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of
Annex IX-3
<PAGE>
Chancery may be enforced, whether such surviving or resulting corporation be a
corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who had demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be conditioned upon
such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
Annex IX-4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware empowers the
Registrants to indemnify, subject to the standards therein prescribed, any
person in connection with any action, suit or proceeding brought or threatened
by reason of the fact that such person is or was a director, officer, employee
or agent of the Registrants or is or was serving as such with respect to
another corporation or other entity at the request of the Registrants. Section
10 of the Registrants' By-Laws provides that such Registrant shall, to the
fullest extent permitted by Section 145 of the General Corporation Law of
Delaware, indemnify its directors and officers from and against any and all of
the expenses, liabilities or other matters referred to in or covered by said
Section. Additionally, as permitted by said Section and the Registrants' By-
Laws, the Registrants have entered into indemnification agreements with each
of its directors and officers. The description of the Berkshire Hathaway Inc.
indemnification agreements under the caption "Summary of the Indemnification
Agreements" on page 9 of Berkshire Hathaway Inc.'s definitive proxy statement
for its May 19, 1987 Annual Meeting of Stockholders, Commission
File No. 0-7413, is incorporated herein by reference. The NBH, Inc.
indemnification agreements are substantially identical to those of Berkshire
Hathaway Inc.
As permitted by Section 102 of the General Corporation Law of Delaware, the
Registrants' Certificates of Incorporation includes a provision eliminating,
to the extent permitted by Delaware law, the personal liability of each
director of the Registrants to the Registrants or any of its stockholders for
monetary damages resulting from breaches of such director's fiduciary duty of
care.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
NUMBER EXHIBIT
------ -------
<C> <S>
2 Agreement and Plan of Merger, dated as of June 19, 1998, by and between
Berkshire Hathaway Inc. and General Re Corporation (included as Annex I
to the Proxy Statement/Prospectus).
3.1 Restated Certificate of Incorporation of NBH, Inc.
3.2 Bylaws of NBH, Inc.
3.3 Restated Certificate of Incorporation of Berkshire Hathaway Inc.(1)
3.4 Bylaws of Berkshire Hathaway Inc.(2)
5 Opinion of Munger, Tolles & Olson LLP, regarding the validity of
securities offered hereby.
8.1 Opinion of Munger, Tolles & Olson LLP, regarding certain tax matters.
8.2 Opinion of Wachtell, Lipton, Rosen & Katz regarding certain tax
matters.
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of Munger, Tolles & Olson LLP (included in Exhibits 5 and 8.1).
23.4 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 8.2)
23.5 Consent of Ronald E. Ferguson
24 Powers of attorney (included on Page II-3 hereof).
99.1 Form of Berkshire Hathaway Inc. proxy
99.2 Form of General Re Corporation proxy
</TABLE>
- --------
(1) Incorporated by reference to Exhibit 3 to Berkshire Hathaway Inc.'s 1996
Annual Report on Form 10-K.
(2) Incorporated by reference to Exhibit 3 to Berkshire Hathaway Inc.'s
Registration Statement on Form S-4, No. 333-40685.
II-1
<PAGE>
ITEM 22. UNDERTAKINGS.
The undersigned Registrants hereby undertake:
(a) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) to reflect in the prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent post-
effective amendment hereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement.
(b) that, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(d) to respond to requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within
one business day of receipt of such request, and to send the incorporated
documents by first-class mail or equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the request.
(e) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when it
became effective.
(f) that, for purposes of determining any liability under the Securities Act
of 1933, each filing of a Registrants' annual report pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of any employee benefit plan's annual report pursuant to Section 15(d)
of the Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(g) insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the foregoing provisions, or otherwise, the
Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by a
Registrant of expenses incurred or paid by a director, officer or controlling
person of such Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, a Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrants
have duly caused this Registration Statement to be signed on their behalf by
the undersigned, thereunto duly authorized in the City of Omaha, State of
Nebraska on August 10, 1998.
BERKSHIRE HATHAWAY, INC. NBH, Inc.
/s/ Marc D. Hamburg /s/ Marc D. Hamburg
By:__________________________________ By: _________________________________
Marc D. Hamburg Marc D. Hamburg
Vice President and Chief Financial Vice President and Chief
Officer Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
each of Warren E. Buffett and Marc D. Hamburg his or her true and lawful
attorney-in-fact and agent with full powers of substitution and
resubstitution, for the undersigned and in the name of the undersigned, in any
and all capacities, to sign any or all amendments (including post-effect
amendments) to this registration statement on Form S-4, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby
ratifying and conforming all that said attorneys-in-fact and agents or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Warren E. Buffett Chairman of the Board and August 10, 1998
____________________________________ Director (principal
Warren E. Buffett executive officer) of
Berkshire Hathaway Inc. and
of NBH, Inc.
/s/ Marc D. Hamburg Vice President and Chief August 10, 1998
____________________________________ Financial Officer
Marc D. Hamburg (principal financial
officer) of Berkshire
Hathaway Inc. and of NBH,
Inc.
/s/ Daniel J. Jaksich Controller (principal August 10, 1998
____________________________________ accounting officer) of
Daniel J. Jaksich Berkshire Hathaway Inc. and
of NBH, Inc.
/s/ Charles T. Munger Vice-Chairman of the Board August 10, 1998
____________________________________ and Director of Berkshire
Charles T. Munger Hathaway Inc. and of NBH,
Inc.
/s/ Susan T. Buffett Director of Berkshire August 10, 1998
____________________________________ Hathaway Inc. and of NBH,
Susan T. Buffett Inc.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Malcolm G. Chace Director of Berkshire August 10, 1998
____________________________________ Hathaway Inc. and of NBH,
Malcolm G. Chace Inc.
/s/ Walter Scott, Jr. Director of Berkshire August 10, 1998
____________________________________ Hathaway Inc. and of NBH,
Walter Scott, Jr. Inc.
/s/ Howard G. Buffett Director of Berkshire August 10, 1998
____________________________________ Hathaway Inc. and of NBH,
Howard G. Buffett Inc.
/s/ Ronald E. Olson Director of Berkshire August 10, 1998
____________________________________ Hathaway Inc. and of NBH,
Ronald L. Olson Inc.
</TABLE>
II-4
<PAGE>
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
NBH, INC.
NBH, Inc., a corporation organized and existing under the laws of the State
of Delaware (the "Corporation"), hereby certifies as follows:
1. This Restated Certificate of Incorporation has been duly adopted in
accordance with the provisions of Sections 241 and 245 of the General
Corporation Law of the State of Delaware by the Board of Directors of the
Corporation without a vote of the stockholders of the Corporation. The
Corporation has not received any payment for any of its stock.
2. The text of the Restated Certificate of Incorporation as heretofore
amended or supplemented is hereby restated to read in its entirety as follows:
FIRST: The name of the Corporation is NBH, Inc.
SECOND: The registered office of the Corporation in the State of Delaware
is located at No. 1209 Orange Street in the City of Wilmington, County of New
Castle. The name and address of its registered agent is The Corporation Trust
Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware
19801.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock that the
Corporation is authorized to issue is 57,650,000, of which 1,650,000 shares
shall be Class A Common Stock, 55,000,000 shall be Class B Common Stock, and
1,000,000 shares shall be Preferred Stock. Shares of Preferred Stock shall have
no par value. Each share of Class A Common Stock shall have a par value of
$5.00. Each share of Class B Common Stock shall have a par value of $0.1667.
The Class A Common Stock and the Class B Common Stock shall sometimes
hereinafter be referred to collectively as the "Common Stock."
1. Preferred Stock. The Board of Directors is authorized, subject to
---------------
limitations prescribed by law and the limitation on authorized Preferred
Stock stated above in this Article FOURTH, to provide for the issuance of
shares of Preferred Stock in one or more series, and, by filing a
certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in any
series, and to fix the designation, powers, preferences and rights of the
shares of each such series and the qualifications, limitations or
restrictions thereof.
<PAGE>
The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not be limited to, determination of the
following:
(a) The number of shares constituting that series and the
distinctive designation of that series;
(b) The dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates
and the relative rights of priority, if any, of payment of dividends
on shares of that series;
(c) Whether that series shall have voting rights, in addition to
the class voting rights provided by law, and, if so, the terms of such
voting rights;
(d) Whether that series shall have conversion privileges, and, if
so, the terms and conditions of such conversion, including provision
for adjustment of the conversion rate in such events as the Board of
Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable,
and, if so, the terms and conditions of such redemption, including the
date or dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary
under different conditions and at different redemption dates;
(f) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms
and amount of such sinking fund;
(g) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment
of shares of that series; and
(h) Any other absolute or relative rights, preferences or
limitations of that series.
Dividends on outstanding shares of Preferred Stock shall be paid or
declared and set apart for payment before any dividends shall be paid or
declared and set apart for payment on shares of Common Stock with respect
to the same dividend period.
The Preferred Stock shall be preferred over the Common Stock as to
assets, and in the event of any liquidation or dissolution or winding up of
the Corporation (whether voluntary or involuntary), the holders of the
Preferred Stock shall be entitled to receive out of the assets of the
Corporation available for distribution to its shareholders, whether from
capital, surplus or earnings, the amount specified for each particular
series, together with any dividends accrued or in arrears, for every share
of their holdings of Preferred Stock before any distribution of the assets
shall be made to the holders of Common Stock, and shall be entitled to no
other or further distribution. If upon any voluntary or
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<PAGE>
involuntary liquidation, dissolution or winding up of the Corporation, the
assets available for distribution to holders of shares of Preferred Stock
of all series shall be insufficient to pay such holders the full
preferential amount to which they are entitled, then such assets shall be
distributed ratably among the shares of all series of Preferred Stock in
accordance with the respective preferential amounts (including unpaid
cumulative dividends, if any, as provided by the Board of Directors)
payable with respect thereto.
Neither the consolidation nor merger of the Corporation with or into
any other corporation, nor any sale, lease, exchange or conveyance of all
or any part of the property, assets or business of the Corporation shall be
deemed to be a liquidation, dissolution or winding up of the Corporation
within the meaning of this Article FOURTH.
2. Class A Common Stock and Class B Common Stock. The powers,
---------------------------------------------
preferences, and rights of the Class A Common Stock and Class B Common
Stock, and the qualifications, limitations and restrictions thereof, are
fixed as follows:
A. Issuance; Payment and Assessability. The shares of Class A
-----------------------------------
Common Stock and Class B Common Stock may be issued by the Corporation
from time to time for such consideration, having a value not less than
par value, as may be fixed from time to time by the Board of Directors
of the Corporation. Any and all shares of Class A Common Stock and
Class B Common Stock so issued for which the consideration so fixed
has been paid or delivered to the Corporation shall be deemed fully
paid stock and shall not be liable to any further call or assessment
thereon, and the holders of said shares shall not be liable for any
further payments in respect of such shares.
B. Dividends; Distributions; Stock Splits. Holders of Class A
--------------------------------------
Common Stock shall be entitled to such dividends or other
distributions (including liquidating distributions) per share, whether
in cash, in kind, in stock (including a stock split) or by any other
means, when and as may be declared by the Board of Directors of the
Corporation out of assets or funds of the Corporation legally
available therefor. Holders of Class B Common Stock shall be entitled
to dividends or other distributions (including liquidating
distributions) per share, whether in cash, in kind, in stock
(including a stock split), or by any other means, equal to one-
thirtieth (1/30th) of the amount per share declared by the Board of
Directors of the Corporation for each share of Class A Common Stock,
and such dividends or distributions with respect to the Class B Common
Stock shall be paid in the same form and at the same time as dividends
or distributions with respect to the Class A Common Stock; provided,
---------
however, that, in the event of a stock split or stock dividend,
-------
holders of Class A Common Stock shall receive shares of Class A Common
Stock and holders of Class B Common Stock shall receive shares of
Class B Common Stock, unless otherwise specifically designated by
resolution of the Board of Directors.
C. Voting. Each holder of Class A Common Stock shall be
------
entitled to one (1) vote for each share of Class A Common Stock
standing in his name on the
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<PAGE>
books of the Corporation. Each holder of Class B Common Stock shall be
entitled to one-two-hundredth (1/200th) of one vote for eachshare of
Class B Common Stock standing in his name on the books of the
Corporation. Unless otherwise required by the Delaware General
Corporation Law, the Class A Common Stock and the Class B Common Stock
shall vote as a single class with respect to all matters submitted to
a vote of shareholders of the Corporation.
D. Conversion. Each share of Class A Common Stock may, at the
----------
option of the holder of record thereof and without payment of any
consideration, be converted into thirty (30) fully paid and
nonassessable shares of Class B Common Stock. Any such conversion may
be effected by any holder of Class A Common Stock surrendering such
holder's certificate or certificates for the Class A Common Stock to
be converted, duly endorsed, at the office of the Corporation or any
transfer agent for the Class A Common Stock, together with a written
notice to the Corporation that such holder elects to convert all or a
specified whole number of shares of Class A Common Stock and stating
the name or names in which such holder desires the certificate or
certificates for the Class B Common Stock to be issued. If so
required by the Corporation, any certificate for shares surrendered
for conversion shall be accompanied by instruments of transfer, in
form satisfactory to the Corporation, duly executed by the holder of
such shares or the duly authorized representative of such holder.
Promptly thereafter, the Corporation shall issue and deliver or cause
to be issued and delivered to such holder or such holder's nominee or
nominees, a certificate or certificates for the number of shares of
Class B Common Stock to which such holder shall be entitled as herein
provided. Such conversion shall be deemed to have been made at the
close of business on the date of receipt by the Corporation or any
such transfer agent of such certificate or certificates for Class A
Common Stock and such notice, and the person or persons entitled to
receive the Class B Common Stock issuable on such conversion shall be
treated for all purposes as the record holder or holders of such Class
B Common Stock on that date.
The issuance of certificates for shares of Class B Common Stock
issuable upon the conversion of shares of Class A Common Stock shall be
made without charge to the converting holder; provided, however, that if
-----------------
any certificate is to be issued in a name other than that of the record
holder of the shares being converted, the Corporation shall not be required
to issue or deliver any such certificate unless and until the person
requesting the issuance thereof shall have paid to the Corporation the
amount of any tax that may be payable with respect to any transfer involved
in the issuance and delivery of such certificate or has established to the
satisfaction of the Corporation that such tax has been paid.
The Corporation covenants that it will at all times reserve and keep
available, solely for the purpose of issuance upon conversion of the
outstanding shares of Class A
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<PAGE>
Common Stock, a number of shares of Class B Common Stock equal to thirty
(30) times the number of shares of Class A Common Stock then outstanding,
in addition to the number of shares of Class B Common Stock then
outstanding; provided, however, that nothing herein shall be construed to
-----------------
preclude the Corporation from satisfying its obligation to issue shares of
Class B Common Stock upon conversion of Class A Common Stock by delivery of
purchased or redeemed shares of Class B Common Stock which are held in the
treasury of the Corporation.
FIFTH: The following additional provisions are in furtherance and not
limitation of any power, privilege or purpose conferred or permitted by law,
this certificate or the by-laws:
1. Except as may be otherwise expressly required by law, or the provisions
of this Certificate or the by-laws, the Board of Directors of the
Corporation shall have and may exercise, transact, manage, promote and
carry on all of the powers, authorities, businesses, objectives and
purposes of the Corporation.
2. The election of directors need not be by ballot unless the by-laws so
require.
3. The Board of Directors of the Corporation is authorized and empowered to
make, alter, amend and repeal the by-laws of the Corporation in any
manner not inconsistent with the laws of the State of Delaware.
4. The Board of Directors may fix from time to time the compensation of its
members.
5. The Corporation may indemnify or insure or both indemnify and insure any
person who is or was a director, officer, employee or agent of the
Corporation or, at its request, of another corporation, partnership,
joint venture, trust or other enterprise, to the full extent provided or
permitted by its by-laws, as from time to time amended, and to the full
extent to which those indemnified may now or hereafter be entitled under
any law, agreement, vote of stockholders or disinterested directors or
otherwise.
SIXTH: No contract or other transaction between the Corporation and any
other corporation, and no act of the Corporation shall in any way be affected or
invalidated by the fact that any of the directors of the Corporation are
pecuniarily or otherwise interested in or are directors or officers of such
other corporation. Any director individually, or any firm of which such
director may be a member, may be a party to or may be pecuniarily or otherwise
interested in any contract or transaction of the Corporation, provided that the
fact that he or such firm is so interested shall be disclosed or shall have been
known to the Board of Directors, or a majority thereof; and any director of the
Corporation, who is also a director or officer of such other corporation, or is
so interested, may be counted in determining the existence of a quorum at any
meeting of the Board of Directors of the Corporation which shall authorize such
contract or transaction, and may vote thereat to authorize any such contract or
transaction, with like force and effect, as if he were not such director or
officer of such other corporation or not so interested,
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<PAGE>
SEVENTH: Any action which would otherwise be required or permitted to be
taken by the vote of stockholders at a meeting thereof may instead be taken by
the written consent of stockholders who would be entitled to vote upon such
action if such a meeting were held having not less than the percentage of the
total number of votes which would have been required to take such action at such
a meeting.
EIGHTH: No director of this Corporation shall have personal liability to
the Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director. The foregoing provision shall not eliminate or
limit the liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware or (iv) for any transaction from which the director derived an improper
personal benefit. In the event that the General Corporation Law of the State of
Delaware is amended after approval of this Article by the stockholders so as to
authorize corporate action further eliminating or limiting the liability of
directors, the liability of a director of this Corporation shall thereupon be
eliminated or limited to the fullest extent permitted by the General Corporation
Law of the State of Delaware, as so amended from time to time. The provisions
of this Article shall not be deemed to limit or preclude indemnification of a
director by the Corporation for any liability of a director which has not been
eliminated by the provisions of this Article.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
executed by the Corporation this 10th day of August, 1998.
NBH, Inc.
By:/s/ Marc D. Hamburg
--------------------
Marc D. Hamburg
Vice President
Attest:
/s/ Jerry W. Hufton
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Jerry W. Hufton
Assistant Secretary
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<PAGE>
Exhibit 3.2
BY-LAWS
OF
NBH, Inc.
SECTION 1
Certification of Incorporation
1.1. The nature of the business or purposes of the corporation shall be
as set forth in its certificate of incorporation. These by-laws, the powers of
the corporation and of its directors and stockholders, and all matters
concerning the management of the business and conduct of the affairs of the
corporation shall be subject to such provisions in regard thereto, if any, as
are set forth in the certificate of incorporation; and the certificate of
incorporation is hereby made a part of these by-laws. In these by-laws,
references to the certificate of incorporation mean the provisions of the
certificate of incorporation (as that term is defined in the General Corporation
Law of Delaware) of the corporation as from time to time in effect, and
references to these by-laws or to any requirement or provision of law mean these
by-laws or such requirement or provision of law as from time to time in effect.
SECTION 2
Offices
2.1. REGISTERED OFFICE. The registered office of the corporation shall
be in the City of Wilmington, County of New Castle, Delaware.
2.2. OTHER OFFICES. The corporation may also have an office or offices at
such other place or places, either within or without the State of Delaware, as
the Board of Directors of the corporation from time to time may determine or as
the business of the corporation may require.
<PAGE>
SECTION 3
Stockholders
3.1. ANNUAL MEETING. The annual meeting of the stockholders shall be
held at nine-thirty o'clock in the forenoon on the first Monday in May in each
year, unless that day be a legal holiday at the place where the meeting is to be
held, in which case the meeting shall be held at the same hour on the next
succeeding day not a legal holiday, or at such other date and time as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting, at which they shall elect a board of directors and transact such
other business as may be required by law or these by-laws or as may be specified
by the chairman of the board or by a majority of the directors then in office or
by vote of the board of directors and of which notice was given in the notice of
the meeting.
3.2. SPECIAL MEETING IN PLACE OF ANNUAL MEETING. If the election for
directors shall not be held on the day designated by these by-laws, the
directors shall cause the election to be held as soon thereafter as convenient,
and to that end, if the annual meeting is omitted on the day herein provided
therefor or if the election of directors shall not be held thereat, a special
meeting of the stockholders may be held in place of such omitted meeting or
election, and any business transacted or election held at such special meeting
shall have the same effect as if transacted or held at the annual meeting, and
in such case all references in these by-laws to the annual meeting of the
stockholders, or to the annual election of directors, shall be deemed to refer
to or include such special meeting. Any such special meeting shall be called,
and the purposes thereof shall be specified in the call, as provided in Section
3.3.
3.3. SPECIAL MEETINGS. A special meeting of the stockholders may be
called at any time by the chairman of the board or by the board of directors. A
special meeting of the stockholders shall be called by the secretary, or in the
case of the death, absence, incapacity or refusal of the secretary, by an
assistant secretary or some other officer, upon application of a majority of the
directors or of one or more stockholders who are entitled to vote and who hold
at least fifty percent of the capital stock issued and outstanding. Any such
application shall state the purpose or purposes of the proposed meeting. Any
such call shall state the place, date, hour, and purposes of the meeting.
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<PAGE>
3.4. PLACE OF MEETING. All meetings of the stockholders for the election
of directors or for any other purpose shall be held at such place within or
without the State of Delaware as may be determined from time to time by the
chairman of the board or the board of directors. Any adjourned session of any
meeting of the stockholders shall be held at the place designated in the vote of
adjournment.
3.5. NOTICE OF MEETINGS. Except as otherwise provided by law, a written
notice of each meeting of stockholders stating the place, day and hour thereof
and, in the case of a special meeting, the purposes for which the meeting is
called, shall be given not less than ten nor more than sixty days before the
meeting, to each stockholder entitled to vote thereat; and to each stockholder
who, by law, by the certificate of incorporation or by these by-laws, is
entitled to notice, by leaving such notice with him or at his residence or usual
place of business, or by depositing it in the United States mail, postage
prepaid, and addressed to such stockholder at his address as it appears in the
records of the corporation. Such notice shall be given by the secretary, or by
an officer or person designated by the board of directors, or in the case of a
special meeting by the officer calling the meeting. As to any adjourned session
of any meeting of stockholders, notice of the adjourned meeting need not be
given if the time and place thereof are announced at the meeting at which the
adjournment was taken except that if the adjournment is for more than thirty
days or if after the adjournment a new record date is set for the adjourned
session, notice of any such adjourned session of the meeting shall be given in
the manner heretofore described. No notice of any meeting of stockholders or any
adjourned session thereof need be given to a stockholder if a written waiver of
notice, executed before or after the meeting or such adjournment session by such
stockholder is filed with the records of the meeting or if the stockholder
attends such meeting without objecting at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
meeting of the stockholders or any adjourned session thereof need be specified
in any written waiver of notice.
3.6. QUORUM OF STOCKHOLDERS. At any meeting of the stockholders, whether
the same be an original or an adjourned session, a quorum shall consist of a
majority in interest of all stock issued and outstanding and entitled to vote at
the meeting, except in any case where a larger quorum is required by law, by the
certificate of incorporation or by these by-laws. Any meeting may be adjourned
from time to time by a majority of the votes properly cast upon the question,
whether or not a quorum is present.
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<PAGE>
3.7. ACTION BY VOTE. When a quorum is present at any meeting, whether the
same be an original or an adjourned session, a plurality of the votes properly
cast for election to any office shall elect to such office and a majority of the
votes properly cast upon any question other than an election to an office shall
decide the question, except when a larger vote is required by law, by the
certificate of incorporation or by these by-laws. No ballot shall be required
for any election unless requested by a stockholder present or represented at the
meeting and entitled to vote in the election.
3.8. ACTION WITHOUT MEETINGS. Unless otherwise provided in the
certificate of incorporation, any action required or permitted to be taken by
stockholders for or in connection with any corporate action may be taken without
a meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted.
If action is taken by unanimous consent of stockholders, the writing or
writings comprising such unanimous consent shall be filed with the records of
the meetings of stockholders.
If action is taken by less than unanimous consent of stockholders and in
accordance with the foregoing, there shall be filed with the records of the
meetings of stockholders the writing or writings comprising such less than
unanimous consent and a certificate signed and attested to by the secretary that
prompt notice was given to all stockholders of the taking of such action without
a meeting and by less than unanimous written consent.
In the event that the action which is consented to is such as would have
required the filing of a certificate under any of the provisions of the General
Corporation Law of Delaware, if such action had been voted upon by the
stockholders at a meeting thereof, the certificate filed under such provision
shall state that written consent has been given under Section 228 of said
General Corporation Law, in lieu of stating that the stockholders have voted
upon the corporate action in question, if such last mentioned statement is
required thereby.
3.9. PROXY REPRESENTATION. Every stockholder may authorize another person
or persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, objecting to
or voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or by his
attorney-in-fact or be authorized by such other means as is provided in Section
212 of the Delaware General Corporation Law. No proxy shall be voted or acted
upon after three years from its date unless
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<PAGE>
such proxy provides for a longer period. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power. A
proxy may be made irrevocable regardless of whether the interest with which it
is coupled is an interest in the stock itself or an interest in the corporation
generally. The authorization of a proxy may but need not be limited to specified
action, provided, however, that if a proxy limits its authorization to a meeting
or meetings of stockholders, unless otherwise specifically provided such proxy
shall entitle the holder thereof to vote at any adjourned session but shall not
be valid after the final adjournment thereof.
3.10. VOTES PER SHARE. Unless otherwise provided in the certificate of
incorporation, each stockholder shall be entitled to one vote for each share of
capital stock having voting power held by such stockholder.
3.11. LIST OF STOCKHOLDERS. The officer who has charge of the stock ledger
of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
such meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in his name. Such list shall be
open to examination by any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for at least ten days prior to the meeting
either at the place within the city where the meeting is to be held, which place
should be specified in the notice of such meeting, or at the place where such
meeting is to be held, and shall also be produced at the time and place of the
meeting during the whole time thereof and subject to the inspection of any
stockholder who may be present. The stock ledger shall be the only evidence as
to who are stockholders entitled to examine such list or to vote in person or by
proxy at such meeting.
SECTION 4
Board of Directions
4.1. NUMBER. The Board of Directors shall consist of one or more members,
the number thereof to be determined from time to time by resolution of the Board
of Directors. Directors need not be stockholders.
4.2. TENURE. Except as otherwise provided by law, by the certificate of
incorporation or by these by-laws, each director shall hold office until his
successor is elected and qualified, or until he sooner dies, resigns, is removed
or becomes disqualified.
4.3. POWERS. The business of the corporation shall be managed by the
board of directors who shall have and may exercise all the power of the
corporation and do all such lawful acts and things as are not by law, the
certificate of incorporation or these by-laws directed or required to be
exercised or done by the stockholders.
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<PAGE>
4.4. VACANCIES. Vacancies and any newly created directorships resulting
from any increase in the number of directors may be filled by vote of the
stockholders at a meeting called for the purpose, or by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. When one or more directors shall resign from the board, effective at a
future date, a majority of the directors then in office, including those who
have resigned, shall have power to fill such vacancy or vacancies, the vote or
action by writing thereon to take effect when such resignation or resignations
shall become effective. The directors shall have and may exercise all their
powers notwithstanding the existence of one or more vacancies in their number,
subject to any requirements of law or of the certificate of incorporation or of
these by-laws as to the number of directors required for a quorum or for any
vote or other action.
4.5. COMMITTEES. The board of directors may, by vote of a majority of the
whole board, (a) designate, change the membership of or terminate the existence
of any committee or committees, each committee to consist of one or more of the
directors; (b) designate one or more directors as alternate members of any such
committee who may replace any absent or disqualified member at any meeting of
the committee; and (c) determine the extent to which each such committee shall
have and may exercise the powers of the board of directors in the management of
the business and affairs of the corporation, including the power to authorize
the seal of the corporation to be affixed to all papers which require it and the
power and authority to declare dividends, to authorize the issuance of stock, or
to adopt a certificate of ownership and merger pursuant to Section 253 of the
General Corporation Law of Delaware; excepting, however, such powers which by
law, by the certificate of incorporation or by these by-laws they are prohibited
from so delegating. In the absence or disqualification of any member of such
committee and his alternate, if any, the member or members thereof present at
any meeting and not disqualified from voting, whether or not constituting a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in the place of any such absent or disqualified member. Except as
the board of directors may otherwise determine, any committee may make rules for
the conduct of its business, but unless otherwise provided by the board or such
rules, its business shall be conducted as nearly as may be in the same manner as
is provided by these by-laws for the conduct of the business by the board of
directors. Each committee shall keep regular minutes of its meetings and report
the same to the board of directors upon request.
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<PAGE>
4.6. REGULAR MEETINGS. Regular meetings of the board of directors may be
held without call or notice at such place within or without the State of
Delaware and at such times as the board may from time to time determine,
provided that notice of the first regular meeting following any such
determination shall be given to absent directors. A regular meeting of the
directors may be held without call or notice immediately after and at the same
place as the annual meeting of the stockholders.
4.7. SPECIAL MEETINGS. Special meetings of the board of directors may be
held at any time and at any place within or without the State of Delaware
designated in the notice of the meeting, when called by the chairman of the
board, or by one-third or more in number of the directors, reasonable notice
thereof being given to each director by the secretary or by the chairman of the
board or any one of the directors calling the meeting.
4.8. NOTICE. It shall be reasonable and sufficient notice to a director
to send notice by mail at least forty-eight hours or by facsimile or electronic
message at least twenty-four hours before the meeting addressed to him at his
usual or last known business or residence address or to give notice to him in
person or by telephone at least twenty-four hours before the meeting. Notice of
a meeting need not be given to any director if a written waiver of notice,
executed by him before or after the meeting, is filed with the records of the
meeting, or to any director who attends the meeting without protesting prior
thereto or at its commencement the lack of notice to him. Neither notice of a
meeting nor a waiver of a notice need specify the purposes of the meeting.
4.9. QUORUM. Except as may be otherwise provided by law, by the
certificate of incorporation or by these by-laws, at any meeting of the
directors a majority of the directors then in office shall constitute a quorum;
a quorum shall not in any case be less than one-third of the total number of
directors constituting the whole board. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
4.10. ACTION BY VOTE. Except as may be otherwise provided by law, by the
certificate of incorporation or by these by-laws, when a quorum is present at
any meeting the vote of a majority of the directors present shall be the act of
the board of directors.
4.11. ACTION WITHOUT A MEETING. Any action required or permitted to be
taken at any meeting of the board of directors or a committee thereof may be
taken without a meeting if all the members of the board or of such committee, as
the case may be, consent thereto in writing, and such writing or writings are
filed with the records of the meeting of the board or of such committee.
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Such consent shall be treated for all purposes as the act of the board or of
such committee, as the case may be.
4.12. COMPENSATION. In the discretion of the board of directors, each
director may be paid such fees for his services as director and be reimbursed
for his reasonable expenses incurred in the performance of his duties as
director as the board of directors from time to time may determine. Nothing
contained in this Section shall be construed to preclude any director from
serving the corporation in any other capacity and receiving reasonable
compensation therefor.
4.13. INTERESTED DIRECTORS AND OFFICERS.
(a) No contract or transaction between the corporation and one or more of
its directors or officers, or between the corporation and any other corporation,
partnership, association, or other organization in which one or more of the
corporation's directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the board or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the board of
directors or the committee, and the board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or
(2) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as
of the time it is authorized, approved or ratified, by the board of
directors, a committee thereof, or the stockholders.
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a committee
which authorizes the contract or transaction.
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<PAGE>
SECTION 5
Officers and Agents
5.1. ENUMERATION; QUALIFICATION. The officers of the corporation shall be
a chairman of the board, a treasurer, a secretary and such other officers, if
any, as the board of directors from time to time may in its discretion elect or
appoint including without limitation a vice-chairman of the board, one or more
vice presidents and a controller. The corporation may also have such agents, if
any, as the board of directors from time to time may in its discretion choose.
Any officer may be, but none except the chairman and any vice-chairman of the
board need be, a director or stockholder. Any two or more offices may be held by
the same person. Any officer may be required by the board of directors to secure
the faithful performance of his duties to the corporation by giving bond in such
amount and with sureties or otherwise as the board of directors may determine.
5.2. POWERS. Subject to law, to the certificate of incorporation and to
the other provisions of these by-laws, each officer shall have, in addition to
the duties and power herein set forth, such duties and powers as are commonly
incident to his office and such additional duties and powers as the board of
directors may from time to time designate.
5.3. ELECTION. The officers may be elected to the board of directors at
their first meeting following the annual meeting of the stockholders or at any
other time. At any time or from time to time the directors may delegate to any
officers their power to elect or appoint any other officer or any agents.
5.4. TENURE. Each officer shall hold office until the first meeting of
the board of directors following the next annual meeting of the stockholders and
until his respective successor is chosen and qualified unless a shorter period
shall have been specified by the terms of his election or appointment, or in
each case until he sooner dies, resigns, is removed or becomes disqualified.
Each agent shall retain his authority at the pleasure of the directors, or the
officer by whom he was appointed or the officer who then holds agent appointive
power.
5.5. CHAIRMAN AND VICE-CHAIRMAN OF THE BOARD OF DIRECTORS. Except as
otherwise voted by the directors, the chairman of the board shall be the chief
executive officer of the corporation, he shall preside at all meetings of the
stockholders and directors at which he is present and shall have such other
powers and duties as the board of directors, executive committee or any other
duly authorized committee shall from time to time designate.
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<PAGE>
Except as otherwise voted by the directors, the vice-chairman of the board,
if any is elected or appointed, shall assume the duties and powers of the
chairman of the board in his absence and shall otherwise have such duties and
powers as shall be designated from time to time by the board of directors.
5.6. VICE PRESIDENTS. Any vice presidents shall have such duties and
powers as shall be designated from time to time by the board of directors or by
the chairman of the board.
5.7. TREASURER AND ASSISTANT TREASURERS. Except as otherwise voted by the
directors, the treasurer shall be the chief financial officer of the corporation
and shall be in charge of its funds and valuable papers, and shall have such
other duties and powers as may be designated from time to time by the board of
directors or by the chairman of the board. If no controller is elected, the
treasurer shall also have the duties and powers of the controller.
Any assistant treasurers shall have such duties and powers as shall be
designated from time to time by the board of directors, the chairman of the
board or the treasurer.
5.8. CONTROLLER AND ASSISTANT CONTROLLERS. If a controller is elected, he
shall be the chief accounting officer of the corporation and shall be in charge
of its books of account and accounting records, and of its accounting
procedures. He shall have such other duties and powers as may be designated from
time to time by the board of directors, the chairman of the board or the
treasurer.
Any assistant controller shall have such duties and powers as shall be
designated from time to time by the board of directors, the chairman of the
board, the treasurer or the controller.
5.9. SECRETARY AND ASSISTANT SECRETARIES. The secretary shall record all
proceedings of the stockholders, of the board of directors and of committees of
the board of directors in a book or series of books to be kept therefor and
shall file therein all writings of, or related to action by stockholder or
director consent. In the absence of the secretary from any meeting, an assistant
secretary, or if there be none or he is absent, a temporary secretary chosen at
the meeting, shall record the proceedings thereof. Unless a transfer agent has
been appointed the secretary shall keep or cause to be kept the stock and
transfer records of the corporation, which shall contain the names and record
addresses of all stockholders and the number of shares registered in the name of
each stockholder. He shall have such other duties and powers as may from time to
time be designated by the board of directors or the chairman of the board.
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<PAGE>
Any assistant secretaries shall have such duties and powers as shall be
designated from time to time by the board of directors, the chairman of the
board or the secretary.
SECTION 6
Resignations and Removals
6.1. Any director or officer may resign at any time by delivering his
resignation in writing to the chairman of the board or the secretary or to a
meeting of the board of directors. Such resignation shall be effective upon
receipt unless specified to be effective at some other time, and without in
either case the necessity of its being accepted unless the resignation shall so
state. A director (including persons elected by directors to fill vacancies in
the board) may be removed from office with or without cause by the vote of the
holders of a majority of the shares issued and outstanding and entitled to vote
in the election of directors. The board of directors may at any time remove any
officer either with or without cause. The board of directors may at any time
terminate or modify the authority of any agent. No director or officer resigning
and (except where a right to receive compensation shall be expressly provided in
a duly authorized written agreement with the corporation) no director or officer
removed, shall have any right to any compensation as such director or officer
for any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the year
or otherwise; unless in the case of a resignation, the directors, or in the case
of a removal, the body acting on the removal, shall in their or its discretion
provide for compensation.
SECTION 7
Vacancies
7.1. If the office of the chairman of the board or the treasurer or the
secretary becomes vacant, the directors may elect a successor by vote of a
majority of the directors then in office. If the office of any other officer
becomes vacant, any person or body empowered to elect or appoint that officer
may choose a successor. Each such successor shall hold office for the unexpired
term, and in the case of the chairman of the board, the treasurer and the
secretary until his successor is chosen and qualified, or in each case until he
sooner dies, resigns, is removed or becomes disqualified. Any vacancy of a
directorship shall be filled as specified in Section 4.4 of these by-laws.
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<PAGE>
SECTION 8
Capital Stock
8.1. STOCK CERTIFICATES. Each stockholder shall be entitled to a
certificate stating the number and the class and the designation of the series,
if any, of the shares held by him, in such form as shall, in conformity to law,
the certificate of incorporation and the by-laws, be prescribed from time to
time by the board of directors. Such certificates shall be signed by the
chairman or vice chairman of the board of directors, or a vice president and by
the treasurer or an assistant treasurer or by the secretary or an assistant
secretary. Any of or all the signatures on the certificate may be a facsimile.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed on such certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he were such
officer, transfer agent, or registrar at the time of its issue.
8.2. LOSS OF CERTIFICATES. In the case of the alleged theft, loss,
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms, including receipt of a bond
sufficient to indemnify the corporation against any claim or account thereof, as
the board of directors may prescribe.
SECTION 9
Transfer of Shares of Stock
9.1. TRANSFER ON BOOKS. Subject to the restrictions, if any, stated or
noted on the stock certificate, shares of stock may be transferred on the books
of the corporation by the surrender to the corporation or its transfer agent of
the certificate therefor properly endorsed or accompanied by a written
assignment and power of attorney properly executed, with necessary transfer
stamps affixed, and with such proof of the authenticity of signature as the
board of directors or the transfer agent of the corporation may reasonably
require. Except as may be otherwise required by law, by the certificate of
incorporation or by these by-laws, the corporation shall be entitled to treat
the record holder of stock as shown on its books as the owner of such stock for
all purposes, including the payment of dividends and the right to receive notice
and to vote or to give any consent with respect thereto and to be held liable
for such calls and assessments, if any, as may lawfully be made thereon,
regardless of any transfer, pledge or other disposition of such stock until the
shares have been properly transferred on the books of the corporation.
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<PAGE>
It shall be the duty of each stockholder to notify the corporation of his post
office address.
9.2 RECORD DATE AND CLOSING TRANSFER BOOKS. In order that the
corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distributions or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the board of directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days (or such longer period as may be required by law) before the date of such
meeting, nor more than sixty days prior to any other action.
If no record date is fixed:
(a) The record date for determining stockholders entitled to notice of or to
vote at a meeting of stockholders shall be at the close of business on the day
next preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held.
(b) The record date for determining stockholders entitled to express consent
to corporate action in writing without a meeting, when no prior action by the
board of directors is necessary, shall be the day on which the first written
consent is expressed.
(c) The record date for determining stockholders for any other purpose shall
be at the close of business on the day on which the board of directors adopts
the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote at
a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
SECTION 10
Indemnification of Directors and Officers
10.1. RIGHT TO INDEMNIFICATION. Each director or officer of the corporation
who was or is a party or is threatened to be made a party to or is involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she, or a person of whom he or she is the legal representative, is or was a
director or officer of the corporation or is or was serving at the request of
the corporation as a director, officer, employee or
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<PAGE>
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the corporation to the fullest extent permitted
by the laws of Delaware, as the same exist or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the corporation to provide broader indemnification rights than said law
permitted the corporation to provide prior to such amendment), against all
costs, charges, expenses, liabilities and losses (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has ceased
to be a director or officer and shall inure to the benefit of his or her heirs,
executors and administrators: provided however, that except for any proceeding
seeking to enforce or obtain payment under any right to indemnification by the
corporation, the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if the corporation has joined in or consented to the initiation
of such proceeding (or part thereof). The corporation may, by action of its
Board of Directors, either on a general basis or as designated by the Board of
Directors, provide indemnification to employees and agents of the corporation,
and to directors, officers, employees and agents of the Company's subsidiaries,
with the same scope and effect as the foregoing indemnification of the same
scope and effect as the foregoing indemnification of directors and officers.
Notwithstanding anything in this Section 10 to the contrary, no person shall be
entitled to indemnification pursuant to this Section on account of any suit in
which judgment is rendered against such person for an accounting of profits made
from the purchase and sale by such person of securities of the corporation
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934.
10.2. NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section 10 shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise. Each person who is or
becomes a director or officer of the corporation shall be deemed to have served
or to have continued to serve in such capacity in reliance upon the indemnity
provided in this Section 10.
10.3. INSURANCE. The corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense,
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<PAGE>
liability or loss, whether or not the corporation would have the power to
indemnify such person against such expense, liability or loss under the General
Corporation Law of Delaware.
10.4. EXPENSES AS A WITNESS. To the extent that any director, officer,
employee or agent of the corporation is by reason of such position, or a
position with another entity at the request of the corporation, a witness in any
action, suit or proceeding, he or she shall be indemnified against all costs and
expenses actually and reasonably incurred by him or her on his or her behalf in
connection therewith.
10.5. INDEMNITY AGREEMENTS. The corporation may enter into indemnity
agreements with the persons who are members of its board of directors from time
to time, and with such officers, employees and agents of the corporation and
with such officers, directors, employees and agents of subsidiaries as the board
may designate, such indemnity agreements to provide in substance that the
corporation will indemnify such persons as contemplated by this Section 10, and
to include any other substantive or procedural provisions regarding
indemnification as are not inconsistent with the General Corporation Law of
Delaware. The provisions of such indemnity agreements shall prevail to the
extent that they limit or condition or differ from the provisions of this
Section 10.
10.6. DEFINITION OF CORPORATION. For purposes of this Section 10 reference
to "the corporation" includes all constituent corporations absorbed in a
consolidation or merger as well as the resulting or surviving corporation so
that any person who is or was a director or officer of such a constituent
corporation shall stand in the same position under the provisions of this
Section with respect to the resulting or surviving corporation as he would if he
had served the resulting or surviving corporation in the same capacity.
SECTION 11
Corporate Seal
11.1. The seal of the corporation shall, subject to alteration by the
directors, consist of a flat-faced circular die with the word "Delaware"
together with the name of the corporation and the year of its organization, cut
or engraved thereon. The seal may be used by causing it or a facsimile thereof
to be impressed or affixed or reproduced or otherwise.
SECTION 12
Execution of Papers
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<PAGE>
12.1. Except as the board of directors may generally or in some particular
cases authorize the execution thereof in some other manner, all deeds, leases,
transfers, contracts, bonds, notes, checks, drafts and other obligations made,
accepted or endorsed by the corporation shall be signed by the chairman of the
board or by one of the vice presidents or by the treasurer.
SECTION 13
Fiscal Year
13.1. Except as from time to time otherwise provided by the board of
directors, the fiscal year of the corporation shall end on the 31st day of
December of each year.
SECTION 14
Amendments
14.1. These by-laws may be made, altered, amended or repealed by vote of a
majority of the directors in office or by vote of a majority of the stock
outstanding and entitled to vote. Any by-law, whether made, altered, amended or
repealed by the stockholders or directors, may be altered, amended or
reinstated, as the case may be, by either the stockholders or by the directors
as hereinbefore provided.
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<PAGE>
EXHIBIT 5
[MUNGER, TOLLES & OLSON LLP LETTERHEAD]
August __, 1998
Berkshire Hathaway Inc.
1440 Kiewit Plaza
Omaha, Nebraska 68131
Dear Sir or Madam:
We have acted as counsel to Berkshire Hathaway Inc., a Delaware
corporation ("Berkshire") and NBH, Inc., a Delaware corporation ("NBH" and,
together with Berkshire, the "Registrants"), in connection with the preparation
of the Registration Statement on Form S-4 (the "Registration Statement") filed
by the Registrants with the Securities and Exchange Commission (the
"Commission").
The Registration Statement relates to the proposed issuance and sale
of shares of Class A Common Stock, par value $5.00 per share (the "Class A
Stock"), and shares of Class B Common Stock, par value $.1667 per share (the
"Class B Stock") by either (i) NBH in connection with the proposed mergers (the
"Mergers") of Berkshire with Wyllis Merger Sub Inc., a Delaware corporation and
wholly-owned subsidiary of NBH ("Merger Sub A") and of General Re Corporation, a
Delaware corporation ("General Re"), with Steven Merger Sub Inc., a Delaware
corporation and wholly owned subsidiary of NBH ("Merger Sub B"), pursuant to
that certain Agreement and Plan of Mergers, dated as of June 19, 1998 (the
"Merger Agreement"), by and between Berkshire and General Re, or, alternatively,
(ii) Berkshire, in connection with a merger of General Re with a subsidiary of
Berkshire, whereby Berkshire will remain the ultimate parent company (the
"Alternative Transaction"). The Alternative Transaction and the Class A Stock
and Class B Stock of Berkshire and NBH are described in the Joint Proxy
Statement/Prospectus included in the Registration Statement to which this
opinion is an exhibit.
<PAGE>
We have examined and are familiar with originals or copies of such
documents, corporate records, and other instruments as we have deemed necessary
or appropriate in connection with this opinion, including, without limitation,
(i) the Registration Statement, (ii) the Merger Agreement, (iii) the Restated
Certificate of Incorporation of Berkshire and the Certificate of Incorporation
of NBH, (iv) the By-Laws of Berkshire and the By-Laws of NBH, and (v)
resolutions adopted to the date hereof by the Boards of Directors of the
Registrants relating to, among other things, the Registration Statement, the
Merger Agreement, and the Merger. This opinion is delivered in accordance with
the requirement of Item 601(b)(5) of Regulation S-K under the Securities Act of
1933, as amended (the "Securities Act").
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed, or photocopies, and the
authenticity of the originals of such latter documents. As to any facts
material to the opinions expressed herein, other than those assumed, we have
relied without independent verification upon the documents referred to above,
the accuracy of factual matters contained therein, and oral or written
statements and representations of officers and other representatives of the
Registrants and others, including public officials.
We are members of the Bar of the State of California. This opinion is
limited to the laws of the State of California, the General Corporation Law of
the State of Delaware, and the laws of the United States. We do not express any
opinion as to the laws of any other jurisdiction or as to any other laws of the
State of Delaware.
We have assumed the due authorization, execution, and delivery by or
on behalf of each of the parties thereto of the securities and documents
referred to above, other than the Registrants, and that (a) the Mergers or the
Alternative Transaction will occur and be conducted in accordance with the
terms, conditions, covenants, and other provisions of the Merger Agreement as
described in the Registration Statement, (b) all applicable provisions of the
Securities Act of 1993, as amended, and such state "blue sky" or other
securities laws as may be applicable have been or shall duly be complied with,
and (c) the Registration Statement, as finally amended, shall become effective
under the Securities Act.
Based upon the foregoing, we of the opinion that the shares of NBH or
Berkshire Class A Stock and Class B Stock, as the case may be, when issued to
the stockholders of General Re and/or Berkshire in accordance with the
provisions of the Merger Agreement, will be legally issued, fully paid, and
nonassessable shares of Class A Stock or Class B Stock, as the case may be.
<PAGE>
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Joint Proxy Statement/Prospectus forming a part of the
Registration Statement. In giving such consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act or the rules or regulations of the Commission promulgated
thereunder.
Very truly yours,
<PAGE>
EXHIBIT 8.1
[LETTERHEAD OF MUNGER, TOLLES & OLSON LLP]
August , 1998
Berkshire Hathaway Inc.
1440 Kiewit Plaza
Omaha, Nebraska 68131
Re: Combination of Berkshire Hathaway Inc. and General Re Corporation
-----------------------------------------------------------------
Ladies and Gentlemen:
In accordance with your request, we provide the following analysis and
opinion relating to certain federal income tax consequences of the transactions
(the "Transactions") whereby Berkshire Hathaway Inc. ("Berkshire") and General
Re Corporation ("General") will combine their businesses pursuant to the terms
and conditions set forth in that certain Agreement and Plan of Mergers dated as
of June 19, 1998 (the "Agreement"). Terms used herein but not defined herein
have the same meaning as in the Agreement.
In furtherance of the Transactions, Berkshire has formed a Delaware
corporation ("Holding Company"), which in turn has formed two wholly-owned
Delaware subsidiaries ("Merger Sub A" and "Merger Sub B") for the sole purpose
of effectuating the mergers described below. In addition, pursuant to the
Agreement, Berkshire has issued to General shares of a new class of non-voting,
non-participating cumulative preferred stock of Berkshire, and General has
issued to Berkshire shares of a new class of non-voting, non-participating
cumulative preferred stock of General.
<PAGE>
If Berkshire and General are required under the Agreement to proceed
with the Transactions, and no Partial Cash Election has been made or can
properly be deemed to have been made by Berkshire, Merger Sub A will merge with
and into Berkshire and Merger Sub B will merge with and into General, in each
case in accordance with the Delaware General Corporation Law, with the result
that Holding Company will acquire through mergers, upon the terms and subject to
the conditions set forth in the Agreement, each share of General Common Stock
issued and outstanding immediately prior to the Effective Time and each share of
Berkshire Common Stock issued and outstanding immediately prior to the Effective
Time. Subject to the provisions of the Agreement, as a result of the Berkshire
Merger, each outstanding and issued share of Berkshire Common Stock shall be
converted into a share of a comparable class of Holding Company Common Stock
and, as a result of the General Merger, each outstanding and issued share of
General Common Stock shall be converted into either the right to receive 0.0035
of a share of Holding Company Class A Common Stock or 0.105 of a share of
Holding Company Class B Common Stock, as determined in accordance with the
election procedures set forth in the Agreement.
If Berkshire and General are required under the Agreement to proceed
with the Transactions, and Berkshire is permitted to and does in fact make, or
is deemed to have made, a Partial Cash Election, then in lieu of the transaction
described in the immediately preceding paragraph, the Berkshire Merger shall not
be consummated, Berkshire shall take any action required so that Merger Sub B is
a direct subsidiary of a direct subsidiary of Berkshire, Merger Sub B shall
merge with and into General pursuant to the Delaware General Corporation Law,
and the Merger Consideration shall consist of a combination of Berkshire Common
Shares and cash based on the formula, and pursuant to the election procedure,
set forth in the Agreement.
No fractional shares of Holding Company Common Stock shall be issued
in the Transactions, but instead fractional shares shall be converted to cash
under a formula in the Agreement.
Our analysis and the opinion set forth herein are based upon the facts
and terms as set forth in the Agreement and in the combined Proxy Statement of
Berkshire and General relating to the Transactions (the "Joint Proxy
Statement/Prospectus"), including in each case the exhibits thereto. Our opinion
is also based on certain representations in the Agreement, and certain written
representations to us from officers of Berkshire and General in certificates of
even date herewith. The facts and terms contained in the above-referenced
documents are incorporated herein by reference as the operative facts and terms
underlying the tax opinion set forth herein. We have assumed that any
representation or statement made "to the best knowledge" or similarly qualified
is correct without such qualification. As to all matters with respect to which a
person or entity making a representation referred to above has represented that
such person or entity either is not a party to, or does not
<PAGE>
have, or is not aware of, any plan or intention, understanding or agreement, we
have assumed that there is in fact no such plan, intention, understanding, or
agreement. One of our key assumptions for purposes of this opinion is that the
facts and representations set forth in the above-referenced documents are true,
complete, correct and accurate on the date of this analysis and remain so to the
Effective Time. Any change or inaccuracy in such facts, representations or
assumptions may adversely affect our opinion. Additionally, our ability to give
the opinion set forth herein at the Effective Time is expressly conditioned upon
our receipt, as of the Effective Time, of certificates, in form and substance
reasonably satisfactory to us, comparable to those referred to in the second
sentence of this paragraph.
In rendering this opinion, we have examined such documents, laws,
regulations and other legal matters as we have considered necessary or
appropriate for purposes of the opinion expressed herein. We have not made any
independent investigation in rendering this opinion other than as described
herein.
Our opinion is based upon the Internal Revenue Code of 1986, as
amended as of the date hereof (the "Code"), and currently applicable Treasury
Regulations promulgated under the Code (including proposed Treasury Regulations,
except as otherwise indicated below), published administrative positions of the
Internal Revenue Service (the "IRS") in revenue rulings and revenue procedures,
and judicial decisions. Such legal authorities are all subject to change,
either prospectively or retroactively, and it is possible that changes in such
legal authorities may occur between the date hereof and the Effective Time. No
assurance can be provided as to the effect of any such change upon our opinion.
The opinion set forth herein has no binding effect on the IRS or the
courts. No assurance can be given that, if contested, a court would agree with
the opinion set forth herein. The opinion set forth herein represents rather
our best legal judgment as to the likely outcome of the issues addressed herein
if such issues were litigated.
On June 29, 1998, Berkshire and General filed a joint private letter
ruling request with the IRS requesting rulings corresponding to the three
Rulings (the 351(e) Ruling, the No Gain or Loss Ruling and the 368(c) Ruling)
specified in the Agreement, and in delivering our opinion we assume that the
facts and representations set forth in such request and any supplemental
submissions are true, complete and correct. No assurance can be given that the
Rulings, or any of them, will be issued in the form requested. In addition to
the other assumptions set forth herein, in delivering our opinion (1) set forth
below we assume that (i) either (A) Berkshire shall have received the 351(e)
Ruling and the No Gain or Loss Ruling or (B) the Proposed Regulations (as
defined in the Agreement) shall have been withdrawn and Berkshire shall have
received either the No Gain or Loss Ruling or the 368(c) Ruling and (ii) at the
Effective
<PAGE>
Time, the stockholders of Berkshire and General will not be subject to one or
more binding commitments to transfer their Holding Company Common Stock received
in the Transactions that would cause such stockholders to fail to be in control
of Holding Company immediately after the Transactions within the meaning of
Section 351(a) of the Code.
In the case of transactions as complex as the Transactions, many
federal, state and local income and other tax consequences arise. We have been
asked only to address the issues specifically set forth below. No opinion is
expressed regarding any other issues.
This opinion is being delivered to you for use in connection with the
combined Proxy Statement of Berkshire and General relating to the Transactions
and may not be relied upon by any other person without our prior written
consent.
Subject to the foregoing, it is our opinion that, at the Effective
Time:
(1) if Berkshire and General are required under the Agreement to
proceed with the Transactions, and no Partial Cash Election has been
made or can properly be deemed to have been made by Berkshire, the
Berkshire Merger will be treated as a transfer of property to Holding
Company by the holders of Berkshire Common Stock governed by Section
351(a) or Section 351(b) of the Code; and
(2) if Berkshire and General are required under the Agreement to
proceed with the Transactions, and Berkshire is permitted to and does
in fact make, or is deemed to have made, a Partial Cash Election, the
Transactions will not qualify as a reorganization within the meaning
of Section 368 of the Code, the Merger Consideration will be taxable
to the stockholders of General, and the Transactions will not be a
taxable transaction to either Berkshire or its stockholders.
We hereby consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration Statement on Form S-4
filed by Berkshire and Holding Company relating to the Transactions and to the
reference to us under the caption "The Transactions -- Federal Income Tax
Considerations" in the Joint Proxy Statement/Prospectus. In giving
such consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
<PAGE>
EXHIBIT 8.2
[LETTERHEAD OF WACHTELL, LIPTON, ROSEN & KATZ]
, 1998
General Re Corporation
695 East Main Street
Stamford, CT 06904-2351
Berkshire Hathaway Inc.
1440 Kiewit Plaza
Omaha, Nebraska 68131
Ladies/Gentlemen:
We have acted as special counsel to General Re Corporation, a
Delaware corporation ("General Re"), in connection with a series of transactions
----------
(the "Transactions") in which Berkshire Hathaway Inc., a Delaware corporation
------------
("Berkshire") and General Re will combine their businesses pursuant to the
---------
Agreement and Plan of Mergers (the "Agreement") dated as of June 19, 1998, by
---------
and between Berkshire and General Re. At your request, in connection with the
filing of the Registration Statement on Form S-4 filed with the Securities and
Exchange Commission in connection with the Transactions (the "Registration
------------
Statement"), we are rendering our opinion pursuant to Item 601(b)(8) of
- ---------
Regulation S-K. Any capitalized term used and not defined herein has the
meaning given to it in the Joint Proxy Statement/Prospectus or the appendices
thereto (including the Agreement).
In furtherance of the Transactions, Berkshire has formed NBH, Inc., a
Delaware corporation ("New Berkshire"), which in turn has formed two wholly
owned Delaware subsidiaries ("Merger Sub A" and "Merger Sub B") for the sole
purpose of effectuating the Transactions. In addition, pursuant to the
Agreement, Berkshire has issued to General Re shares of a new class of
nonvoting, non-participating cumulative preferred stock of Berkshire, and
<PAGE>
General re has issued to Berkshire shares of a new class of nonvoting,
non-participating cumulative preferred stock of General Re.
For purposes of the opinion set forth below, we have relied, with the
consent of Berkshire and the consent of General Re, upon the accuracy and
completeness of the statements and representations (which statements and
representations we have neither investigated nor verified) contained,
respectively, in the certificates of the officers of Berkshire and General Re
dated the date hereof, and have assumed that such statements and
representations will be complete and accurate as of the Effective Time and that
all representations made to the knowledge of any person or entity or with
similar qualification are and will be true and correct as if made without such
qualification. We have also relied upon the accuracy of the Registration
Statement, the joint proxy statement/prospectus of Berkshire and General Re (the
"Joint Proxy Statement/Prospectus") filed with the Securities and Exchange
- ---------------------------------
Commission in connection with the Transactions, and the joint request for a
private letter ruling filed by Berkshire and General Re with the Internal
Revenue Service on June 29, 1998, requesting rulings corresponding to the three
Rulings (the 351(e) Ruling, the No Gain or Loss Ruling and the 368(c) Ruling)
specified in the Agreement.
We have also assumed that: (i) the transactions contemplated by the
Agreement will be consummated in accordance therewith and as described in the
Joint Proxy Statement/Prospectus (and no transaction or condition found therein
and material to this opinion will be waived by any party); (ii) the Mergers and
the Alternative General Re Merger, as the case may be, will qualify as statutory
mergers under the applicable laws of the State of Delaware; and (iii) the
Transactions will be reported by New Berkshire, Berkshire and General Re on
their respective federal income tax returns in a manner consistent with the
opinions set forth below.
In addition to the other assumptions set forth herein, in delivering
our opinion (1) set forth below we assume that: (i) either (A) Berkshire shall
have received the 351(e) Ruling and the No Gain or Loss Ruling or (B) the
Proposed Regulations (as defined in the Agreement) shall have been withdrawn and
Berkshire shall have received either the No Gain or Loss Ruling or the 368(c)
Ruling; and (ii) at the Effective Time, the stockholders of Berkshire and
General Re will not be subject to one or more binding commitments to transfer
their New Berkshire Common Stock received in the Transactions that would cause
such stockholders to fail to be in control of New Berkshire immediately after
the Transactions within the meaning of Section 351(a) of the Code.
Based upon and subject to the foregoing, it is our opinion, under
currently applicable United States federal income tax law, that, at the
Effective Time:
(1) if Berkshire and General Re are required under the Agreement
to proceed with the Transactions, and no Partial Cash Election has been made or
can properly be deemed to have been made by Berkshire, the General Re Merger
will be treated as a transfer of property to New Berkshire by the holders of
General Re Common Stock governed by Section 351(a) or Section 351(b) of the
Code; and
-2-
<PAGE>
(2) if Berkshire and General Re are required under the Agreement
to proceed with the Transactions, and Berkshire is permitted to make and does in
fact make, or is deemed to have made, a Partial Cash Election, the Transactions
will not qualify as a reorganization within the meaning of Section 368 of the
Code, the Merger Consideration will be taxable to the stockholders of General
Re, and the Transactions will not be a taxable transaction to either Berkshire
or its stockholders.
This opinion relates solely to certain federal income tax
consequences of the Merger and no opinion is expressed as to the tax
consequences under any foreign, state or local tax law. No assurance can be
given that any of the Rulings will be issued in the form requested.
We are furnishing this opinion to you solely in connection with
the Registration Statement and this opinion is not to be relied upon,
circulated, quoted or otherwise referred to for any other purpose.
We hereby consent to the filing of this opinion with the
Securities and Exchange Commission as an exhibit to the Registration Statement,
and to the reference to us under the caption "THE TRANSACTIONS--Federal Income
Tax Considerations" in the Joint Proxy Statement/Prospectus. In giving such
consent, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
-3-
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Berkshire Hathaway Inc. and NBH, Inc. on Form S-4 of our reports dated March 6,
1998, appearing in the Annual Report on Form 10-K of Berkshire Hathaway Inc. for
the year ended December 31, 1997, and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
Deloitte & Touche LLP
Omaha, Nebraska
August 7, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Proxy Statement/Prospectus
of our report dated January 30, 1998, on our audits of the consolidated
financial statements and financial statement schedules of General Re Corporation
and subsidiaries as of December 31, 1997 and 1996, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1997. We also consent to the reference to our firm
under the caption "Experts".
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
July 29, 1998
<PAGE>
EXHIBIT 23.5
CONSENT
Pursuant to Rule 438 promulgated by the Securities and Exchange Commission,
the undersigned hereby consents to being named as a person about to become a
director of NBH, Inc. or Berkshire Hathaway Inc. in their Registration Statement
on Form S-4 and related Joint Proxy Statement/Prospectus relating to the
proposed business combination with General Re Corporation.
Dated: August 7, 1998
/s/ Ronald E. Ferguson
------------------------------
Ronald E. Ferguson
<PAGE>
EXHIBIT 99.1
BERKSHIRE HATHAWAY INC.
PROXY FOR COMMON STOCK
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS
SEPTEMBER 16, 1998
The undersigned stockholder of Berkshire Hathaway Inc. ("Berkshire") hereby
appoints Warren E. Buffett, Charles T. Munger, and Marc D. Hamburg as
attorneys, agents, and proxies of the undersigned, with full power of
substitution in each of them, to vote, in the name and on behalf of the
undersigned at the Special Meeting of Stockholders (the "Special Meeting") of
Berkshire to be held on September 16, 1998 at 9:30 a.m., at the Orpheum
Theater, 409 South 16th Street, Omaha, Nebraska, and at all adjournments
thereof, all of the shares of Class A Common Stock and Class B Common Stock of
Berkshire which the undersigned would be entitled to vote if personally
present, with all powers the undersigned would possess if personally present.
PROPOSAL: To approve and adopt the Agreement and Plan of Mergers dated June
19, 1998 (the "Merger Agreement") by and between Berkshire and General Re
Corporation, a Delaware corporation ("General Re"), and to approve the
transactions contemplated thereby, including either the merger of Berkshire
with Wyllis Merger Sub Inc., a Delaware corporation ("Merger Sub A"), pursuant
to a Plan of Merger between Berkshire, NBH, Inc., a Delaware corporation, and
Merger Sub A, or the Alternative Transaction (as defined in the Proxy
Statement) involving the merger of General Re with a subsidiary of Berkshire
pursuant to a Plan of Merger between General Re, Berkshire and such
subsidiary.
[_] FOR [_] AGAINST [_] ABSTAIN
PROPOSAL: To approve an amendment to the Restated Certificate of
Incorporation of Berkshire to increase the number of shares of Berkshire Class
A Common Stock authorized for issuance from 1,500,000 to 1,650,000, and to
increase the number of shares of Berkshire Class B Common Stock authorized for
issuance from 50,000,000 to 55,000,000. This amendment will be effective if
the Alternative Transaction occurs.
[_] FOR [_] AGAINST [_] ABSTAIN
The undersigned hereby acknowledged receipt of the Notice of Special Meeting
and the Joint Proxy Statement/Prospectus (the "Proxy Statement") dated August
13, 1998 relating to the Special Meeting.
ALL SHARES WILL BE VOTED AS SPECIFIED. IF THE PROXY IS SIGNED AND SENT BUT
NO CHOICE IS SPECIFIED, THE SHARES WILL BE VOTED FOR APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT AND FOR APPROVAL OF THE AMENDMENT TO THE CERTIFICATE OF
INCORPORATION. SHARES WILL BE VOTED AT THE DISCRETION OF THE PROXY HOLDERS AS
TO ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING FOR WHICH
DISCRETIONARY AUTHORITY MAY BE GRANTED. PROXIES NOT RECEIVED OR VOTES TO
ABSTAIN WILL BE TREATED AS VOTES AGAINST THE PROPOSALS.
<PAGE>
Any of said proxies or their substitutes who shall be present and act, or if
only one shall attend, then that one, shall have and may exercise all the
powers of said proxies hereunder.
_________________________ __________
(SIGNATURE) (DATE)
_________________________ __________
(SIGNATURE) (DATE)
Please sign exactly as your name(s)
appear(s) hereon. All holders must
sign. When signing in a fiduciary
capacity, please indicate full title
as such. If a corporation or a
partnership, please sign in full
corporate or partnership name by
authorized person.
PLEASE EXECUTE AND RETURN THIS PROXY PROMPTLY.
YOUR COOPERATION WILL BE APPRECIATED.
<PAGE>
EXHIBIT 99.2
GENERAL RE CORPORATION
PROXY FOR COMMON STOCK
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS
SEPTEMBER 18, 1998
The undersigned stockholder of General Re Corporation ("General Re") hereby
appoints Ronald E. Ferguson, James E. Gustafson, Charles F. Barr, Elizabeth A.
Monrad and Robert D. Graham, as attorneys, agents, and proxies of the
undersigned, with full power of substitution in each of them, to vote, in the
name and on behalf of the undersigned at the Special Meeting of Stockholders
(the "Special Meeting") of General Re to be held on September 18, 1998 at
10:00 a.m., at Financial Centre, 695 East Main Street, Stamford, Connecticut,
and at all adjournments thereof, all of the shares of Common Stock of General
Re which the undersigned would be entitled to vote if personally present, with
all powers the undersigned would possess if personally present.
PROPOSAL: To approve and adopt the Agreement and Plan of Mergers dated June
19, 1998 (the "Merger Agreement") by and between General Re and Berkshire
Hathaway Inc., a Delaware corporation ("Berkshire"), and to approve the
transactions contemplated thereby, including either the merger of General Re
with Steven Merger Sub Inc., a Delaware corporation ("Merger Sub B"), pursuant
to a Plan of Merger between General Re, NBH, Inc., a Delaware corporation, and
Merger Sub B, or the Alternative Transaction (as defined in the Proxy
Statement) involving the merger of General Re with a subsidiary of Berkshire
pursuant to a plan of Merger between General Re, Berkshire and such
subsidiary.
<TABLE>
<S> <C> <C>
[_] FOR [_] AGAINST [_] ABSTAIN
</TABLE>
The undersigned hereby acknowledged receipt of the Notice of Special Meeting
and the Joint Proxy Statement/Prospectus (the "Proxy Statement") dated August
13, 1998 relating to the Special Meeting.
ALL SHARES WILL BE VOTED AS SPECIFIED. IF THE PROXY IS SIGNED AND SENT BUT
NO CHOICE IS SPECIFIED, THE SHARES WILL BE VOTED FOR APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT. SHARES WILL BE VOTED AT THE DISCRETION OF THE PROXY
HOLDERS AS TO ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING FOR
WHICH DISCRETIONARY AUTHORITY MAY BE GRANTED. PROXIES NOT RECEIVED OR VOTES TO
ABSTAIN WILL BE TREATED AS VOTES AGAINST THE PROPOSALS.
Any of said proxies or their substitutes who shall be present and act, or if
only one shall attend, then that one, shall have and may exercise all the
powers of said proxies hereunder.
Dated: _______________________ , 1998
_____________________________________
(SIGNATURE)
_____________________________________
(JOINT OWNER'S SIGNATURE)
Please sign exactly as your name
appears. When signing as an
attorney, guardian, executor,
administrator, or trustee, please
give title. If the signer is a
corporation, please give the full
corporate name, and sign by a duly
authorized officer showing the
officer's title. EACH joint owner is
required to sign.
PLEASE EXECUTE AND RETURN THIS PROXY PROMPTLY.
YOUR COOPERATION WILL BE APPRECIATED.
