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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) February 6, 1999
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THE CHUBB CORPORATION
(Exact name of Registrant as Specified in Charter)
New Jersey 1-8661 13-2595722
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(State or Other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
15 Mountain View Road PO Box 1615
Warren, New Jersey 07061-1615
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (908) 903-3607
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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
The Chubb Corporation ("Parent") has entered into an Agreement and Plan
of Merger, dated as of February 6, 1999 (the "Merger Agreement"), with
Executive Risk Inc. (the "Company") and Excalibur Acquisition, Inc., a wholly
owned subsidiary of Parent ("Sub"). The Merger Agreement provides for the
merger of Sub with and into the Company, with the Company as the surviving
corporation. In the merger, each outstanding share of common stock of the
Company will be converted into the right to receive 1.235 shares of common
stock of Parent. In connection with the execution of the Merger Agreement, the
Parent and Company entered into a Stock Option Agreement, dated as of February
6, 1999 (the "Stock Option Agreement"), under which the Company has granted
Parent an option, exercisable under certain circumstances, to purchase 19.9% of
the Company common shares outstanding immediately prior to exercise at a price
of $71.71 per share.
Also in conjunction with the execution of the Merger Agreement, Parent
and certain directors of the Company who own stock of the Company entered into
a Voting Agreement under which the directors have agreed to vote all of their
shares in favor of the Merger and against any competing transaction.
On February 8, 1999, Parent and the Company issued a joint press release
announcing the execution of the Merger Agreement. The foregoing description of
the Merger Agreement, Stock Option Agreement, Voting Agreement and press
release are qualified in their entirety by reference to the full texts of such
documents, which are filed as exhibits hereto and incorporated herein by
reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits
99.1 Joint Press Release dated February 8, 1999.
99.2 Agreement and Plan of Merger dated February 6, 1999.
99.3 Stock Option Agreement dated February 6, 1999.
99.4 Voting Agreement dated February 6, 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
THE CHUBB CORPORATION
By: /s/ Robert Rusis
--------------------------------
Name: Robert Rusis
Title: Senior Vice President
and General Counsel
February 10, 1999
EXHIBIT INDEX
99.1 Joint Press Release dated February 8, 1999.
99.2 Agreement and Plan of Merger dated February 6, 1999.
99.3 Stock Option Agreement dated February 6, 1999.
99.4 Voting Agreement dated February 6, 1999.
EXHIBIT 99.1
Chubb to Acquire Executive Risk for Stock Valued
at $71.71 Per Share
PR News Wire -- February 8, 1999
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WARREN, N.J., Feb. 8 /PRNewswire/ -- The Chubb Corporation (NYSE: CB) and
Executive Risk Inc. (NYSE: ER) jointly announced today that they have entered
into a definitive merger agreement under which Chubb will acquire Executive
Risk.
The agreement, which has been approved by the boards of directors of both
companies, provides that Executive Risk shareholders will receive 1.235 shares
of Chubb common stock for each outstanding common share of Executive Risk.
Based on the closing prices of both companies' shares on Friday, February 5,
1999, Executive Risk shareholders would receive the equivalent of $71.71 per
share. This represents a premium of 63% over Friday's closing price, 44% over
Executive Risk's average trading price for the last month, and 38% over
Executive Risk's three-month average trading price. The total value of the
transaction would be approximately $850 million.
"Our partnership with Executive Risk will enable Chubb to solidify leading
market positions in numerous, profitable executive protection lines and move to
top positions in others," said Dean R. O'Hare, Chairman and CEO of Chubb. "By
further strengthening our position in specialty lines that offer attractive
opportunities for profitable growth, we achieve one of our key strategic
acquisition criteria. Moreover, both companies share a commitment to
underwriting profitability and a belief that the best way to make good on this
commitment is through further expansion in specialty markets."
"This transaction achieves several goals for Executive Risk," said Stephen J.
Sills, Executive Risk's President and CEO. "It delivers substantial immediate
value to our shareholders. It further strengthens our directors and officers
and our errors and omissions businesses by combining them with those of Chubb,
long a leader in these markets. We believe our shareholders can benefit further
from the merged company's continued growth, and our employees will have new
opportunities for reward and career growth in the combined organization. Chubb
is the right strategic merger partner for us, and we are delighted to be
joining forces with them."
Chubb said that following completion of the merger, it plans to establish a new
operation, Chubb-Executive Risk, based in Simsbury, Connecticut, which will
manage the combined company's book of executive protection business. This
business had combined gross premiums of approximately $1.7 billion in 1998.
This new entity will be managed by Mr. Sills, chairman and CEO, and Gary J.
Tully, president and COO. Mr. Tully is currently the head of Chubb's executive
protection practice.
"Combining Chubb's top-rated balance sheet and 115-office global network with
Executive Risk's fast, innovative product development capability will enable
us to better leverage both of our strengths in the marketplace," said Chubb's
Mr. O'Hare. "In addition, our relationships with 5000 retail independent
agents and brokers worldwide and Executive Risk's relationships with more than
2200 wholesale agents, specialty brokers and program administrators offer both
companies access to whole new distribution channels."
"While the combination will result in expense savings, the driving force here
is the opportunity to accelerate premium growth in attractive specialty
markets," said Mr. Sills of Executive Risk. "These are markets where we expect
to achieve the kind of attractive underwriting profit margins that both
companies have consistently achieved."
Chubb expects the transaction to result in modest earnings dilution in 1999 of
less than 2%. In the year 2000, Chubb expects the transaction to be slightly
accretive. Mr. O'Hare said, "The combination of cost savings and the
opportunities for significantly enhanced premium growth will minimize the
dilutive impact. Moreover, the financial strength of Chubb will allow the
company to cede a smaller portion of Executive Risk's business in the future."
The merger agreement contains customary termination provisions including an
option for Chubb to acquire 19.9% of Executive Risk's shares. The directors of
Executive Risk have all agreed to vote their shares in favor of the merger.
Completion of the acquisition is subject to approval by Executive Risk
shareholders and various regulatory authorities. Closing is expected in the
second quarter of 1999.
Chubb was advised by Goldman, Sachs & Co. and Davis Polk & Wardwell.
Donaldson, Lufkin & Jenrette Securities Corporation and Dewey Ballantine LLP
advised Executive Risk.
Chubb is a leading global specialty insurer. It is known for its strength in
executive protection and financial institution coverages, particularly D&O,
E&O, fiduciary and fidelity. Chubb is also active in other commercial lines
and has a large and profitable personal lines business. Based in Warren, New
Jersey, Chubb has approximately 9,500 employees worldwide. Its 1998 gross
written premiums were $6 billion.
Executive Risk is a fast-growing specialty insurance company focused on the
directors and officers, professional liability, errors and omissions and
ancillary markets. The company offers a wide range of innovative D&O and E&O
coverages. Gross written premiums in 1998 were in excess of $500 million, an
increase of 20% over the prior year. Based in Simsbury, Connecticut, Executive
Risk has almost 600 employees.
Forward Looking Information
Certain statements in this communication may be considered to be "forward
looking statements" as that term is defined in the Private Securities
Litigation Reform Act of 1995 such as statements that include words or phrases
"will result", "are expected to", "will continue", "is anticipated",
"estimate", or similar expressions. Such statements are subject to certain
risks and uncertainties. The factors which could cause actual results to
differ materially from those suggested by any such statements include but are
not limited to those discussed or identified from time to time in the
Corporations' public filings with the Securities & Exchange Commission and
specifically to: risks or uncertainties associated with the Corporations'
expectations with respect to completion of the Executive Risk merger or with
respect to market positions, premiums, earnings per share and profitability
resulting from the Executive Risk transaction; and, more generally,
to: general economic conditions including changes in interest rates and the
performance of the financial markets, changes in domestic and foreign laws,
regulations and taxes, changes in competition and pricing environments,
regional or general changes in asset valuations, the occurrence of significant
natural disasters, the development of major Year 2000 liabilities, the
inability to reinsure certain risks economically, the adequacy of loss
reserves, as well as general market conditions, competition, pricing and
restructurings.
/CONTACT: Gail Devlin, 908-903-3245, or Glenn Montgomery, 908-903-2365, both
of Chubb; or Bob Deutsch, 860-408-2500, or Tim Curry, 860-408-2484, both of
Executive Risk/
EXHIBIT 99.2
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
dated as of
February 6, 1999
among
EXECUTIVE RISK INC.
THE CHUBB CORPORATION
and
EXCALIBUR ACQUISITION, INC.
TABLE OF CONTENTS
Page
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ARTICLE 1
Definitions
Section 1.1. Definitions.................................................. 2
ARTICLE 2
The Merger
Section 2.1. The Merger................................................... 6
Section 2.2. Organizational Documents..................................... 7
Section 2.3. Directors and Officers....................................... 7
ARTICLE 3
Conversion of Securities and Related Matters
Section 3.1. Conversion of Capital Stock.................................. 8
Section 3.2. Fractional Shares; Adjustments............................... 8
Section 3.3. Exchange of Certificates..................................... 9
Section 3.4. Company Stock Options........................................ 11
ARTICLE 4
Representations and Warranties of The Company
Section 4.1. Corporate Existence and Power................................ 12
Section 4.2. Corporate Authorization...................................... 13
Section 4.3. Governmental Authorization................................... 13
Section 4.4. Non-Contravention............................................ 13
Section 4.5. Capitalization............................................... 14
Section 4.6. Subsidiaries................................................. 15
Section 4.7. The Company SEC Documents.................................... 16
Section 4.8. Financial Statements; No Material Undisclosed
Liabilities.................................................. 16
Section 4.9. Information to Be Supplied................................... 17
Section 4.10. Absence of Certain Changes................................... 18
Section 4.11. Litigation................................................... 18
Section 4.12. Taxes........................................................ 18
Section 4.13. Employees and Employee Benefits.............................. 19
Section 4.14. Compliance with Insurance Laws; Licenses and
Permits...................................................... 21
Section 4.15. Insurance Matters............................................ 23
Section 4.16. Liabilities and Reserves..................................... 24
Section 4.17. Title to Properties.......................................... 25
Section 4.18. Intellectual Property........................................ 25
Section 4.19. Environmental Matters........................................ 25
Section 4.20. Finders' Fees; Opinions of Financial Advisor................. 26
Section 4.21. Required Vote; Board Approval................................ 26
Section 4.22. State Takeover Statutes; Rights Agreement.................... 26
Section 4.23. Tax Treatment................................................ 27
Section 4.24. Year 2000 Compliance......................................... 27
ARTICLE 5
Representations and Warranties of Parent
Section 5.1. Corporate Existence and Power................................ 28
Section 5.2. Corporate Authorization...................................... 28
Section 5.3. Governmental Authorization................................... 28
Section 5.4. Non-Contravention............................................ 29
Section 5.5. Capitalization of Parent and MergerSub....................... 29
Section 5.6. Parent SEC Documents......................................... 30
Section 5.7. Financial Statements; No Material Undisclosed
Liabilities.................................................. 30
Section 5.8. Information to Be Supplied................................... 32
Section 5.9. Absence of Certain Changes................................... 32
Section 5.10. Litigation................................................... 32
Section 5.11. Compliance with Laws; Licenses and Permits................... 33
Section 5.12. Finders' Fees................................................ 33
Section 5.13. Liabilities and Reserves..................................... 33
Section 5.14. Year 2000 Compliance......................................... 34
Section 5.15. Tax Treatment................................................ 34
ARTICLE 6
Covenants of The Company
Section 6.1. The Company Interim Operations............................... 35
Section 6.2. Stockholder Meeting.......................................... 38
Section 6.3. Acquisition Proposals; Board Recommendation.................. 38
Section 6.4. Transfer Taxes............................................... 40
Section 6.5. Retention Program............................................ 40
Section 6.6. Certain Agreements........................................... 40
ARTICLE 7
Covenants of Parent
Section 7.1. Parent Interim Operations.................................... 41
Section 7.2. Director and Officer Liability............................... 42
Section 7.3. Employee Benefits............................................ 43
Section 7.4. Stock Exchange Listing....................................... 44
Section 7.5. Conduct of MergerSub......................................... 44
ARTICLE 8
Covenants of Parent and The Company
Section 8.1. Reasonable Best Efforts...................................... 44
Section 8.2. Certain Filings; Cooperation in Receipt of Consents.......... 44
Section 8.3. Public Announcements......................................... 45
Section 8.4. Access to Information; Notification of Certain Matters....... 46
Section 8.5. Further Assurances........................................... 47
Section 8.6. Tax and Accounting Treatment................................. 47
Section 8.7. Affiliate Letters............................................ 47
ARTICLE 9
Conditions to the Merger
Section 9.1. Conditions to the Obligations of Each Party.................. 47
Section 9.2. Conditions to the Obligations of The Company................. 48
Section 9.3. Conditions to the Obligations of Parent and
MergerSub.................................................... 47
ARTICLE 10
Termination
Section 10.1. Termination................................................. 50
Section 10.2. Effect of Termination....................................... 51
Section 10.3. Fees and Expenses........................................... 52
ARTICLE 11
Miscellaneous
Section 11.1. Notices..................................................... 53
Section 11.2. Survival of Representations, Warranties and
Covenants after the Effective Time.......................... 54
Section 11.3. Amendments; No Waivers...................................... 55
Section 11.4. Successors and Assigns...................................... 55
Section 11.5. Governing Law............................................... 55
Section 11.6. Counterparts; Effectiveness; Third Party
Beneficiaries............................................... 56
Section 11.7. Jurisdiction................................................ 56
Section 11.8. Waiver of Jury Trial........................................ 56
Section 11.9. Enforcement................................................. 56
Section 11.10. Entire Agreement........ ................................... 56
EXHIBITS
Exhibit A -- Rule 145 Affiliate's Letter
SCHEDULES
Company Disclosure Schedule
Parent Disclosure Schedule
Schedule 6.01(i)
Schedule 7.03(c)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of February 6, 1999 among
Executive Risk Inc., a Delaware corporation (the "Company"), The Chubb
Corporation, a New Jersey corporation ("Parent"), and Excalibur Acquisition,
Inc., a Delaware corporation and a direct, wholly-owned subsidiary of Parent
("MergerSub").
RECITALS
WHEREAS, the Boards of Directors of the Company and Parent each
have determined that a business combination between the Company and Parent is
advisable and in the best interests of their respective companies and
stockholders and presents an opportunity for their respective companies to
achieve long-term strategic and financial benefits, and accordingly have agreed
to effect the merger provided for herein upon the terms and subject to the
conditions set forth herein;
WHEREAS, the parties hereto intend that the merger provided for
herein shall qualify for U.S. federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the U.S. Internal Revenue Code of
1986, as amended (together with the rules and regulations promulgated
thereunder, the "Code") (a "368 Reorganization");
WHEREAS, concurrently with entering into this Agreement, the
Company has granted Parent an option to acquire up to 19.9% of newly issued
Company Common Shares (as defined below) on the terms and subject to the
conditions set forth in the Stock Option Agreement between the Company and
Parent dated as of the date hereof (the "Stock Option Agreement"); and
WHEREAS, by resolutions duly adopted, the respective Boards of
Directors of the Company, Parent and MergerSub have approved and adopted this
Agreement, the Stock Option Agreement and the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, and
intending to be legally bound, the parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.1. Definitions. (a) As used herein, the following
terms have the following meanings:
"Acquisition Proposal" means any offer or proposal for, or
indication of interest in, a merger, consolidation, share exchange, business
combination, reorganization, recapitalization, liquidation, dissolution or
other similar transaction involving, or any purchase of 30% or more of (i) any
class of equity securities of the Company or Executive Risk Indemnity Inc. or
(ii) the consolidated assets of the Company and its Subsidiaries or Executive
Risk Indemnity Inc., other than the transactions contemplated by this Agreement
and the Stock Option Agreement.
"Affiliate" means, with respect to any Person, any other Person,
directly or indirectly, controlling, controlled by, or under common control
with, such Person. For purposes of this definition, the term "control"
(including the correlative terms "controlling", "controlled by" and "under
common control with") means the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or otherwise.
"Business Day" means any day other than a Saturday, Sunday or
one on which banks are authorized by law to close in New York, New York.
"Company Balance Sheet" means the Company's consolidated balance
sheet included in the Company 10-K relating to its fiscal year ended on
December 31, 1997.
"Company Common Share" means one share of common stock of the
Company, $.01 par value per share.
"Company SEC Documents" means (i) the annual reports on Form
10-K of the Company (the "Company 10-Ks") for the fiscal years ended December
31, 1996 and December 31, 1997, (ii) the quarterly reports on Form 10-Q of the
Company (the "Company 10-Qs") for the fiscal quarters ended September 30, June
30 and March 31 of fiscal year 1998, (iii) the Company's proxy or information
statements relating to meetings of, or actions taken without a meeting by, the
Company stockholders held since December 31, 1996, and (iv) all other reports,
filings, registration statements and other documents filed by the Company with
the SEC since December 31, 1996.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Governmental Entity" means any federal, state or local
governmental authority, any transgovernmental authority or any court,
administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign.
"knowledge" (and all correlative terms) as to any party means
to the knowledge of the executive officers of such party identified in Section
1.01(a) of that party's Disclosure Schedule.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset, provided, however, that the term "Lien" shall not include (i)
liens for water and sewer charges and current taxes not yet due and payable or
being contested in good faith and (ii) mechanics', carriers', workers',
repairers', materialmen's, warehousemen's and other similar liens arising or
incurred in the ordinary course of business.
"Material Adverse Effect" means a material adverse effect on the
financial condition, business or results of operations of a Person and its
Subsidiaries, taken as a whole, other than effects caused by (i) changes in
general economic or securities markets conditions, (ii) changes that affect the
insurance industry in general or (iii) the public announcement of the
transactions contemplated by this Agreement. "Parent Material Adverse Effect"
means a Material Adverse Effect in respect of Parent and "Company Material
Adverse Effect" means a Material Adverse Effect in respect of the Company.
"NYSE" means The New York Stock Exchange.
"Parent Balance Sheet" means Parent's consolidated balance sheet
included in the Parent 10-K relating to its fiscal year ended on December 31,
1997.
"Parent Common Share" means one share of common stock of
Parent, par value $1.00 per share.
"Parent Insurance Subsidiaries" means the Subsidiaries which
conduct Parent's insurance operations.
"Parent SEC Documents" means (i) Parent's annual reports on Form
10-K for its fiscal years ended December 31, 1996 and December 31, 1997 (the
"Parent 10-Ks"), (ii) Parent's quarterly reports on Form 10-Q (the "Parent
10-Qs") for its fiscal quarters ended September 30, June 30 and March 31, of
fiscal year 1998, (iii) Parent's proxy or information statements relating to
meetings of, or actions taken without a meeting by, Parent's stockholders held
since December 31, 1996, and (iv) all other reports, filings, registration
statements and other documents filed by it with the SEC since December 31,
1996.
"Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including any Governmental Entity.
"Proxy Statement/Prospectus" means the proxy statement/
prospectus including the Registration Statement and the proxy statement for
the Company Stockholder Meeting, together with any amendments or supplements
thereto.
"Registration Statement" means the Registration Statement on
Form S-4 registering under the Securities Act the Parent Common Shares
issuable in connection with the Merger.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Subsidiary" means, with respect to any Person, any corporation
or other entity of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
Persons performing similar functions are directly or indirectly owned by such
Person. "Parent Subsidiary" means a Subsidiary of Parent and "Company
Subsidiary" means a Subsidiary of the Company.
"Superior Proposal" means a bona fide, written Acquisition
Proposal for all of the outstanding Company Common Shares that is on terms
that a majority of the Company's Board of Directors determines in good faith
(after consultation with an investment bank of nationally recognized
reputation and the Company's outside counsel) would result in a transaction,
if consummated, that is more favorable to the Company's stockholders, from a
financial point of view (taking into account, among other things, all legal,
financial, regulatory and other aspects of the proposal including any break-up
fees, expense reimbursement provisions, conditions to consummation and the
identity of the offeror) than the transactions contemplated hereby (after
giving effect to any revised proposal made by or on behalf of Parent prior to
the end of the three-Business-Day-period referred to in Section 6.3(d)).
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Terms Section
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Certificate of Merger 2.1(b)
Certificates 3.3(a)
Closing 2.1(d)
Code Recitals
Company Preamble
Company Actuarial Analyses 4.15(c)
Company Employee Plans 4.13(a)
Company Insurance Contracts 4.15(a)
Company Insurance Subsidiaries 4.6(b)
Company Intellectual Property 4.18
Company Material Adverse Effect 1.1(a)
Company Option 3.4(a)
Company Recommendation 6.2
Company Returns 4.12
Company SAP Statements 4.8(b)
Company Securities 4.5(b)
Company Stockholder Approval 4.21(a)
Company Stockholder Meeting 6.2
Company Subsidiary 1.1(a)
Company Systems 4.24
Company 10-Ks 1.1(a)
Company 10-Qs 1.1(a)
Confidentiality Agreement 8.4(a)
DGCL 2.1(a)
Effective Time 2.1(b)
Employees 7.3(a)
End Date 10.1(b)(i)
Environmental Laws 4.19(b)
ERISA 4.13(a)
ERISA Affiliate 4.13(a)
Exchange Agent 3.3(a)
Exchange Fund 3.3(a)
GAAP 4.8(a)
HSR Act 4.3(b)
Indemnified Parties 7.2(b)
Insurance Laws 4.14(a)
Insurance Subsidiaries 4.6(b)
Laws 4.14(b)
Merger 2.1(a)
MergerSub Common Share 3.1(a)
Merger Consideration 3.1(b)
MergerSub Preamble
Multiemployer Plan 4.13(b)
Owned Property 4.17
Parent Preamble
Parent Cumulative Preferred 5.5(a)
Parent Material Adverse Effect 1.1(a)
Parent Option 3.4(a)
Parent SAP Statements 5.7(b)
Parent Securities 5.5(b)
Parent Serial Preferred 5.5(a)
Parent Subsidiary 1.1(a)
Parent Systems 5.14
Parent 10-Ks 1.1(a)
Parent 10-Qs 1.1(a)
Retirement Plan 4.13(b)
Rights 3.1(b)
Rights Agreement 3.1(b)
Stock Option Agreement Preamble
Surviving Corporation 2.1(a)
Termination Fee 10.3(e)
Third Party Acquisition Event 10.3(f)
368 Reorganization Recitals
Transfer Taxes 6.4
Year 2000 Compliant 4.24
ARTICLE 2
The Merger
Section 2.1. The Merger. (a) At the Effective Time,
MergerSub shall be merged (the "Merger") with and into the Company in
accordance with the terms and conditions of this Agreement and of the
General Corporation Law of the State of Delaware (the "DGCL"), at which
time the separate existence of MergerSub shall cease and the Company shall
be the surviving corporation (the "Surviving Corporation").
(b) Not later than the second Business Day after satisfaction
or, to the extent permitted hereby, waiver of the conditions set forth in
Article 9 (other than conditions that by their nature are to be satisfied at
the Closing, but subject to those conditions), the Company and MergerSub
will file a certificate of merger (the "Certificate of Merger") with the
Secretary of State of the State of Delaware and make all other filings or
recordings required by the DGCL in connection with the Merger. The Merger
shall become effective upon the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware in accordance with the DGCL
or at such later time which the parties hereto shall have agreed upon and
designated in such Certificate of Merger as the effective time of the
Merger (the "Effective Time").
(c) From and after the Effective Time, the Merger shall have
the effects set forth in the DGCL.
(d) The closing of the Merger (the "Closing") shall be held
at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, NY
(or such other place as agreed by the parties) at 10:00 a.m. New York City
time on a date to be specified by the parties, which shall be no later than
the second Business Day after satisfaction or, to the extent permitted
hereby, waiver of the conditions set forth in Article 9 (other than
conditions that by their nature are to be satisfied at the Closing, but
subject to those conditions), unless the parties hereto agree to another
date or time.
Section 2.2. Organizational Documents. The Certificate of
Merger shall provide that at the Effective Time (i) the Company's certificate
of incorporation in effect immediately prior to the Effective Time shall be the
Surviving Corporation's certificate of incorporation and (ii) MergerSub's
bylaws in effect immediately prior to the Effective Time shall be the Surviving
Corporation's bylaws, in each case until amended in accordance with applicable
law.
Section 2.3. Directors and Officers. From and after the
Effective Time (until successors are duly elected or appointed and qualified),
(i) MergerSub's directors at the Effective Time shall be the Surviving
Corporation's directors and (ii) the Company's officers immediately prior to
the Effective Time shall be the Surviving Corporation's officers.
ARTICLE 3
Conversion of Securities and Related Matters
Section 3.1. Conversion of Capital Stock. At the Effective
Time, by virtue of the Merger:
(a) Each share of common stock of MergerSub (each, a
"MergerSub Common Share") outstanding immediately prior to the Effective
Time shall be converted into and become one share of common stock of the
Surviving Corporation.
(b) Except as otherwise provided in Section 3.1(c) or Section
3.2(a), each Company Common Share outstanding immediately prior to the
Effective Time, together with the rights ("Rights") attached thereto and issued
pursuant to the Amended and Restated Rights Agreement dated as of November 12,
1998, between the Company and Chasemellon Shareholder Services, L.L.C., as
Rights Agent (the "Rights Agreement"), shall be converted into the right to
receive 1.235 Parent Common Shares. This Agreement shall refer to the Parent
Common Shares required to be issued pursuant to this Section 3.1(b), together
with any cash payments required to be made in lieu of fractional Parent Common
Shares, collectively as the "Merger Consideration."
(c) Each Company Common Share held by the Company as treasury
stock or owned by Parent or any Parent Subsidiary immediately prior to the
Effective Time shall be canceled, and no payment shall be made in respect
thereof.
Section 3.2. Fractional Shares; Adjustments. (a) No
fractional Parent Common Shares shall be issued in the Merger. All fractional
Parent Common Shares that a holder of any Company Common Shares would
otherwise be entitled to receive as a result of the Merger shall be
aggregated. If a fractional Parent Common Share results from such
aggregation, the holder shall be entitled to receive, in lieu thereof, a cash
amount, without interest, determined by multiplying the closing sale price of
a Parent Common Share on the New York Stock Exchange on the trading day
immediately preceding the Effective Time by the fraction of a Parent Common
Share to which such holder would otherwise have been entitled. As promptly as
practicable after the determination of the amount of cash, if any, to be paid
to holders of fractional share interests, the Exchange Agent (as hereinafter
defined) shall so notify Parent, and Parent shall deposit such amount with the
Exchange Agent and shall cause the Exchange Agent to forward payments to such
holders of fractional share interests, subject to and in accordance with the
terms of Section 3.3.
(b) If at any time during the period between the date of this
Agreement and the Effective Time, any change in the outstanding shares of
capital stock of Parent or securities convertible or exchangeable into capital
stock of Parent shall occur, including by reason of any reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, or any dividend or distribution thereon (other than regular quarterly
cash dividends) or a record date with respect to any of the foregoing shall
occur during such period, the number of Parent Common Shares constituting part
of the Merger Consideration shall be appropriately adjusted to provide to the
holders of the Parent Common Shares and the Company Common Shares the same
economic effect as contemplated by this Agreement prior to the consummation of
such event.
Section 3.3. Exchange of Certificates.
(a) Exchange Agent. Promptly after the date hereof, Parent
shall appoint First Chicago Trust Company of New York as an agent (the
"Exchange Agent") for the benefit of holders of Company Common Shares for
the purpose of exchanging, pursuant to this Article 3, certificates
("Certificates") that immediately prior to the Effective Time represented
outstanding Company Common Shares which were converted into the right to
receive the Merger Consideration. Parent will make available to the
Exchange Agent, as needed, the Merger Consideration, together with any
dividends or distributions with respect thereto, if any, to be paid in
respect of Company Common Shares pursuant to this Article 3 (the "Exchange
Fund"), and except as contemplated by Section 3.3(f) or Section 3.3(g)
hereof, the Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedures. As promptly as practicable after the
Effective Time, Parent shall send, or will cause the Exchange Agent to send,
to each holder of record of a Certificate or Certificates a letter of
transmittal and instructions (which shall be in customary form and specify
that delivery shall be effected, and risk of loss and title shall pass, only
upon delivery of the Certificates to the Exchange Agent), for use in the
exchange contemplated by this Section 3.3. Upon surrender of a Certificate to
the Exchange Agent, together with a duly executed letter of transmittal, the
holder of such Certificate shall be entitled to receive in exchange therefor
the Merger Consideration and unpaid dividends and distributions thereon, if
any, as provided in this Article 3 in respect of the Company Common Shares
represented by such Certificate (after giving effect to any required
withholding tax). Until surrendered as contemplated by this Section 3.3 each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive the Merger Consideration and unpaid dividends and
distributions thereon, if any, as provided in this Article 3. If any portion
of the Merger Consideration is to be paid to a Person other than the Person in
whose name the Certificate is registered, it shall be a condition to such
payment that the Certificate so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the Person requesting such
payment shall pay to the Exchange Agent any transfer or other taxes required
as a result of such payment to a Person other than the registered holder of
such Certificate or establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not payable. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent, the posting by such Person of a bond, in such reasonable
amount as Parent may direct, as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will deliver,
in exchange for such lost, stolen or destroyed Certificate, the proper amount
of the Merger Consideration, together with any unpaid dividends and
distributions on any such Parent Common Shares, as contemplated by this
Article 3.
(c) Distributions with Respect to Unexchanged Shares.
Whenever a dividend or other distribution is declared by Parent in respect
of the Parent Common Shares, the record date for which is at or after the
Effective Time, that declaration shall include dividends or other
distributions in respect of all Parent Common Shares issuable pursuant to
this Agreement. No dividends or other distributions declared or made after
the Effective Time with respect to Parent Common Shares constituting part
of the Merger Consideration shall be paid to the holder of any
unsurrendered Certificate, and no cash payment in lieu of fractional shares
shall be paid to any such holder, until such Certificate is surrendered as
provided in this Section 3.3. Following such surrender, there shall be
paid, without interest, to the Person in whose name the Parent Common
Shares have been registered (i) at the time of such surrender, the amount
of dividends or other distributions with a record date at or after the
Effective Time previously paid or payable on the date of such surrender
with respect to such whole Parent Common Shares, less the amount of any
withholding taxes that may be required thereon, and (ii) at the appropriate
payment date subsequent to surrender, the amount of dividends or other
distributions with a record date at or after the Effective Time but prior
to surrender and a payment date subsequent to surrender payable with
respect to such whole Parent Common Shares, less the amount of any
withholding taxes which may be required thereon.
(d) No Further Ownership Rights in The Company Common
Shares. All Parent Common Shares issued upon surrender of Certificates in
accordance with the terms hereof (including any cash paid pursuant to this
Article 3) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such Company Common Shares represented thereby, and,
as of the Effective Time, the stock transfer books of the Company shall be
closed and there shall be no further registration of transfers on the
Company's stock transfer books of Company Common Shares outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Section 3.3.
(e) Return of Merger Consideration. Upon demand by Parent,
the Exchange Agent shall deliver to Parent any portion of the Merger
Consideration made available to the Exchange Agent pursuant to this Section
3.3 that remains undistributed to holders of Company Common Shares one year
after the Effective Time. Holders of Certificates who have not complied
with this Section 3.3 prior to such demand shall thereafter look only to
Parent for payment of any claim to the Merger Consideration and dividends
or distributions, if any, in respect thereof.
(f) No Liability. None of Parent, the Surviving
Corporation or the Exchange Agent shall be liable to any Person in respect
of any Company Common Shares (or dividends or distributions with respect
thereto) for any amounts paid to a public official pursuant to any
applicable abandoned property, escheat or similar law. Any amounts
remaining unclaimed by any holder of Company Common Shares immediately
prior to such time when such amounts would otherwise escheat to or become
the property of any Governmental Entity, shall, to the extent permitted by
applicable laws, become the property of Parent, free and clear of all
claims or interest of any Person previously entitled thereto.
(g) Withholding Rights. Each of the Surviving Corporation and
Parent shall be entitled to deduct and withhold from the Merger Consideration
(and any dividends or distributions thereon) otherwise payable hereunder to
any Person such amounts as it is required to deduct and withhold with respect
to the making of such payment under any provision of federal, state, local or
foreign income tax law. To the extent that the Surviving Corporation or
Parent so withholds those amounts, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of Company
Common Shares in respect of which such deduction and withholding was made by
the Surviving Corporation or Parent, as the case may be.
Section 3.4. Company Stock Options. (a) At the Effective Time,
each option to purchase Company Common Shares (each, a "Company Option")
outstanding under any stock option or compensation plan or arrangement of the
Company, whether or not vested or exercisable, shall be deemed to constitute
an option (each a "Parent Option") to acquire, on the same terms and
conditions as were applicable under such Company Option, the same number of
Parent Common Shares as the holder of such Company Option would have been
entitled to receive pursuant to Section 3.1(b) of this Agreement had such
holder exercised such Company Option in full immediately prior to the
Effective Time (rounded up to the nearest whole number), at a price per share
(rounded down to the nearest whole cent) equal to (x) the aggregate exercise
price for Company Common Shares otherwise purchasable pursuant to such Company
Option divided by (y) the number of full Parent Common Shares deemed
purchasable pursuant to such Company Option in accordance with the foregoing.
(b) Prior to the Effective Time, the Company and Parent shall
take all actions (including, if appropriate, amending the terms of the
Company's stock option or compensation plans or arrangements) that are
necessary to give effect to the transactions contemplated by Section
3.4(a).
(c) At or prior to the Effective Time, Parent shall take all
corporate action necessary to reserve for issuance a sufficient number of
Parent Common Shares for delivery upon exercise of the Parent Options. At or
prior to the Effective Time, Parent shall file a registration statement on
Form S-8 (or any successor form), with respect to the Parent Common Shares
subject to such Parent Options, and shall use its reasonable best efforts to
maintain the effectiveness of such registration statement(s), maintain the
current status of the prospectus(es) contained therein and comply with all
applicable state securities or "blue sky" laws for so long as such Parent
Options remain outstanding.
ARTICLE 4
Representations and Warranties of The Company
Except as disclosed in (i) the Company Disclosure Schedule
attached hereto or (ii) the Company SEC Documents filed prior to the date
hereof, the Company represents and warrants to Parent that:
Section 4.1. Corporate Existence and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, and has all corporate powers required to carry
on its business as now conducted. The Company is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction where
the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except where the failure to be
so qualified, individually or in the aggregate, would not be reasonably likely
to have a Company Material Adverse Effect. The Company has heretofore made
available to Parent true and complete copies of the Company's certificate of
incorporation and bylaws as currently in effect.
Section 4.2. Corporate Authorization. The execution, delivery
and performance by the Company of this Agreement and the Stock Option
Agreement and the consummation by the Company of the transactions contemplated
hereby and thereby are within the Company's corporate powers and, except for
the Company Stockholder Approval (as defined herein), have been duly
authorized by all necessary corporate action. Assuming that each of this
Agreement and the Stock Option Agreement constitutes the valid and binding
obligation of Parent and MergerSub, as applicable, each of this Agreement and
the Stock Option Agreement constitutes a valid and binding agreement of the
Company, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws, now or hereafter in
effect, relating to or affecting creditors' rights and remedies and to general
principles of equity.
Section 4.3. Governmental Authorization. The execution,
delivery and performance by the Company of this Agreement and the Stock Option
Agreement and the consummation by the Company of the transactions contemplated
hereby and thereby require no action by or in respect of, or filing with, any
Governmental Entity other than (a) the filing of a certificate of merger in
accordance with the DGCL; (b) compliance with any applicable requirements of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"); (c)
compliance with, and the filing (if necessary) of a notification with the
European Commission under, Council Regulation (EEC) No. 4064/89 and any other
foreign filings or approvals; (d) compliance with any applicable requirements
of the Securities Act and the Exchange Act; (e) such as may be required under
any applicable state securities or blue sky laws; (f) filings with and
approval of the Commissioners of Insurance of the jurisdictions listed on
Section 4.03 (f) of the Company Disclosure Schedule; (g) such as may be
required under the Connecticut Hazardous Waste Establishment Transfer Act and
the rules and regulations promulgated thereunder; and (h) such other consents,
approvals, actions, orders, authorizations, registrations, declarations and
filings which, if not obtained or made, would not, individually or in the
aggregate, (x) be reasonably likely to have a Company Material Adverse Effect,
or (y) prevent or materially impair the ability of the Company to consummate
the transactions contemplated by this Agreement or the Stock Option Agreement.
Section 4.4. Non-Contravention. The execution, delivery and
performance by the Company of this Agreement and the Stock Option Agreement
and the consummation by the Company of the transactions contemplated hereby
and thereby do not and will not (a) contravene or conflict with the Company's
certificate of incorporation or bylaws, (b) assuming compliance with the
matters referred to in Section 4.3, contravene or conflict with or constitute
a violation of any provision of any law, regulation, judgment, injunction,
order or decree binding upon or applicable to the Company or any Company
Subsidiary, (c) constitute a default under or give rise to a right of
termination, cancellation or acceleration of any right or obligation of the
Company or any Company Subsidiary or to a loss of any benefit or status to
which the Company or any Company Subsidiary is entitled under any provision of
any agreement, contract or other instrument binding upon the Company or any
Company Subsidiary or any license, franchise, permit or other similar
authorization held by the Company or any Company Subsidiary, or (d) result in
the creation or imposition of any Lien on any asset of the Company or any
Company Subsidiary other than, in the case of each of (b), (c) and (d), any
such items that would not, individually or in the aggregate (x) be reasonably
likely to have a Company Material Adverse Effect or (y) prevent or materially
impair the ability of the Company to consummate the transactions contemplated
by this Agreement.
Section 4.5. Capitalization. (a) The authorized capital stock
of the Company consists of 50,000,000 Company Common Shares and 4,000,000
shares of preferred stock, par value $0.01 per share. As of February 1, 1999,
there were outstanding (x) 11,117,526 Company Common Shares, (y) no shares of
Company preferred stock and (z) stock options to purchase an aggregate of
1,868,553 Company Common Shares (of which options to purchase an aggregate of
874,412 Company Common Shares were exercisable and of which 1,268,469 options
have associated restoration or reload option rights). All outstanding shares
of capital stock of the Company have been duly authorized and validly issued
and are fully paid and nonassessable.
(b) As of the date hereof, except (i) as set forth in this
Section 4.5, (ii) the Rights, (iii) for changes since February 1, 1999
resulting from the exercise of stock options, the grant of stock options
pursuant to Restoration Stock Option Agreements between the Company and
directors and employees of the Company and its Subsidiaries in effect on
the date hereof or the conversion of stock units and dividend equivalents
thereon outstanding on such date, and (iv) for the rights of employees of
the Company and its Subsidiaries pursuant to the Company's Performance
Share Plan (pursuant to which up to a maximum of 114,300 Company Common
Shares may be issued) and Stock Incentive Plan, as in effect on the date
hereof there are no outstanding (x) shares of capital stock or other voting
securities of the Company, (y) securities of the Company convertible into
or exchangeable for shares of capital stock or voting securities of the
Company, and (z) options or other rights to acquire from the Company, and
no obligation of the Company to issue, any capital stock, voting securities
or securities convertible into or exchangeable for capital stock or voting
securities of the Company (the items in clauses (x), (y) and (z) being
referred to collectively as the "Company Securities"). There are no
outstanding obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any Company Securities.
Section 4.6. Subsidiaries. (a) Each Subsidiary of the Company
is a corporation duly incorporated or an entity duly organized, and is validly
existing and in good standing, under the laws of its jurisdiction of
incorporation or organization, has all powers and authority and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted and is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, in each case with such exceptions as,
individually or in the aggregate, would not be reasonably likely to have a
Company Material Adverse Effect. The Company Disclosure Schedule sets forth a
list of all Subsidiaries of the Company and their respective jurisdictions of
incorporation or organization and identifies the Company's (direct or
indirect) percentage equity ownership interest therein.
(b) The Company conducts its insurance operations through the
Subsidiaries listed in Section 4.6(b) of the Company Disclosure Schedule
(collectively, the "Company Insurance Subsidiaries"). Each of the Company
Insurance Subsidiaries is, where required, (i) duly licensed or authorized as
an insurance company or reinsurer in its jurisdiction of incorporation, (ii)
duly licensed or authorized as an insurance company and, where applicable, a
reinsurer, or is an eligible excess or surplus lines insurer, in each other
jurisdiction where it is required to be so licensed, authorized or eligible,
and (iii) duly authorized or eligible in its jurisdiction of incorporation and
each other applicable jurisdiction to write each line of business reported as
being written in the Company SAP Statements (as hereinafter defined), except
where the failure to be so licensed, authorized or eligible, individually or
in the aggregate, would not be reasonably likely to have a Company Material
Adverse Effect. The Company has made all required filings under applicable
insurance holding company statutes except where the failure to file,
individually or in the aggregate, would not be reasonably likely to have a
Company Material Adverse Effect.
(c) All of the outstanding shares of capital stock of, or other
ownership interest in, each Subsidiary of the Company has been validly issued
and is fully paid and nonassessable. All of the outstanding capital stock of,
or other ownership interest, which is owned, directly or indirectly, by the
Company in, each of its Subsidiaries is owned free and clear of any Lien and
free of any other limitation or restriction (including any limitation or
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests) with such exceptions as, individually or
in the aggregate, would not be reasonably likely to have a Company Material
Adverse Effect. There are no outstanding (i) securities of the Company or any
of its Subsidiaries convertible into or exchangeable or exercisable for shares
of capital stock or other voting securities or ownership interests in any of
its Subsidiaries, (ii) options, warrants or other rights to acquire from the
Company or any of its Subsidiaries, and no other obligation of the Company or
any of its Subsidiaries to issue, any capital stock, voting securities or other
ownership interests in, or any securities convertible into or exchangeable or
exercisable for any capital stock, voting securities or ownership interests in,
any of its Subsidiaries or (iii) obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any outstanding
securities of any of its Subsidiaries or any capital stock of, or other
ownership interests in, any of its Subsidiaries.
Section 4.7. The Company SEC Documents. (a) The Company has
made available to Parent the Company SEC Documents and any other communication
received from or sent to the SEC. The Company has filed all reports, filings,
registration statements and other documents required to be filed by it with
the SEC since December 31, 1996. No Company Subsidiary is required to file
any form, report, registration statement or prospectus or other document with
the SEC.
(b) As of its filing date, each Company SEC Document complied
as to form in all material respects with the applicable requirements of the
Securities Act and/or the Exchange Act, as the case may be.
(c) No Company SEC Document filed pursuant to the Exchange Act
contained, as of its filing date or mailing date, as applicable, any untrue
statement of a material fact or omitted to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. No Company SEC Document, as
amended or supplemented, if applicable, filed pursuant to the Securities Act
contained, as of the date such document or amendment became effective, any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading.
Section 4.8. Financial Statements; No Material Undisclosed
Liabilities. (a) The audited consolidated financial statements and unaudited
consolidated interim financial statements of the Company included in the
Company 10-Ks and the Company 10-Qs fairly present in all material respects,
in conformity with generally accepted accounting principles applied on a
consistent basis ("GAAP") (except as may be indicated in the notes thereto),
the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended (subject to normal
year-end adjustments in the case of any unaudited interim financial
statements).
(b) The Company has delivered or made available to Parent
true and complete copies of the annual and quarterly statements of each of
the Company Insurance Subsidiaries as filed with the applicable insurance
regulatory authorities for the years ended December 31, 1995, 1996 and 1997
and the quarterly periods ended March 31, 1998, June 30, 1998 and September
30, 1998, including all exhibits, interrogatories, notes, schedules and any
actuarial opinions, affirmations or certifications or other supporting
documents filed in connection therewith (collectively, the "Company SAP
Statements"). The Company SAP Statements fairly present in all material
respects, in conformity with statutory accounting practices prescribed or
permitted by the applicable insurance regulatory authority applied on a
consistent basis, the statutory financial position of such Company
Insurance Subsidiaries as at the respective dates thereof and the results
of operations of such Subsidiaries for the respective periods then ended.
The Company SAP Statements complied in all material respects with all
applicable laws, rules and regulations when filed, and no material
deficiency has been asserted with respect to any Company SAP Statements by
the applicable insurance regulatory body or any other governmental agency
or body. The annual statutory balance sheets and income statements
included in the Company SAP Statements have been audited by Ernst & Young
LLP, and the Company has delivered or made available to Parent true and
complete copies of all audit opinions related thereto. The Company has
delivered or made available to Parent true and complete copies of all
examination reports of insurance departments and any insurance regulatory
agencies since January 1, 1995 relating to the Company Insurance
Subsidiaries.
(c) There are no liabilities of the Company or any Company
Subsidiary of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, in each case, that are required by GAAP
to be set forth on a consolidated balance sheet of the Company, other than:
(i) liabilities or obligations disclosed or
provided for in the Company Balance Sheet or disclosed in
the notes thereto;
(ii) liabilities or obligations under this
Agreement and the Stock Option Agreement or incurred in
connection with the transactions contemplated hereby and
thereby; and
(iii) other liabilities or obligations, which,
individually or in the aggregate, would not be reasonably
likely to have a Company Material Adverse Effect.
Section 4.9. Information to Be Supplied. (a) The information
to be supplied in writing by the Company expressly for inclusion or
incorporation by reference in the Proxy Statement/Prospectus will (i) in the
case of the Registration Statement, at the time it becomes effective, not
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 not misleading and (ii) in the case of the remainder of the
Proxy Statement/Prospectus, at the time of the mailing thereof and at the time
of the Company Stockholder Meeting, not 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 (with respect to information relating to the
Company) as to form in all material respects with the provisions of the
Securities Act and the Exchange Act.
(b) Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any statements made or incorporated
by reference in the Proxy Statement/Prospectus based on information supplied
in writing by Parent or MergerSub expressly for use therein.
Section 4.10. Absence of Certain Changes. Since December 31,
1997, except as otherwise expressly contemplated by this Agreement, the
Company and the Company Subsidiaries have conducted their business in the
ordinary course consistent with past practice and there has not been (a) any
action, event, occurrence, development, change in method of doing business,
or state of circumstances or facts that, individually or in the aggregate, has
had or would be reasonably likely to have a Company Material Adverse Effect; or
(b) any change by the Company in accounting principles or methods (other than
as required by GAAP).
Section 4.11. Litigation. There is no action, suit,
investigation, arbitration or proceeding (or to the knowledge of the Company
any basis therefor) pending against, or to the knowledge of the Company
threatened against, the Company or any Company Subsidiary or any of their
respective assets or properties before any arbitrator or Governmental Entity
that, individually or in the aggregate, would be reasonably likely to have a
Company Material Adverse Effect.
Section 4.12. Taxes. (a) All material tax returns,
statements, reports and forms (collectively, the "Company Returns") required
to be filed with any taxing authority by, or with respect to, the Company and
the Company Subsidiaries were filed on a timely basis and were true, complete
and correct except to the extent that the failure to file or be true, complete
and correct would not, individually or in the aggregate, have a Company
Material Adverse Effect; (b) the Company and the Company Subsidiaries have
timely paid all material taxes (which for purposes of Section 4.12 shall
include interest, penalties and additions to tax with respect thereto) shown
as due and payable on the Company Returns (other than taxes which are being
contested in good faith and for which adequate reserves are reflected on the
Company Balance Sheet) except to the extent that the failure to pay would not,
individually or in the aggregate, have a Company Material Adverse Effect; (c)
the Company and the Company Subsidiaries have made provision for all material
taxes payable by them for which no Company Return has yet been filed except for
inadequately reserved taxes that would not, individually or in the aggregate,
have a Company Material Adverse Effect; (d) no taxing authority has asserted
or initiated (or threatened to assert or initiate) in writing any action, suit,
proceeding or claim against the Company or any of the Company Subsidiaries
that, individually or in the aggregate, would have a Company Material Adverse
Effect; (e) there is no application pending for approval of a change in
accounting methods; (f) neither the Company nor any of the Company
Subsidiaries has been a member of an affiliated, consolidated, combined or
unitary group other than one of which the Company was the common parent; and
(g) neither the Company nor any of the Company Subsidiaries is obligated by
any contract, agreement or other arrangement to indemnify any other person
with respect to taxes or to compensate any third party for any tax payment or
tax liability under a tax sharing or similar agreement.
Section 4.13. Employees and Employee Benefits. (a) Section
4.13(a) of the Company Disclosure Schedule contains a correct and complete list
identifying each material "employee benefit plan", as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974 ("ERISA"), each
employment, severance or similar contract, plan, arrangement or policy and
each other plan or arrangement (written or oral) providing for compensation,
bonuses, profit-sharing, stock option or other stock related rights or other
forms of incentive or deferred compensation, insurance coverage (including any
self-insured arrangements), health or medical benefits, disability benefits,
supplemental unemployment benefits, severance benefits and post-employment or
retirement benefits (including compensation, pension, health, medical or life
insurance benefits) which is maintained, administered or contributed to by the
Company or any Company Subsidiary and covers any employee or former employee
of the Company or any Company Subsidiary. Copies of such plans (and, if
applicable, related trust agreements) and all amendments thereto and written
summary descriptions thereof have been furnished, or will be made available
upon request, to Parent together with the most recent annual report (Form 5500
including, if applicable, Schedule B thereto) prepared in connection with any
such plan. Such plans are referred to collectively herein as the "Company
Employee Plans".
(b) Neither the Company nor any current ERISA Affiliate
maintains, contributes to or is required to contribute to, or has in the
past maintained, contributed to or been required to contribute to any plan
subject to Title IV of ERISA or Section 412 of the Code, including, without
limitation, any "multiemployer plan" (as defined in Section 3(37) of
ERISA). To the knowledge of the Company, no event has occurred or is
reasonably likely to occur that would cause the Company or any ERISA
Affiliate to incur liability or be subject to any lien under Title IV of
ERISA or Section 412 of the Code with respect to any plan currently or
previously maintained or contributed to by any former ERISA Affiliate. For
purposes of this Agreement the term "ERISA Affiliate" shall mean any entity
which, together with the Company, would be treated as a single employer
under Section 414 of the Code.
(c) Each Company Employee Plan which is intended to be qualified
under Section 401(a) of the Code is so qualified and has received a favorable
determination letter from the Internal Revenue Service stating that it is so
qualified and, to the knowledge of the Company, nothing has occurred since the
date of such letter that would cause it to be revoked, whether prospectively
or retroactively. The Company has furnished, or will make available upon
request, to Parent copies of the most recent Internal Revenue Service
determination letters with respect to each such Company Employee Plan. Each
Company Employee Plan has been maintained in substantial compliance with its
terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations, including but not limited to ERISA and the Code, which
are applicable to such Company Employee Plan except as would not be reasonably
likely to have a Company Material Adverse Effect. To the knowledge of the
Company, nothing has been done or omitted to be done and no transaction or
holding of any asset under or in connection with any Company Employee Plan has
occurred that will make the Company or any Company Subsidiary, or any officer
or director of the Company or any Company Subsidiary, subject to any liability
under Title I of ERISA or liable for any tax pursuant to Section 4975 of the
Code (assuming the taxable period of any such transaction expired as of the
date hereof) that would be reasonably likely to have a Company Material
Adverse Effect.
(d) The execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Company
Employee Plan, trust or loan that will or may result in any payment (whether
of severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits with
respect to any current or former employee, executive or director of the
Company or any Company Subsidiary. To the knowledge of the Company, there is
no contract, agreement, plan or arrangement covering any employee or former
employee of the Company that, individually or collectively, would be
reasonably likely to give rise to the payment of any amount that would result
in a material loss of tax deductions pursuant to the terms of Section 162(m) of
the Code.
(e) Neither the Company nor any Company Subsidiary maintains or
contributes to any Company Employee Plan which provides, or has any liability
to provide, life insurance, medical or other welfare benefits to any
employee(s) upon their retirement or termination of employment, except as
required by Section 601 of ERISA and Section 4980B of the Code.
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) relating to any Company Employee Plan
which would increase materially the expense of maintaining such Company
Employee Plans in the aggregate above the level of the expense incurred in
respect thereof for the fiscal year ended December 31, 1998.
(g) Neither the Company nor any Company Subsidiary is presently
or has been in the past a party to, or bound by, any collective bargaining
agreement or union contract with respect to employees. There are no pending
or, to the knowledge of the Company, threatened representation questions
respecting any employees of the Company or any Company Subsidiary.
(h) The Company and each Company Subsidiary is in compliance
with all applicable federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of
employment, wages, hours and withholding except as would not be reasonably
likely to have a Company Material Adverse Affect.
Section 4.14. Compliance with Insurance Laws; Licenses and
Permits. (a) The business and operations of the Company and the Company
Insurance Subsidiaries have been conducted in compliance with all applicable
statutes and regulations regulating the business of insurance and all
applicable orders and directives of insurance regulatory authorities and
market conduct recommendations resulting from market conduct examinations of
insurance regulatory authorities (collectively, "Insurance Laws"), except
where the failure to so conduct business and operations would not,
individually or in the aggregate, be reasonably likely to have a Company
Material Adverse Effect or prevent or materially impair the ability of the
Company to consummate the transactions contemplated by this Agreement or the
Stock Option Agreement or cause the loss of eligibility to do business where
such loss would, individually or in the aggregate, have a Company Material
Adverse Effect. Each Company Insurance Subsidiary and to the knowledge of the
Company each program administrator listed on Section 4.14(a) of the Company
Disclosure Schedule has marketed, sold and issued insurance products in
compliance, in all material respects, with Insurance Laws applicable to the
business of such Company Insurance Subsidiary and in the respective
jurisdictions in which such products have been sold. There is no pending or,
to the knowledge of the Company, threatened charge by any insurance regulatory
authority that any of the Company Insurance Subsidiaries has violated, nor any
pending or, to the knowledge of the Company, threatened investigation by any
insurance regulatory authority with respect to possible violations of, any
applicable Insurance Laws where such violations would, individually or in the
aggregate, be reasonably likely to have a Company Material Adverse Effect.
None of the Company Insurance Subsidiaries is subject to any order or decree
of any insurance regulatory authority relating specifically to such Company
Insurance Subsidiary (as opposed to insurance companies generally) which would,
individually or in the aggregate, be reasonably likely to have a Company
Material Adverse Effect. The Company Insurance Subsidiaries have filed all
reports required to be filed with any insurance regulatory authority on or
before the date hereof as to which the failure to file such reports would
individually or in the aggregate, be reasonably likely to have a Company
Material Adverse Effect.
(b) In addition to Insurance Laws the business of each of the
Company and the Company Insurance Subsidiaries have not been, and are not
being, conducted in violation of any federal, state, local or foreign law,
statute, ordinance, rule, regulation, judgment, order, injunction, decree,
arbitration award, agency requirement, license or permit of any Governmental
Entity (collectively with Insurance Laws, "Laws"), except for violation or
possible violations that, individually or in the aggregate, are not reasonably
likely to have a Company Material Adverse Effect or prevent or materially
impair the ability of the Company to consummate the transactions contemplated
by this Agreement or the Stock Option Agreement. No investigation or review
by any Governmental Entity with respect to the Company is pending or to the
knowledge of the Company, threatened, nor has any Governmental Entity to the
knowledge of the Company indicated, formally or informally, an intention to
conduct the same, except for those the outcome of which are not, individually
or in the aggregate, reasonably likely to have a Company Material Adverse
Effect or prevent or materially impair the ability of the Company to
consummate the transactions contemplated by this Agreement or the Stock Option
Agreement. The Company and the Company Insurance Subsidiaries each has all
permits, licenses, trademarks, patents, trade names, copyrights, service
marks, franchises, variances, exemptions, orders and other governmental
authorizations, consents and approvals necessary to conduct its business as
presently conducted except those the absence of which are not, individually or
in the aggregate, reasonably likely to have a Company Material Adverse Effect
or prevent or materially impair the ability of the Company to consummate the
Merger and the other transactions contemplated by this Agreement or the Stock
Option Agreement. Section 4.14(b) of the Company Disclosure Schedule sets
forth (i) every insurance license of the Company or its Subsidiaries, and (ii)
every jurisdiction where the Company and its Subsidiaries are eligible to
engage in surplus lines business.
Section 4.15. Insurance Matters. (a) Except as otherwise
would not, individually or in the aggregate, be reasonably likely to have a
Company Material Adverse Effect, to the extent required under applicable law,
all policies, binders, slips, certificates and other agreements of insurance
in effect as of the date hereof (including all applications, supplements,
endorsements, riders and ancillary agreements in connection therewith) that
are issued by the Company Insurance Subsidiaries (the "Company Insurance
Contracts") and any and all marketing materials, are 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.
Such forms comply in all material respects with the insurance statutes,
regulations and rules applicable thereto.
(b) To the knowledge of the Company, all reinsurance and
coinsurance treaties or agreements, including retrocessional agreements, to
which the Company or any Company Insurance Subsidiary is a party or under
which the Company or any Company Insurance Subsidiary has any existing rights,
obligations or liabilities are in full force and effect except for such
treaties or agreements the failure of which to be in full force and effect as
would not, individually or in the aggregate, be reasonably likely to result in
a cost to the Company or any of its Subsidiaries of an amount in excess of
$500,000. Neither the Company nor any Company Insurance Subsidiary, nor, to
the knowledge of the Company, any other party to a reinsurance or coinsurance
treaty or agreement to which the Company or any Company Insurance Subsidiary
is a party, is in default in any material respect as to any provision thereof,
and no such agreement contains any provision providing that the other party
thereto may terminate such agreement by reason of the transactions
contemplated by this Agreement except for such treaties or agreements the
default under or termination of which as would not, individually or in the
aggregate, be reasonably likely to result in a cost to the Company or any of
its Subsidiaries of an amount in excess of $500,000. The Company has not
received any notice to the effect that the financial condition of any other
party to any such agreement is impaired with the result that a default
thereunder may reasonably be anticipated, whether or not such default may be
cured by the operation of any offset clause in such agreement.
(c) Prior to the date hereof, the Company has delivered or made
available to Parent a true and complete copy of any actuarial reports prepared
by actuaries, independent or otherwise, with respect to the Company or any
Company Insurance Subsidiary since December 31, 1995, and all attachments,
addenda, supplements and modifications thereto (the "Company Actuarial
Analyses"). To the knowledge of the Company (x) the information and data
furnished by the Company or any Company Insurance Subsidiary to its
independent actuaries in connection with the preparation of the Company
Actuarial Analyses were accurate in all material respects and (y) each Company
Actuarial Analysis was based upon an accurate inventory of policies in force
for the Company and the Company Insurance Subsidiaries, as the case may be, at
the relevant time of preparation, was prepared in all material respects using
appropriate modeling procedures accurately applied and in conformity with
published actuarial standards of practice consistently applied, and the
projections contained therein were properly prepared in accordance with the
assumptions stated therein.
(d) As of the date hereof, the persons specified in Section
1.01(a) of the Company Disclosure Schedule have no reason to believe that any
rating presently held by the Company Insurance Subsidiaries will 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.
Section 4.16. Liabilities and Reserves. (a) The reserves
carried on the Company SAP Statements of each Company Insurance Subsidiary for
the year ended December 31, 1997 and the nine month period ended September 30,
1998 for unearned premiums, losses, loss adjustment expenses, 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 jurisdiction of domicile of such Company Insurance
Subsidiary, were determined in all material respects in accordance with
published actuarial standards of practice and principles consistently applied,
and are fairly stated in all material respects in accordance with accepted
actuarial and statutory accounting principles. Such reserves were adequate in
the aggregate to cover the total amount of all reasonably anticipated
liabilities of the Company and each Company Insurance Subsidiary under all
outstanding insurance, reinsurance and other applicable agreements as of the
respective dates of such Company SAP Statements. The admitted assets of the
Company and each Company Insurance Subsidiary as determined under applicable
Laws are in an amount at least equal to the minimum amounts required by
applicable Laws.
(b) 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 the Company, no
claim or assessment is pending or threatened against any Company Insurance
Subsidiary by (i) any state insurance guaranty associations in connection
with such association's fund relating to insolvent insurers or (ii) any
assigned risk plan or other involuntary market plan which if determined
adversely would, individually or in the aggregate, be reasonably likely to
result in a cost to the Company or any of its Subsidiary of an amount in
excess of $500,000.
Section 4.17. Title to Properties. The Company has good and
marketable title to its headquarters located at 82 Hopmeadow Street in
Simsbury, Connecticut ("Owned Property") and such property is free and clear
of all Liens except for such Liens, defects in title, easements, restrictive
covenants and similar encumbrances or impediments that, in the aggregate, do
not materially interfere with the ability of the Company and its Subsidiaries
to conduct their business, taken as a whole, as currently conducted.
Section 4.18. Intellectual Property. With such exceptions as,
individually or in the aggregate, would not be reasonably likely to have a
Company Material Adverse Effect, the Company and the Company Subsidiaries own
or have a valid license to use each trademark, service mark, trade name, mask
work, invention, patent, trade secret, copyright, know-how (including any
registrations or applications for registration of any of the foregoing) or any
other similar type of proprietary intellectual property right (collectively,
the "Company Intellectual Property") necessary to carry on the business of the
Company and the Company Subsidiaries, taken as a whole, as currently
conducted. Neither the Company nor any Company Subsidiary has received any
written notice of infringement of or challenge to, and, to the Company's
knowledge, there are no claims pending with respect to the rights of others to
the use of, any Company Intellectual Property. Section 4.18 to the Company
Disclosure Schedule identifies each trademark, service mark and trade name
registered with the U.S. Trademark and Patent Office which the Company and its
Subsidiaries own.
Section 4.19. Environmental Matters. (a) With such exceptions
as, individually or in the aggregate, would not be reasonably likely to have a
Company Material Adverse Effect, (i) no written notice, notification, demand,
request for information, citations, summons, complaint or order has been
received by, and no investigation, action, claim, suit, proceeding or review is
pending or threatened by any Person against, the Company or any Company
Subsidiary, with respect to any applicable Environmental Law, (ii) the Company
and the Company Subsidiaries are and have been in compliance with all
applicable Environmental Laws and (iii) there are no liabilities of the
Company or any Company Subsidiary of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, arising under or
relating to any Environmental Law, and there are no fact, conditions,
situations or set of circumstances that could reasonably be expected to result
in or be the basis for any such liability.
(b) For purposes of this Section 4.19 the term "Environmental
Laws" means any federal, state, local and foreign statutes, laws (including,
without limitation, common law), judicial decisions, regulations, ordinances,
rules, judgments, orders, codes, injunctions, permits or governmental
agreements relating to human health and safety, the environment or to
pollutants, contaminants, wastes, or chemicals.
Section 4.20. Finders' Fees; Opinions of Financial Advisor.
(a) Except for Donaldson, Lufkin & Jenrette Securities Corporation and Salomon
Smith Barney Inc., there is no investment banker, broker, finder or other
intermediary which has been retained by, or is authorized to act on behalf of,
the Company or any Company Subsidiary who might be entitled to any fee or
commission from Parent or any of its Affiliates upon consummation of the
transactions contemplated by this Agreement or the Stock Option Agreement.
(b) The Company has received the opinions of Donaldson,
Lufkin & Jenrette Securities Corporation and Salomon Smith Barney Inc.,
dated as of the date hereof, to the effect that, as of such date, the
Merger Consideration is fair to the holders of Company Common Shares from a
financial point of view.
Section 4.21. Required Vote; Board Approval. (a) The only
vote of the holders of any class or series of capital stock of the Company
required by law, rule or regulation to approve this Agreement, the Merger
and/or any of the other transactions contemplated hereby is the affirmative
vote (the "Company Stockholder Approval") of the holders of a majority of the
outstanding Company Common Shares in favor of the adoption and approval of
this Agreement and the Merger.
(b) The Company's Board of Directors has unanimously (a)
determined that this Agreement and the Stock Option Agreement and the
transactions contemplated hereby and thereby, including the Merger, are in the
best interests of the Company and its stockholders, (b) approved this
Agreement and the Stock Option Agreement and the transactions contemplated
hereby and thereby and (c) resolved to recommend to such stockholders that
they vote in favor of adopting and approving this Agreement and the Merger in
accordance with the terms hereof.
Section 4.22. State Takeover Statutes; Rights Agreement. (a)
The Company has taken all actions required to be taken by it in order to exempt
this Agreement and the Stock Option Agreement and the transactions
contemplated hereby and thereby from the provisions of Section 203 of the
DGCL, and accordingly, neither such Section nor to the knowledge of the
Company any other anti-takeover statute or regulation applies to the Merger or
any of such transactions. To the knowledge of the Company no other "control
share acquisition", "fair price" or other anti-takeover laws or regulations
enacted under state or federal laws in the United States apply to this
Agreement and the Stock Option Agreement or any of the transactions
contemplated hereby and thereby.
(b) The Company has taken all action necessary, so long as this
Agreement or the Stock Option Agreement is in effect, to (i) render the Rights
inapplicable to the Merger and the other transactions contemplated by this
Agreement and the Stock Option Agreement and (ii) ensure that (A) neither
Parent, MergerSub nor any of their Affiliates will become an Acquiring Person
(as defined in the Rights Agreement) as a result of the transactions
contemplated hereby and thereby and (B) neither a Distribution Date nor an
Acquisition Date (each as defined in the Rights Agreement) shall occur by
reason of the approval or execution of this Agreement or the Stock Option
Agreement, the announcement or consummation of the Merger or the announcement
or consummation of any of the other transactions contemplated by this
Agreement and the Stock Option Agreement.
Section 4.23. Tax Treatment. Neither the Company nor any of
its Affiliates has taken or agreed to take any action or, to the knowledge of
the Company is aware of any fact or circumstance that would prevent the Merger
from qualifying as a 368 Reorganization.
Section 4.24. Year 2000 Compliance. The Company has (i)
completed a review and assessment of all areas within the business and
operations of the Company and the Subsidiaries (including those areas affected
by suppliers and vendors) that could be adversely affected by the "Year 2000
Problem" (that is, the risk that computer software and systems used by the
Company or any of the Subsidiaries (or their respective suppliers and vendors)
may be unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999), (ii)
developed a plan and timeline for addressing the Year 2000 Problem on a timely
basis, which plan and timeline have been made available to Parent and (iii) to
date, implemented such plan in all material respects in accordance with such
timetable. The Company reasonably believes that all computer software and
systems (including those of suppliers and vendors) that are used in the
business or operations of the Company or the Subsidiaries as presently
conducted (the "Company Systems") will on a timely basis be able to perform
properly date-sensitive functions for all dates before and from and after
January 1, 2000 ("Year 2000 Compliant") except for such failures to perform
which would not, individually or in the aggregate, be reasonably likely to have
a Company Material Adverse Effect.
ARTICLE 5
Representations and Warranties of Parent
Except as disclosed in (i) the Parent Disclosure Schedule
attached hereto or (ii) the Parent SEC Documents filed prior to the date
hereof, Parent represents and warrants to the Company that:
Section 5.1. Corporate Existence and Power. Each of Parent and
MergerSub is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate powers required to carry on its business as now conducted. Parent
is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified would not, individually
or in the aggregate, be reasonably likely to have a Parent Material Adverse
Effect. Parent has heretofore made available to the Company true and complete
copies of Parent's restated certificate of incorporation and bylaws as
currently in effect. MergerSub was formed solely for the purpose of effecting
the Merger and, since the date of its incorporation, MergerSub has not engaged
in any activities and has not incurred any liabilities or obligations other
than in connection with its formation and in connection with or as
contemplated by this Agreement.
Section 5.2. Corporate Authorization. The execution, delivery
and performance by Parent and MergerSub (as applicable) of this Agreement and
the Stock Option Agreement and the consummation by Parent and MergerSub (as
applicable) of the transactions contemplated hereby and thereby are within the
corporate powers of Parent and MergerSub (as applicable) and have been duly
authorized by all necessary corporate action. Assuming that each of this
Agreement and the Stock Option Agreement constitutes the valid and binding
obligation of the Company, each of this Agreement and the Stock Option
Agreement constitutes a valid and binding agreement of each of Parent and
MergerSub (as applicable), enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws, now or
hereafter in effect, relating to or affecting creditors' rights and remedies
and to general principles of equity.
Section 5.3. Governmental Authorization. The execution,
delivery and performance by Parent and MergerSub of this Agreement, the
execution delivery and performance by Parent of the Stock Option Agreement and
the consummation by Parent and MergerSub of the transactions contemplated
hereby and thereby (as applicable) require no action by or in respect of, or
filing with, any Governmental Entity other than (a) those set forth in clauses
(a) through (g) of Section 4.3 and (b) such other consents, approvals, actions,
orders, authorizations, registrations, declarations and filings which, if not
obtained or made, would not, individually or in the aggregate, (i) be
reasonably likely to have a Parent Material Adverse Effect, or (ii) prevent or
materially impair the ability of Parent and MergerSub to consummate the
transactions contemplated by this Agreement or the Stock Option Agreement.
Section 5.4. Non-Contravention. The execution, delivery and
performance by Parent and MergerSub of this Agreement, the execution delivery
and performance by Parent of the Stock Option Agreement and the consummation
by Parent and MergerSub of the transactions contemplated hereby and thereby
(as applicable) do not and will not (a) contravene or conflict with the
restated certificate of incorporation or bylaws of Parent or the certificate
of incorporation or bylaws of MergerSub, (b) assuming compliance with the
matters referred to in Section 5.3, contravene or conflict with any provision
of law, regulation, judgment, injunction, order or decree binding upon or
applicable to Parent or any Parent Subsidiary, (c) constitute a default under
or give rise to a right of termination, cancellation or acceleration of any
right or obligation of Parent or any Parent Subsidiary or to a loss of any
benefit or status to which Parent or any Parent Subsidiary is entitled under
any provision of any agreement, contract or other instrument binding upon
Parent or any Parent Subsidiary or any license, franchise, permit or other
similar authorization held by Parent or any Parent Subsidiary, or (d) result
in the creation or imposition of any Lien on any asset of Parent or any Parent
Subsidiary other than, in the case of each of (b), (c) and (d), any such items
that would not, individually or in the aggregate, (x) be reasonably likely to
have a Parent Material Adverse Effect or (y) prevent or materially impair the
ability of Parent or MergerSub to consummate the transactions contemplated by
this Agreement or the Stock Option Agreement.
Section 5.5. Capitalization of Parent and MergerSub. (a) The
authorized capital stock of Parent consists of 600,000,000 Parent Common
Shares, and 4,000,000 shares of preferred stock, $1.00 par value per share (of
which 500,000 have been designated Series A Cumulative Participating Preferred
Stock). There were outstanding (i) as of January 31, 1999, 162,008,492 Parent
Common Shares and no shares of the preferred stock, (ii) as of December 31,
1998, stock options to purchase an aggregate of 9,669,816 Parent Common Shares
(of which options to purchase an aggregate of 6,573,577 Parent Common Shares
were vested and exercisable) and (iii) as of December 31, 1998, employee
performance incentive awards relating to an aggregate of 556,517 Parent Common
Shares. All outstanding shares of capital stock of Parent have been duly
authorized and validly issued and are fully paid and nonassessable.
(b) As of the date hereof, except as set forth in this Section
5.5 and except for changes since December 31, 1998 resulting from the grant of
stock options and other awards under the Parent's Long-Term Stock Incentive
Plan (1996) in the ordinary course of business consistent with past practice
and the exercise of stock options outstanding on such date and the payment of
performance incentive awards outstanding on such date, there are no
outstanding (i) shares of capital stock or other voting securities of Parent,
(ii) securities of Parent convertible into or exchangeable for shares of
capital stock or voting securities of Parent, and (iii) options or other
rights to acquire from Parent, and no obligation of Parent to issue, any
capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Parent (the items in
clauses (i), (ii) and (iii) being referred to collectively as the "Parent
Securities"). There are no outstanding obligations of Parent or any Parent
Subsidiary to repurchase, redeem or otherwise acquire any Parent Securities.
(c) The Parent Common Shares to be issued as part of the Merger
Consideration have been duly authorized and, when issued and delivered in
accordance with the terms of this Agreement, will have been validly issued,
fully paid and nonassessable and free of any preemptive or other similar
right.
(d) The authorized capital stock of MergerSub consists solely of
100 MergerSub Common Shares, of which, as of the date hereof, 100 were issued
and outstanding. All outstanding MergerSub Common Shares have been duly
authorized and validly issued and are fully paid and nonassessable, free of any
preemptive or other similar right.
Section 5.6. Parent SEC Documents. (a) Parent has made
available to the Company the Parent SEC Documents. Parent has filed all
reports, filings, registration statements and other documents required to be
filed by it with the SEC since December 31, 1996.
(b) As of its filing date, each Parent SEC Document complied as
to form in all material respects with the applicable requirements of the
Securities Act and/or the Exchange Act, as the case may be.
(c) No Parent SEC Document filed pursuant to the Exchange Act
contained, as of its filing date or mailing date, as applicable, any untrue
statement of a material fact or omitted to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. No Parent SEC Document, as
amended or supplemented, if applicable, filed pursuant to the Securities Act as
of the date such document or amendment became effective contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein not misleading.
Section 5.7. Financial Statements; No Material Undisclosed
Liabilities. (a) The audited consolidated financial statements and unaudited
consolidated interim financial statements of Parent included in the Parent
10-Ks and the Parent 10-Qs fairly present in all material respects, in
conformity with GAAP (except as may be indicated in the notes thereto), the
consolidated financial position of Parent and its consolidated Subsidiaries as
of the dates thereof and their consolidated results of operations and cash
flows for the periods then ended (subject to normal year-end adjustments in
the case of any unaudited interim financial statements).
(b) Parent has delivered or made available to the Company true
and complete copies of the annual and quarterly statements of each of the
United States Parent Insurance Subsidiaries as filed with the applicable
insurance regulatory authorities for the years ended December 31, 1995,
1996 and 1997 and the quarterly periods ended March 31, 1998, June 30, 1998
and September 30, 1998, including all exhibits, interrogatories, notes,
schedules and any actuarial opinions, affirmations or certifications or
other supporting documents filed in connection therewith (collectively, the
"Parent SAP Statements"). The Parent SAP Statements fairly present in all
material respects, in conformity with statutory accounting practices
prescribed or permitted by the applicable insurance regulatory authority
applied on a consistent basis, the statutory financial position of such
Parent Insurance Subsidiaries as at the respective dates thereof and the
results of operations of such Subsidiaries for the respective periods then
ended. The Parent SAP Statements complied in all material respects with
all applicable laws, rules and regulations when filed, and no material
deficiency has been asserted with respect to any Parent SAP Statements by
the applicable insurance regulatory body or any other governmental agency
or body. The annual statutory balance sheets and income statements
included in the Parent SAP Statements have been audited by Ernst & Young
LLP, and Parent has delivered or made available to the Company true and
complete copies of all audit opinions related thereto.
(c) There are no liabilities of Parent or any Parent Subsidiary
of any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise that are required by GAAP to be set forth on a
consolidated balance sheet of Parent, other than:
(i) liabilities or obligations disclosed or
provided for in the Parent Balance Sheet (including the
notes thereto);
(ii) liabilities or obligations under this
Agreement and the Stock Option Agreement or incurred in
connection with the transactions contemplated hereby and
thereby; and
(iii) other liabilities or obligations, which,
individually or in the aggregate, would not be reasonably
likely to have a Parent Material Adverse Effect.
Section 5.8. Information to Be Supplied. (a) The information
to be supplied in writing by Parent expressly for inclusion or incorporation by
reference in the Proxy Statement/Prospectus will (i) in the case of the
Registration Statement, at the time it becomes effective, not 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 not misleading and (ii) in the case of the remainder of the Proxy
Statement/Prospectus, at the time of the mailing thereof and at the time of the
Company Stockholder Meeting, not 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 (with respect to information relating to
Parent) as to form in all material respects with the provisions of the
Securities Act and the Exchange Act.
(b) Notwithstanding the foregoing, Parent makes no
representation or warranty with respect to any statements made or
incorporated by reference in the Proxy Statement/Prospectus with respect to
information supplied in writing by the Company expressly for use therein.
Section 5.9. Absence of Certain Changes. Since December 31,
1997, except as otherwise expressly contemplated by this Agreement, Parent and
the Parent Subsidiaries have conducted their business in the ordinary course
consistent with past practice and there has not been any action, event,
occurrence, development, change in method of doing business or state of
circumstances or facts that, individually or in the aggregate, has had or would
be reasonably likely to have a Parent Material Adverse Effect.
Section 5.10. Litigation. There is no action, suit,
investigation, arbitration or proceeding (or to the knowledge of Parent any
basis therefor) pending against, or to the knowledge of Parent threatened
against, Parent or any Parent Subsidiary or any of their respective assets or
properties before any arbitrator or Governmental Entity that, individually or
in the aggregate, would be reasonably likely to have a Parent Material Adverse
Effect.
Section 5.11. Compliance with Laws; Licenses and Permits. (a)
Neither Parent nor any Parent Subsidiary is in violation of, or has violated,
any applicable provisions of any laws, statutes, ordinances, regulations,
judgments, injunctions, orders or consent decrees, except for any such
violations which, individually or in the aggregate, would not be reasonably
likely to have, a Parent Material Adverse Effect. None of the Parent
Insurance Subsidiaries is subject to any order or decree of any insurance
regulatory authority specifically relating to such Parent Insurance Subsidiary
(as opposed to insurance companies generally) which would, individually or in
the aggregate, be reasonably likely to have a Parent Material Adverse Effect.
(b) Each of Parent and the Parent Subsidiaries has all permits,
licenses, approvals, authorizations of and registrations with and under all
federal, state, local and foreign laws, and from all Governmental Entities
required by Parent and the Parent Subsidiaries to carry on their respective
businesses as currently conducted, except where the failure to have any such
permits, licenses, approvals, authorizations or registrations, individually or
in the aggregate, would not be reasonably likely to have a Parent Material
Adverse Effect. No investigation or review by any Governmental Entity with
respect to Parent is pending or to the knowledge of the Parent, threatened, nor
has any Governmental Entity to the knowledge of Parent indicated, formally or
informally, an intention to conduct the same, except for those the outcome of
which are not, individually or in the aggregate, reasonably likely to have a
Parent Material Adverse Effect or prevent or materially impair the ability of
Parent to consummate the transactions contemplated by this Agreement or the
Stock Option Agreement.
Section 5.12. Finders' Fees. Except for Goldman, Sachs & Co.,
whose fees will be paid by Parent, there is no investment banker, broker,
finder or other intermediary who might be entitled to any fee or commission
from Parent or any of its Affiliates upon consummation of the transactions
contemplated by this Agreement or the Stock Option Agreement.
Section 5.13. Liabilities and Reserves. (a) The reserves
carried on the Parent SAP Statements of each Parent Insurance Subsidiary for
the year ended December 31, 1997 and the nine month period ended September 30,
1998 for unearned premiums, losses, loss adjustment expenses, 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 jurisdiction of domicile of such Parent Insurance
Subsidiary, were determined in all material respects in accordance with
published actuarial standards of practice and principles consistently applied,
and are fairly stated in all material respects in accordance with accepted
actuarial and statutory accounting principles. Such reserves were adequate in
the aggregate to cover the total amount of all reasonably anticipated
liabilities of the Parent and each Parent Insurance Subsidiary under all
outstanding insurance, reinsurance and other applicable agreements as of the
respective dates of such Parent SAP Statements. The admitted assets of Parent
and each Parent Insurance Subsidiary as determined under applicable Laws are
in an amount at least equal to the minimum amounts required by applicable Laws.
(b) 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 Parent, no claim or
assessment is pending or threatened against any Parent Insurance Subsidiary by
(i) any state insurance guaranty associations in connection with such
association's fund relating to insolvent insurers or (ii) any assigned risk
plan or other involuntary market plan which if determined adversely would,
individually or in the aggregate, be reasonably likely to result in a cost to
Parent or any Subsidiary of an amount in excess of $5,000,000.
Section 5.14. Year 2000 Compliance. Parent has (i) completed a
review and assessment of all areas within the business and operations of Parent
and the Subsidiaries (including those areas affected by suppliers and vendors)
that could be adversely affected by the "Year 2000 Problem" (that is, the risk
that computer software and systems used by Parent or any of the Subsidiaries
(or their respective suppliers and vendors) may be unable to recognize and
perform properly date-sensitive functions involving certain dates prior to and
any date after December 31, 1999), (ii) developed a plan and timeline for
addressing the Year 2000 Problem on a timely basis, which plan and timeline
have been made available to the Company and (iii) to date, implemented such
plan in all material respects in accordance with such timetable. Parent
reasonably believes that all computer software and systems (including those of
vendors and suppliers) that are used in the business or operations of Parent or
the Subsidiaries as presently conducted (the "Parent Systems") will on a
timely basis be able to perform properly date-sensitive functions for all dates
before and from and after January 1, 2000 ("Year 2000 Compliant") except for
such failures to perform which would not, individually or in the aggregate,
be reasonably likely to have a Parent Material Adverse Effect.
Section 5.15. Tax Treatment. Neither Parent nor any of its
Affiliates has taken or agreed to take any action or to the knowledge of
Parent is aware of any fact or circumstance that would prevent the Merger from
qualifying as a 368 Reorganization.
ARTICLE 6
Covenants of The Company
The Company agrees that:
Section 6.1. The Company Interim Operations. Except as set
forth in the Company Disclosure Schedule or as otherwise expressly contemplated
hereby, without the prior consent of Parent (which consent shall not be
unreasonably withheld or delayed), from the date hereof until the Effective
Time, the Company shall, and shall cause each of the Company Subsidiaries to,
conduct their business in all material respects in the ordinary course
consistent with past practice and shall use commercially reasonable efforts to
(i) preserve intact its present business organization, (ii) maintain in effect
all material foreign, federal, state and local licenses, approvals and
authorizations, including, without limitation, all material licenses and
permits that are required for the Company or any Company Subsidiary to carry
on its business and (iii) preserve existing relationships with its material
customers, lenders, suppliers and others having material business
relationships with it. Without limiting the generality of the foregoing,
except as set forth in the Company Disclosure Schedule or as otherwise
expressly contemplated by this Agreement, from the date hereof until the
Effective Time, without the prior consent of Parent (which consent shall not
be unreasonably withheld or delayed), the Company shall not, nor shall it
permit any Company Subsidiary to:
(a) amend the Company's certificate of incorporation or by-laws;
(b) split, combine or reclassify any shares of capital stock
of the Company or any less-than-wholly-owned Company Subsidiary or declare,
set aside or pay any dividend or other distribution (whether in cash, stock
or property or any combination thereof) in respect of its capital stock, or
redeem, repurchase or otherwise acquire or offer to redeem, repurchase, or
otherwise acquire any of its securities or any securities of any Company
Subsidiary, except for regular quarterly cash dividends (having customary
record and payment dates, not in excess of $.02 per Company Common Share);
(c) (i) issue, deliver or sell, or authorize the issuance,
delivery or sale of, any shares of its capital stock of any class or any
securities convertible into or exercisable for, or any rights, warrants or
options to acquire, any such capital stock or any such convertible securities,
other than (A) the issuance of Company Common Shares upon the exercise of
stock options or pursuant to the Company's Performance Share Plan and Stock
Incentive Plan in accordance with their present terms and (B) the granting of
options to acquire Company Common Shares in the ordinary course of business
consistent with past practice; (ii) amend in any material respect any material
term of any outstanding security of the Company or any Company Subsidiary or
(iii) consent, including consent by the applicable committee, to any transfer
of a Company Stock Option;
(d) other than in connection with transactions permitted by
Section 6.1(e), incur any capital expenditures or any obligations or
liabilities in respect thereof, except for those (i) contemplated by the
capital expenditure budgets for the Company and Company Subsidiaries made
available to Parent, (ii) incurred in the ordinary course of business of
the Company and the Company Subsidiaries or (iii) not otherwise described
in clauses (i) and/or (ii) which, do not exceed $5 million individually or
$10 million in the aggregate;
(e) except for acquisitions in the ordinary course of the
investment activities of the Company and its Subsidiaries consistent with past
practice, acquire (whether pursuant to merger, stock or asset purchase or
otherwise) in one transaction or series of related transactions (i) any assets
(including any equity interests) having a fair market value in excess of $10
million, or (ii) all or substantially all of the equity interests of any
Person or any business or division of any Person having a fair market value in
excess of $5 million;
(f) sell, lease, encumber or otherwise dispose of any assets,
other than (i) sales in the ordinary course of business consistent with past
practice, (ii) equipment and property no longer used in the operation of the
Company's business and (iii) assets related to discontinued operations of the
Company or any Company Subsidiary;
(g) incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or warrants or rights
to acquire any debt securities of the Company or any Company Subsidiary or
guarantee any debt securities of others or request any advances in respect of,
or make any drawdowns on, any existing indebtedness which advance or drawdown
exceeds $5 million, individually, or $25 million in the aggregate;
(h) (i) enter into any agreement or arrangement that would,
after the Effective Time, limit or restrict Parent, any Parent Subsidiary
or any of their respective Affiliates other than the Company and its
Subsidiaries, from engaging or competing in any line of business or in any
location, or (ii) amend, modify or terminate any material contract,
agreement or arrangement of the Company or any Company Subsidiary or
otherwise waive, release or assign any material rights, claims or benefits
of the Company or any Company Subsidiary thereunder, other than (x)
amendment of stock option agreements, in effect on the date hereof, with
employees, officers and directors of the Company and its Subsidiaries to
provide that unvested stock options shall vest upon a change in control of
the Company and (y) causing all accrued benefits under the Company's
Benefit Equalization Plan to be fully funded through an irrevocable "Rabbi"
trust or similar funding vehicle to be established by the Company and (z)
entering into agreements with certain employees of the Company to fully
indemnify them for the effects of any excise tax that may be imposed under
Section 4999 of the Code (or any successor provision) provided that the
total aggregate amount paid under such agreements shall not exceed $2
million;
(i) (i) except in the ordinary course of business consistent
with past practice as required by law or an existing agreement, increase
the amount of compensation of any director or executive officer or make any
increase in or commitment to increase any employee benefits, (ii) except as
required by law or an agreement existing on the date hereof or as
contemplated by Schedule 6.01(i) hereto grant any material severance or
termination pay to any director, officer or employee of the Company or any
Company Subsidiary, (iii) adopt any additional employee benefit plan or,
except in the ordinary course of business, make any material contribution
to any existing such plan or (iv) except as may be required by law or
pursuant to any agreement existing on the date hereof, amend in any
material respect any Company Employee Plan, other than (x) amendment of
stock option agreements, in effect on the date hereof, with employees,
officers and directors of the Company and its Subsidiaries to provide that
unvested stock options shall vest upon a change in control of the Company
and (y) causing all accrued benefits under the Company's Benefit
Equalization Plan to be fully funded through an irrevocable "Rabbi" trust
or similar funding vehicle to be established by the Company and (z)
entering into agreements with certain employees of the Company to fully
indemnify them for the effects of any excise tax that may be imposed under
Section 4999 of the Code (or any successor provision) provided that the
total aggregate amount paid under such agreements shall not exceed $2
million;
(j) change the Company's (x) methods of accounting in effect
at September 30, 1998, except as required by changes in GAAP or by
Regulation S-X of the Exchange Act, as concurred in by its independent
public accountants or (y) fiscal year;
(k) other than in the ordinary course of business consistent
with past practice, make any tax election or enter into any settlement or
compromise of any tax liability that in either case is material to the
business of the Company and the Company Subsidiaries, taken as a whole;
(l) pay, discharge, settle or satisfy (x) any claim, liability
or obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise) for an amount in excess of $500,000 (other than insurance and
reinsurance claims arising in the ordinary course of business consistent
with past practice) other than ordinary course repayment of indebtedness or
payment of contractual obligations when due;
(m) enter into any (x) new quota share, excess or other
reinsurance transaction with a term expiring after December 31, 1999 or (y)
any renewal or extension of an existing treaty or other program for a term
that exceeds one year (unless such treaty or program shall be terminable
immediately after such one-year term by the Company or the Company
Subsidiary, as applicable);
(n) take any action that would cause any of its representations
and warranties herein to become untrue in any material respect; and
(o) agree, resolve or commit to do any of the foregoing.
Notwithstanding anything to the contrary in this Agreement, the
Company shall use its commercially reasonable efforts to complete the plan
referred to in Section 4.24 on a timely basis.
Section 6.2. Stockholder Meeting. The Company shall cause a
meeting of its stockholders (the "Company Stockholder Meeting") to be duly
called and held as soon as reasonably practicable for the purpose of obtaining
the Company Stockholder Approval. Unless otherwise required by its fiduciary
duties (as determined in good faith by a majority of its members after receipt
of advice of its outside legal counsel), (i) the Company's Board of Directors
shall recommend approval and adoption by its stockholders of this Agreement
(the "Company Recommendation"), (ii) neither the Company's Board of Directors
nor any committee thereof shall amend, modify, withdraw, condition or qualify
the Company Recommendation in a manner materially adverse to Parent or take
any action or make any statement materially inconsistent with the Company
Recommendation and (iii) the Company shall use its reasonable best efforts to
solicit the Company Stockholder Approval.
Section 6.3. Acquisition Proposals; Board Recommendation. (a)
The Company agrees that it shall not, nor shall it permit any Company
Subsidiary to, nor shall it authorize or knowingly permit any officer,
director, employee, investment banker, attorney, accountant, agent or other
advisor or representative of the Company or any Company Subsidiary, directly or
indirectly, to (i) take any action to solicit, initiate or facilitate or
encourage the submission of any Acquisition Proposal, (ii) engage in any
negotiations regarding, or furnish to any Person any non-public information
with respect to, or take any other action knowingly to facilitate any
inquiries or the making of any proposal that constitutes, or may be reasonably
expected to lead to, any Acquisition Proposal, (iii) grant any waiver or
release under any standstill or similar agreement with respect to any class of
the Company's equity securities or (iv) enter into any agreement with respect
to any Acquisition Proposal, other than in the manner contemplated by Section
6.3(d); provided, however, that the Company may take any actions described in
the foregoing clauses (i), (ii), (iii), or (iv) in respect of any Person who
makes a bona fide Acquisition Proposal, but only if (x) the Board of Directors
of the Company determines in good faith (after receipt of advice of its
outside legal counsel) that it is required to take such actions in order to
comply with its fiduciary duties under applicable law and (y) prior to
furnishing any non-public information to such Person, such Person shall have
entered into a confidentiality agreement with the Company on terms no less
favorable to the Company than the Confidentiality Agreement between the
Company and Parent dated as of January 5, 1999. The Company shall cease and
cause to be terminated immediately all existing discussions or negotiations,
if any, with any Persons conducted heretofore with respect to, or that could
be reasonably expected to lead to, any Acquisition Proposal.
(b) Unless the Company's Board of Directors has previously
withdrawn, or is concurrently therewith withdrawing, the Company
Recommendation in accordance with Section 6.3(d), neither the Company's Board
of Directors nor any committee thereof shall recommend any Acquisition
Proposal to the Company stockholders. Notwithstanding the foregoing, nothing
contained in this Section 6.3(b) or elsewhere in this Agreement shall prevent
the Company's Board of Directors from complying with Rule 14e-2 under the 1934
Act with respect to any Acquisition Proposal or making any disclosure required
by applicable law.
(c) Promptly (but in no event later than 24 hours) after receipt
by the Company or any Company Subsidiary (or any of their respective directors,
officers, agents or advisors) of any Acquisition Proposal, any contacts
concerning, or any request for non-public information or for access to the
properties, books or records of the Company or any Company Subsidiary or any
request for a waiver or release under any standstill or similar agreement, by
any Person that has made an Acquisition Proposal or indicates that it is
considering making an Acquisition Proposal, the Company shall notify Parent
that a Person may be considering making an Acquisition Proposal, which notice
shall state the identity of such Person and the material terms and conditions
of such proposal. The Company shall keep Parent reasonably apprised of any
material developments with respect to such proposal.
(d) Pursuant to the terms of Section 10.1, the Company may
terminate this Agreement if (x) the Company's Board of Directors shall have
authorized the Company, subject to the terms and conditions of this Agreement,
to enter into a binding agreement concerning a transaction that constitutes a
Superior Proposal, (y) the Company notifies Parent that it intends to enter
into such agreement, specifying the material terms and conditions of such
agreement, and (z) the Company pays Parent the fee contemplated by Section
10.3(b) provided, however, that the Company may not so terminate this
Agreement if, within three Business Days of receiving such notice Parent makes
an offer such that the Board of Directors of the Company determines that such
Superior Proposal is no longer a Superior Proposal (it being understood that
the Company shall not enter into such binding agreement during such three
Business Day period).
Section 6.4. Transfer Taxes. All state, local, foreign or
provincial sales, use, real property transfer, stock transfer or similar taxes
(including any interest or penalties with respect thereto) attributable to the
Merger (collectively, the "Transfer Taxes") shall be timely paid by the
Company.
Section 6.5. Retention Program. At the request of Parent, the
Company shall, and shall cause each Company Subsidiary to, cooperate in good
faith with Parent to assist in the implementation of an employee retention
benefit program designed by Parent, in it sole discretion; provided, however,
that all benefits and payments under such retention benefit program shall be
contingent upon the consummation of the transactions contemplated herein and
the Surviving Corporation shall be solely liable for all obligations and
liabilities under any such retention benefit program.
Section 6.6. Certain Agreements. The Company shall, and shall
cause its Subsidiaries to, provide reasonable advance notice to such officer or
employee as may from time to time be designated by Parent of its intention to
enter into any agreement or arrangement that limits or restricts the Company,
any Company Subsidiary or any of their respective Affiliates, or that would,
following the Effective Time, limit or restrict the Company or any Company
Subsidiary, from engaging or competing in any line of business or in any
location, and shall, in each case, consult with such designee and in good faith
consider any proposals (including as to the advisability of entering into any
such contract) or requests for changes as Parent may reasonably suggest.
ARTICLE 7
Covenants of Parent
Parent agrees that:
Section 7.1. Parent Interim Operations. Except as set forth in
the Parent Disclosure Schedule or as otherwise expressly contemplated hereby,
without the prior consent of the Company (which consent shall not be
unreasonably withheld or delayed), from the date hereof until the Effective
Time, Parent shall, and shall cause each of the Parent Subsidiaries to, conduct
their business in all material respects in the ordinary course consistent with
past practice and shall use commercially reasonable efforts to (i) preserve
intact its present business organization, (ii) maintain in effect all material
foreign, federal, state and local licenses, approvals and authorizations,
including, without limitation, all material licenses and permits that are
required for Parent or any Parent Subsidiary to carry on its business and
(iii) preserve existing relationships with its material customers, lenders,
suppliers and others having material business relationships with it. Without
limiting the generality of the foregoing, except as otherwise expressly
contemplated by this Agreement and the Stock Option Agreement, from the date
hereof until the Effective Time, without the prior consent of the Company
(which consent shall not be unreasonably withheld or delayed), Parent shall
not, not shall it permit any Parent Subsidiary to:
(a) make any amendment to Parent's restated certificate of
incorporation that changes any material term or provision of the Parent Common
Shares;
(b) make any material changes to MergerSub's certificate of
incorporation;
(c) take any action that would or would be reasonably likely to
prevent or materially impair the ability of Parent to consummate the
transactions contemplated by this Agreement or the Stock Option Agreement,
including actions that would be reasonably likely to prevent or materially
impair the ability of Parent, the Company or any of their Subsidiaries to
obtain any consent, registration, approval, permit or authorization required
to be obtained from any Governmental Entity prior to the Effective Time in
connection with the execution and delivery of this Agreement or the Stock
Option Agreement and the consummation of the Merger and the other transactions
contemplated by this Agreement and the Stock Option Agreement;
(d) authorize or pay any extraordinary dividend on, or other
extraordinary distribution with respect to, Parent's capital stock or engage in
any recapitalization, restructuring or reorganization with respect to Parent's
capital stock which materially and adversely affects the rights of the holders
of Parent Common Shares;
(e) other than in the ordinary course of business consistent
with past practice, make any tax election or enter into any settlement or
compromise of any tax liability except for such settlements or compromises as
individually or in the aggregate would not be reasonably likely to have a
Parent Material Adverse Effect;
(f) take any action that would cause any of its representations
and warranties herein to become untrue in any material respect; and
(g) agree, resolve or otherwise commit to do any of the
foregoing.
Section 7.2. Director and Officer Liability. (a) Parent and
the Surviving Corporation agree that the indemnification obligations set forth
in the Company's certificate of incorporation, as amended, and the Company's
bylaws, in each case as of the date of this Agreement, shall survive the
Merger and shall not be amended, repealed or otherwise modified for a period
of six years after the Effective Time in any manner that would adversely affect
the rights thereunder of the individuals who on or prior to the Effective Time
were directors, officers, employees or agents of the Company or the Company
Subsidiaries.
(b) The Company shall indemnify and hold harmless, and, after
the Effective Time, Parent shall, and shall cause the Surviving Corporation to,
indemnify and hold harmless, in each case to the fullest extent permitted under
applicable law, each present and former director or officer of the Company and
each Company Subsidiary and each such person who served at the request of the
Company or any Company Subsidiary as a director or officer, (collectively, the
"Indemnified Parties") against all costs and expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages, liabilities and
settlement amounts paid in connection with any claim, action, suit, proceeding
or investigation (whether arising before or after the Effective Time), whether
civil, administrative or investigative, arising out of or pertaining to any
action or omission in their capacity as an officer or director, in each case
occurring before the Effective Time (including the transactions contemplated
by this Agreement) and the Stock Option Agreement). Subject to an Indemnified
Party's obligation to refund any advances in accordance with the DGCL, Parent
shall advance all expenses reasonably incurred by such Indemnified Party.
(c) Immediately prior to the Closing, the Company shall
purchase, from an insurer chosen by the Company, a single payment, run-off
policy of directors' and officers' liability insurance covering current and
former officers and directors of the Company and its Subsidiaries on terms
and conditions as favorable as may be available (but no more favorable to
the Indemnified Parties than the policy in effect as of the date hereof)
for a premium not to exceed $250,000 in the aggregate, such policy to
become effective at the Closing and remain in effect for a period of six
years after the Closing.
(d) The provisions of this Section are intended to be for the
benefit of, and shall be enforceable by, each of the Indemnified Parties and
his or her heirs and legal representatives, and shall be in addition to any
other rights any Indemnified person may have.
Section 7.3. Employee Benefits. (a) Following the Effective
Time and until December 31, 1999 Parent shall, or shall cause Surviving
Corporation and its Subsidiaries to, continue to maintain each Company
Employee Plan in existence on the date hereof (other than any stock option or
other equity-related plans maintained by the Company) in accordance with their
existing terms and during the period of January 1, 2000 through December 31,
2000, Parent shall, or shall cause the Surviving Corporation and its
Subsidiaries to, maintain benefit plans which are in the aggregate at least as
favorable to the employees of the Surviving Corporation and its Subsidiaries
(the "Employees") as the benefit plans in effect as of the date hereof,
excluding for these purposes any stock option or other equity-related plans
maintained by the Company.
(b) Parent shall, or shall cause the Surviving Corporationand
its Subsidiaries to, (i) waive all limitations as to preexisting conditions
and waiting periods with respect to participation and coverage requirements
applicable to the Employees under any welfare plan in which such Employees
may be eligible to participate after the Effective Date (except to the
extent that such conditions or waiting periods would apply under the then
existing plans of the Company and the Company Subsidiaries absent any
change in such welfare plan coverage), (ii) provide each Employee with
credit for all service with the Company and the Company Subsidiaries for
purposes of participation eligibility and vesting (but not for purposes of
benefit calculation, early retirement factors or benefit accruals, other
than benefits previously accrued under a Company Employee Plan) under each
employee benefit plan covering such Employees after the Effective Time.
(c) Parent shall at the regular meeting of the Organization and
Compensation Committee of the Board of Directors of Parent to be held in March
of 1999, recommend to such committee to grant to certain employees of the
Company, as of the Effective Time, options on not more than 200,000 Parent
Common Shares under Parent's Long-Term Stock Incentive Plan based on the
recommendations by the Company and in accordance with the terms described on
Schedule 7.03(c).
Section 7.4. Stock Exchange Listing. Parent shall use its
reasonable best efforts to cause the Parent Common Shares to be issued in
connection with the Merger or upon exercise of Parent Options to be listed on
the NYSE, subject to official notice of issuance.
Section 7.5. Conduct of MergerSub. Parent will take all action
necessary to cause MergerSub (a) to perform its obligations under this
Agreement and to consummate the Merger on the terms and conditions set forth
in this Agreement and (b) not to engage in any activities or incur any
liabilities or obligations other than in connection with or as contemplated by
this Agreement.
ARTICLE 8
Covenants of Parent and The Company
The parties hereto agree that:
Section 8.1. Reasonable Best Efforts. Subject to the terms and
conditions hereof, each party will use reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement as promptly as
practicable.
Section 8.2. Certain Filings; Cooperation in Receipt of
Consents. (a) As promptly as practicable after the date hereof, Parent and
the Company shall prepare and Parent shall file with the SEC the Registration
Statement, in which the Proxy Statement/Prospectus will be included. Each of
the Company and Parent shall use all reasonable efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing and to keep the Registration Statement
effective as long as is necessary to consummate the Merger. The Company shall
mail the Proxy Statement/Prospectus to its stockholders as promptly as
practicable after the Registration Statement is declared effective under the
Securities Act and, if necessary, after the Proxy Statement/Prospectus shall
have been so mailed, promptly circulate amended, supplemental or supplemented
proxy material, and, if required in connection therewith, resolicit proxies.
Parent shall also take any action required to be taken under any applicable
state securities or blue sky laws in connection with the issuance of Parent
Common Shares in the Merger.
(b) No amendment or supplement to the Proxy Statement/Prospectus
will be made by the Company or Parent without the approval of the other party,
which will not be unreasonably withheld or delayed. Each party will advise
the other party, promptly after it receives notice thereof, of the time when
the Registration Statement has become effective or any supplement or amendment
has been filed, the issuance of any stop order, the suspension of the
qualification of the Parent Common Shares issuable in connection with the
Merger for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Proxy Statement/Prospectus or comments thereon and responses
thereto or requests by the SEC for additional information. If at any time
prior to the Effective Time the Company or Parent discovers any information
relating to either party, or any of their respective Affiliates, officers or
directors, that should be set forth in an amendment or supplement to the Proxy
Statement/Prospectus, so that such document would not include any misstatement
of a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, the party that discovers such information shall promptly
notify the other parties hereto and an appropriate amendment or supplement
describing such information shall be promptly filed with the SEC and, to the
extent required by law or regulation, disseminated to the stockholders of the
Company and Parent.
(c) The Company and Parent shall cooperate with one another in
(i) determining whether any other action by or in respect of, or filing with,
any Governmental Entity is required, or any actions, consents, approvals or
waivers are required to be obtained from parties to any material contracts, in
connection with the consummation of the transactions contemplated hereby, (ii)
seeking any such other actions, consents, approvals or waivers or making any
such filings, furnishing information required in connection therewith and
seeking promptly to obtain any such actions, consents, approvals or waivers
and (iii) setting a mutually acceptable date for the Company Stockholder
Meeting. Each party shall permit the other party to review any communication
given by it to, and consult with each other in advance of any meeting or
conference with, any Governmental Entity or, in connection with any proceeding
by a private party, with any other Person, and to the extent permitted by the
applicable Governmental Entity or other Person, give the other party the
opportunity to attend and participate in such meetings and conferences, in
each case in connection with the transactions contemplated hereby.
Section 8.3. Public Announcements. The parties shall consult
with each other before issuing any press release or making any public statement
with respect to this Agreement and the Stock Option Agreement and the
transactions contemplated hereby and thereby and, except as may be required
by applicable law or any listing agreement with any national securities
exchange, will not issue any such press release or make any such public
statement prior to such consultation.
Section 8.4. Access to Information; Notification of Certain
Matters. (a) From the date hereof until the Effective Time and subject to
applicable law, the Company and Parent shall (i) give to the other party, its
counsel, financial advisors, auditors and other authorized representatives
reasonable access to the offices, properties, books and records of such party,
(ii) furnish or make available to the other party, its counsel, financial
advisors, auditors and other authorized representatives such financial and
operating data and other information as such Persons may reasonably request
and (iii) instruct its employees, counsel, financial advisors, auditors and
other authorized representatives to cooperate with the reasonable requests of
the other party in its investigation. Any investigation pursuant to this
Section shall be conducted in such manner as not to interfere unreasonably
with the conduct of the business of the other party. All such information
shall be governed by the terms of the Confidentiality Agreement between Parent
and the Company dated January 5, 1999 (the "Confidentiality Agreement")
(provided, however, that Parent shall be permitted to use such information for
all purposes of consummating this Agreement and transition planning). No
information or knowledge obtained in any investigation pursuant to this
Section 8.4(a) shall affect or be deemed to modify any representation or
warranty made by any party hereunder.
(b) Each party hereto shall give notice to each other party
hereto, as promptly as practicable after the event giving rise to the
requirement of such notice, of:
(i) any communication received by such party
from, or given by such party to, any Governmental Entity in
connection with any of the transactions contemplated hereby;
and
(ii) any actions, suits, claims, investigations
or proceedings commenced or, to its knowledge, threatened
against, relating to or involving or otherwise affecting
such party or any of its Subsidiaries that, if pending on
the date of this Agreement, would have been required to have
been disclosed, or that relate to the consummation of the
transactions contemplated by this Agreement
provided, however, that the delivery of any notice pursuant to this Section
8.4(b) shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
Section 8.5. Further Assurances. At and after the Effective
Time, the officers and directors of the Surviving Corporation will be
authorized to execute and deliver, in the name and on behalf of the Company or
MergerSub, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or MergerSub, any other actions
and things to vest, perfect or confirm of record or otherwise in the Surviving
Corporation any and all right, title and interest in, to and under any of the
rights, properties or assets of the Company acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger.
Section 8.6. Tax and Accounting Treatment. (a) Prior to and
following the Effective Time, each party shall use its reasonable best efforts
to cause the Merger to qualify as a 368 Reorganization, and will not take any
action reasonably likely to cause the Merger not so to qualify.
(b) Each party shall use its reasonable best efforts to obtain
the opinions referred to in Sections 9.2(b) and 9.3(c).
Section 8.7. Affiliate Letters. Within 30 days following the
date hereof, the Company shall cause to be delivered to Parent a letter
identifying, to the Company's knowledge, all Persons who may be deemed to be
"affiliates" of the Company for purposes of Rule 145(c) under the Securities
Act. The Company shall use commercially reasonable efforts to cause each such
Person who is so identified to deliver to Parent on or prior to the Effective
Time a letter agreement substantially in the form of Exhibit A-1 to this
Agreement.
ARTICLE 9
Conditions to the Merger
Section 9.1. Conditions to the Obligations of Each Party. The
obligations of the Company, Parent and MergerSub to consummate the Merger are
subject to the satisfaction of the following conditions:
(a) the Company Stockholder Approval shall have been obtained;
(b) the Parent Common Shares to be issued in the Merger shall
have been authorized for listing on the NYSE, subject to official notice of
issuance;
(c) (i) the Proxy Statement/Prospectus shall have become
effective in accordance with the provisions of the Securities Act, no stop
order suspending the effectiveness of the Proxy Statement/Prospectus shall
have been issued by the SEC and no proceedings for that purpose shall have been
initiated by the SEC and not concluded or withdrawn and (ii) all state
securities or blue sky authorizations necessary to carry out the transactions
contemplated hereby shall have been obtained and be in effect;
(d) (i) any applicable waiting period under the HSR Act
relating to the Merger shall have expired or been earlier terminated and
(ii) if required by applicable law, the parties shall have received a
decision from the European Commission under Regulation 4064/89 that the
proposed Merger and any matters arising therefrom fall within either
Article 6.1(a) or Article 6.1(b) of such Regulation and that, in any event,
the Merger will not be referred to any competent authority or dealt with by
the European Commission pursuant to Article 9.3 of such Regulation;
(e) all notices, reports and other filings required to be made
prior to the Effective Time by the Company or Parent or any of their respective
Subsidiaries with, and all consents, registrations, approvals, permits and
authorizations required to be obtained prior to the Effective Time by the
Company or Parent or any of their respective Subsidiaries from, any
Commissioner of Insurance, or any other governmental authority of any
jurisdiction, in connection with the execution and delivery of this Agreement
and the consummation of the Merger and the other transactions contemplated by
this Agreement shall have been made or obtained (as the case may be) other
than any such consents, approvals or permits, the absence of which would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect; and
(f) no Governmental Entity of competent authority or
jurisdiction shall have issued any order, injunction or decree, or taken
any other action, that is in effect and restrains, enjoins or otherwise
prohibits the consummation of the Merger.
Section 9.2. Conditions to the Obligations of The Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction of the following further conditions:
(a) (i) Parent and MergerSub each shall have performed in all
material respects all of its obligations hereunder required to be performed by
it at or prior to the time of the filing of the Certificate of Merger, (ii)
(A) the representations and warranties of Parent contained in this Agreement
that are qualified by reference to a Parent Material Adverse Effect shall be
true and correct when made and at and as of the time of filing the Certificate
of Merger, as if made at and as of such time (except to the extent any such
representation or warranty expressly speaks as of an earlier date, in which
case it shall be true and correct as of such date) and (B) all other
representations and warranties of Parent shall have been true and correct when
made and at and as of the time of the filing of the Certificate of Merger as
if made at and as of such time (except to the extent any such representation
or warranty expressly speaks as of an earlier date, in which case it shall be
true and correct as of such date), except for such inaccuracies as are not
reasonably likely, individually or in the aggregate, to have a Parent Material
Adverse Effect, and (iii) the Company shall have received a certificate signed
by the Chief Executive Officer or Chief Financial Officer of Parent to the
foregoing effect;
(b) The Company shall have received an opinion of Dewey
Ballantine LLP in form and substance reasonably satisfactory to the
Company, on the basis of certain facts, representations and assumptions set
forth in such opinion, dated as of the date of the filing of the
Certificate of Merger, to the effect that the Merger will be treated for
federal income tax purposes as a 368 Reorganization. In rendering such
opinion, such counsel shall be entitled to rely upon customary
representations of officers of the Company and Parent in form and substance
reasonably satisfactory to such counsel and other reasonable assumptions
set forth therein; and
(c) The parties shall have obtained or made all consents,
approvals, actions, orders, authorizations, registrations, declarations,
announcements and filings contemplated by Sections 4.3 and 5.3 which if not
obtained or made (i) would render consummation of the Merger illegal or
(ii) (assuming the Effective Time had occurred) would be reasonably likely
to have a Parent Material Adverse Effect.
Section 9.3. Conditions to the Obligations of Parent and
MergerSub. The obligations of Parent and MergerSub to consummate the Merger
are subject to the satisfaction of the following further conditions:
(a) (i) The Company shall have performed in all material
respects all of its obligations hereunder required to be performed by it at
or prior to the Effective Time, (ii) (A) the representations and
warranties of the Company contained in this Agreement that are qualified by
reference to a Company Material Adverse Effect shall be true and correct
when made and at and as of the time of the filing of the Certificate of
Merger, as if made at and as of such time (except to the extent any such
representation or warranty speaks as of an earlier date, in which case it
shall be true and correct as of such date) and (B) all other
representations and warranties of the Company shall have been true and
correct when made and at and as of the time of filing of the Certificate of
Merger, as if made as of such time (except to the extent any such
representation or warranty expressly speaks as of an earlier date, in which
case it shall be true and correct as of such date), except for such
inaccuracies as are not reasonably likely, individually or in the
aggregate, to have a Company Material Adverse Effect, and (iii) Parent
shall have received a certificate signed by the Chief Executive Officer,
President or Chief Financial Officer of the Company to the foregoing
effect;
(b) The parties shall have obtained or made all consents,
approvals, actions, orders, authorizations, registrations, declarations,
announcements and filings contemplated by Sections 4.3 and 5.3 which if not
obtained or made (i) would render consummation of the Merger illegal or (ii)
(assuming the Effective Time had occurred) would be reasonably likely to have
a Parent Material Adverse Effect or a Company Material Adverse Effect; and
(c) Parent shall have received an opinion of Davis Polk &
Wardwell in form and substance reasonably satisfactory to Parent, on thebasis
of certain facts, representations and assumptions set forth in such opinion,
dated as of the date of the filing of the Certificate of Merger, to the effect
that the Merger will be treated for federal income tax purposes as a 368
Reorganization. In rendering such opinion, such counsel shall be entitled to
rely upon customary representations of officers of the Company and Parent in
form and substance reasonably satisfactory to such counsel and other
reasonable assumptions set forth therein.
ARTICLE 10
Termination
Section 10.1. Termination. This Agreement may be terminated
at any time prior to the Effective Time by written notice by the
terminating party to the other party (except if such termination is
pursuant to Section 10.1(a)), whether before or after the Company
Stockholder Approval shall have been obtained:
(a) by mutual written agreement of Parent and the Company;
(b) by either Parent or the Company, if
(i) the Merger shall not have been consummated
by December 31, 1999 (the "End Date"); provided, however,
that the right to terminate this Agreement under this
Section 10.1(b)(i) shall not be available to any party whose
breach of any provision of this Agreement has resulted in
the failure of the Merger to occur on or before the End
Date;
(ii) there shall be any law or regulation
that makes consummation of the Merger illegal or otherwise
prohibited or any judgment, injunction, order or decree of
any Governmental Entity having competent jurisdiction
enjoining the Company, Parent or MergerSub from consummating
the Merger is entered and such judgment, injunction,
judgment or order shall have become final and nonappealable
and, prior to such termination, the parties shall have used
their respective reasonable best efforts to resist, resolve
or lift, as applicable, such law, regulation, judgment,
injunction, order or decree;
(iii) at the Company Stockholder Meeting
(including any adjournment or postponement thereof), the
Company Stockholder Approval shall not have been obtained;
(c) by the Company, (i) if a breach of any representation,
warranty, covenant or agreement on the part of Parent or MergerSub set forth
in this Agreement shall have occurred which would cause the condition set
forth in Section 9.2(a) not to be satisfied, and such condition shall be
incapable of being satisfied by the End Date; or (ii) as contemplated by
Section 6.3(d); or
(d) by Parent, (i) if the Company's Board of Directors shall
have (A) amended, modified, withdrawn, conditioned or qualified the Company
Recommendation in a manner materially adverse to Parent and/or (B) recommended
any Acquisition Proposal to the Company's stockholders; (ii) if there shall
have occurred a willful and material breach of Sections 6.2 or 6.3 by the
Company, any Company Subsidiary or any of their respective officers,
directors, employees, advisors or other agents; or (iii) if a breach of or
failure to perform any representation, warranty, covenant or agreement on the
part of the Company set forth in this Agreement shall have occurred which would
cause the condition set forth in Section 9.3(a) not to be satisfied, and such
condition is incapable of being satisfied by the End Date.
Section 10.2. Effect of Termination. If this Agreement is
terminated pursuant to Section 10.1 (including any such termination by way of
Section 6.3(d)), there shall be no liability or obligation on the part of
Parent, the Company, MergerSub, or any of their respective officers, directors,
stockholders, agents or Affiliates, except as set forth in Section 10.3;
provided that the provisions of Sections 10.2, 10.3, 11.1, 11.3, 11.4, 11.5,
11.6, 11.7, 11.8, 11.9 and 11.10 of this Agreement shall remain in full force
and effect and survive any termination of this Agreement.
Section 10.3. Fees and Expenses. (a) Except as set forth in
this Section 10.3, all fees and expenses incurred in connection herewith and
the transactions contemplated hereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated. Nothing herein shall
relieve any party hereto of any liability or damages resulting from any breach
of this Agreement; provided, however, that the Company shall have no further
liability or obligation pursuant to this Agreement if it shall have paid the
Termination Fee (as hereinafter defined).
(b) If this Agreement is terminated pursuant to Section
10.1(c)(ii), or Section 10.1(d)(i), the Company shall (i) pay to Parent a
Termination Fee and (ii) reimburse Parent for its actual, documented
out-of-pocket expenses incurred to third parties in connection with the
transactions contemplated hereby not to exceed $4 million.
(c) If this Agreement is terminated by either party pursuant to
Section 10.1(b)(iii),
(x) the Company shall reimburse Parent for its actual,
documented out-of-pocket expenses incurred to third
parties in connection with the transactions contemplated
hereby not to exceed $4 million, and
(y) if (A) at the time of termination, an Acquisition
Proposal shall have been made and be pending and (B)
within 12 months after such termination, a Third Party
Acquisition Event occurs, the Company shall pay to
Parent the Termination Fee within one Business Day of
the earlier to occur of the date on which it enters into
any agreement constituting, or consummates such Third
Party Acquisition Event.
(d) If this Agreement is terminated by Parent pursuant to
Section 10.01(d)(ii),
(x) the Company shall reimburse Parent for its
actual, documented out-of-pocket expenses incurred to third
parties in connection with the transactions contemplated
hereby not to exceed $5 million, and
(y) if within 12 months after such termination, a
Third Party Acquisition Event occurs, the Company shall pay
to Parent the Termination Fee within one Business Day of the
earlier of the date on which it enters into any agreement
constituting, or consummates, such Third Party Acquisition
Event.
(e) "Termination Fee" means, in the case of a termination fee
payable pursuant to (i) Section 10.03(b) or 10.03(c) hereof, $30 million, or
(ii) Section 10.03(d), $40 million.
(f) A "Third Party Acquisition Event" means (i) the
consummation of an Acquisition Proposal involving the purchase of a
majority of either the equity securities of the Company or of the
consolidated assets of the Company and the Company Subsidiaries, taken as a
whole, or any such transaction that, if it had been proposed prior to the
termination of this Agreement would have constituted an Acquisition
Proposal or (ii) the entering into by the Company or any of the Company
Subsidiaries of a definitive agreement with respect to any such
transaction.
(g) Any payment of the Termination Fee (and reimbursement of
expenses) pursuant to this Section 10.3 shall be made within one Business Day
after termination of this Agreement (or as otherwise expressly set forth in
this Agreement). If one party fails to pay to (or reimburse) the other
promptly any fee or expense due hereunder (including the Termination Fee), the
defaulting party shall pay the costs and expenses (including legal fees and
expenses) in connection with any action, including the filing of any lawsuit
or other legal action, taken to collect payment, together with interest on the
amount of any unpaid fee and/or expense at the publicly announced prime rate
of Citibank, N.A. from the date such fee was required to be paid to the date
it is paid.
(h) Notwithstanding anything herein to the contrary, no party
shall be required to pay a Termination Fee to the other party if the other
party is in material breach of this Agreement.
ARTICLE 11
Miscellaneous
Section 11.1. Notices. Except as otherwise expressly set
forth in Section 6.3(c), all notices, requests and other communications to
any party hereunder shall be in writing (including facsimile or similar
writing) and shall be given,
if to Parent or MergerSub, to:
The Chubb Corporation
15 Mountain View Road
P.O. Box 1615
Warren, New Jersey 07061-1615
Attention: General Counsel
Facsimile: (908) 903-3607
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: Dennis S. Hersch
Facsimile: (212) 450-4800
if to the Company, to:
Executive Risk Inc.
82 Hopmeadow Street
P.O. Box 2002
Simsbury, CT 06070-7683
Attention: General Counsel
Facsimile: (860) 408-2464
with a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019
Attention: James A. FitzPatrick, Jr.
Facsimile: (212) 259-6333
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties hereto. Each such notice,
request or other communication shall be effective (a) if given by facsimile,
when such facsimile is transmitted to the facsimile number specified in this
Section and the appropriate facsimile confirmation is received or (b) if given
by any other means, when delivered at the address specified in this Section.
Section 11.2. Survival of Representations, Warranties and
Covenants after the Effective Time. The representations and warranties
contained herein and in any certificate or other writing delivered pursuant
hereto shall not survive the Effective Time or the termination of this
Agreement. The covenants contained in Articles 2 and 3 and Sections 6.4, 7.2,
7.3, 11.2, 11.4, 11.5, 11.6, 11.7, 11.8, 11.9, 11.10 shall survive the
Effective Time.
Section 11.3. Amendments; No Waivers. (a) Any provision of
this Agreement may be amended or waived prior to the Effective Time if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by the Company, Parent and MergerSub or in the case of a waiver, by
the party against whom the waiver is to be effective; provided that after the
Company Stockholder Approval, no such amendment or waiver shall, without the
further approval of such stockholders, be made that would require such
approval under any applicable law, rule or regulation.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights
or remedies provided by law.
Section 11.4. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto, except that Parent
or MergerSub may transfer or assign to any wholly owned Parent Subsidiary the
right to enter into the transactions contemplated by this Agreement, provided
that no such assignment shall be permitted if it would delay or impede the
Merger or any of the other transactions contemplated by this Agreement, and
any such transfer or assignment will not relieve Parent or MergerSub of its
obligations hereunder. Any purported assignment in violation hereof shall be
null and void.
Section 11.5. Governing Law. This Agreement shall be
construed in accordance with and governed by the internal laws of the State of
Delaware without reference to its principles of conflicts of laws.
Section 11.6. Counterparts; Effectiveness; Third Party
Beneficiaries. This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Agreement shall become
effective when each party hereto shall have received counterparts hereof
signed by all of the other parties hereto. Except as set forth in Section
7.2, no provision of this Agreement is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.
Section 11.7. Jurisdiction. Except as otherwise expressly
provided in this Agreement, the parties hereto agree that any suit, action or
proceeding seeking to enforce any provision of, or based on any matter arising
out of or in connection with, this Agreement or the transactions contemplated
hereby shall be brought in the United States District Court for the Southern
District of New York or any other New York State court sitting in New York
City, and each of the parties hereby consents to the exclusive jurisdiction of
such courts (and of the appropriate appellate courts therefrom) in any such
suit, action or proceeding and irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court
or that any such suit, action or proceeding which is brought in any such court
has been brought in an inconvenient forum. Process in any such suit, action
or proceeding may be served on any party anywhere in the world, whether within
or without the jurisdiction of any such court. Without limiting the
foregoing, each party agrees that service of process on such party as provided
in Section 11.1 shall be deemed effective service of process on such party.
Section 11.8. Waiver of Jury Trial. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section 11.9. Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms. It is accordingly
agreed that the parties shall be entitled to specific performance of the terms
hereof, this being in addition to any other remedy to which they are entitled
at law or in equity.
Section 11.10. Entire Agreement. This Agreement (together
with the exhibits and schedules hereto), the Stock Option Agreement and the
Confidentiality Agreement constitute the entire agreement between the parties
with respect to the subject matter hereof and supersede all prior agreements
and understandings, both oral and written, between the parties with respect to
the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
EXECUTIVE RISK INC.
By: /s/ Stephen J. Sills
--------------------------------------------
Name: Stephen J. Sills
Title: President and Chief Executive Officer
THE CHUBB CORPORATION
By: /s/ Dean R. O'Hare
--------------------------------------------
Name: Dean R. O'Hare
Title: Chairman and Chief Executive Officer
EXCALIBUR ACQUISITION, INC.
By: /s/ Glenn A. Montgomery
--------------------------------------------
Name: Glenn A. Montgomery
Title: Vice President
EXHIBIT 99.3
CONFORMED COPY
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (the "Option Agreement") dated as of
February 6, 1999 between The Chubb Corporation, a New Jersey corporation
("Buyer" or "Holder"), and Executive Risk Inc., a Delaware corporation (the
"Company").
RECITALS
WHEREAS, both Buyer's and the Company's Board of Directors
have approved an Agreement and Plan of Merger dated as of the date hereof
(as the same may be amended from time to time, the "Merger Agreement")
providing for the merger of a wholly owned Subsidiary of Buyer with and
into the Company; and
WHEREAS, as a condition to Buyer's entering into the Merger
Agreement, Buyer has required that the Company agree, and the Company has
agreed, to grant to Buyer the option set forth herein to purchase
authorized but unissued Company Common Shares.
NOW, THEREFORE, in consideration of the premises herein
contained, the parties agree as follows:
1. Definitions. Capitalized terms used but not defined
herein shall have the same meanings as in the Merger Agreement.
2. Grant of Option. Subject to the terms and conditions
set forth herein, the Company hereby grants to Buyer an unconditional,
irrevocable option (the "Option") to purchase up to that number of shares
which equals 19.9% of the issued and outstanding Company Common Shares (the
"Option Shares") immediately prior to the first exercise of this Option at
a price per share (the "Option Price") equal to $71.70, payable in cash as
provided in Section 4 hereof. The number of Option Shares and the Option
Price are subject to adjustment as set forth herein.
3. Exercise and Termination of Option. (a) The Holder may
exercise the Option, in whole or in part, and from time to time, after the
occurrence of a Trigger Event and prior to the day (the "Termination Date")
which is 45 days after the Trigger Event. "Trigger Event" shall mean an
event which obligates the Company to pay the Termination Fee pursuant to
Section 10.03(b) of the Merger Agreement.
(b) If the Holder is entitled to and wishes to exercise the
Option, it shall deliver to the Company a written notice (the date of
receipt of which is referred to as the "Notice Date") specifying (i) the
total number of shares it intends to purchase pursuant to such exercise and
(ii) a place and date not earlier than five business days nor later than 20
calendar days from the Notice Date for the closing of such purchase (the
"Closing Date"); provided that if the closing of a purchase and sale
pursuant to the Option (the "Closing") cannot be consummated by reason of
any applicable judgment, decree, order, law or regulation, the period of
time that otherwise would run pursuant to this sentence shall run instead
from the date on which such restriction on consummation has expired or been
terminated; and, provided further that, without limiting the foregoing, if
prior notification to or approval of any regulatory authority is required
in connection with such purchase, Holder and, if applicable, the Company
shall promptly file the required notice or application for approval and
shall expeditiously process the same (and the Company shall cooperate with
Holder in the filing of any such notice or application and the obtaining of
any such approval), and the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on which, as the
case may be, (i) any required notification period has expired or been
terminated or (ii) such approval has been obtained, and in either event,
any requisite waiting period has passed. Any exercise of the Option shall
be deemed to occur on the Notice Date relating thereto.
(c) If the Holder receives official notice that an approval of
any regulatory authority required for the purchase of the Option Shares
would not be issued or granted or a Closing Date shall not have occurred
within twelve months after the related Notice Date due to the failure to
obtain any such required approval, the Holder shall be entitled to exercise
its right as set forth in Section 8 hereof or, to the extent legally
permitted, to exercise the Option in connection with the resale of Company
Common Shares or other securities pursuant to a registration statement as
provided in Section 9 hereof.
(d) It shall be a condition to the exercise of this Option that
(i) no preliminary or permanent injunction or other order, decree or ruling
against the sale or delivery of the Option Shares issued by any federal or
state court of competent jurisdiction in the United States is in effect at
such time, (ii) any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") shall have expired or
been terminated at or prior to such time, and (iii) any approval required
to be obtained prior to the delivery of the Option Shares under the laws of
any jurisdiction shall have been obtained and shall be in full force and
effect.
4. Payment and Delivery of Certificates. (a) At the
Closing referred to in Section 3 hereof, the Holder shall pay to the
Company on the Closing Date the aggregate Purchase Price for the Company
Common Shares purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated
not later than one business day prior to such Closing Date by the Company;
provided that failure or refusal of the Company to designate such a bank
account shall not preclude the Holder from exercising the Option.
(b) At such Closing, simultaneously with the delivery of cash
as provided in Section 4(a), the Company shall deliver to the Holder a
certificate or certificates representing the number of Company Common Shares
purchased by the Holder, registered in the name of the Holder or a nominee
designated in writing by the Holder (which shall be a wholly owned subsidiary),
which shares shall be fully paid and non-assessable and free and clear of
all Liens, claims, charges and encumbrances of any kind whatsoever. Any
certificates so issued shall bear a legend reflecting any resale
restrictions applicable to the shares represented thereby.
(c) At the time any Company Common Shares are issued pursuant
to any exercise of the Option, if the Company shall have issued any share
purchase rights or similar securities to holders of Company Common Shares
prior thereto, then each Company Common Share issued pursuant to an
exercise of the Option shall also represent rights with terms substantially
the same as and at least as favorable to the Holder as those issued to
other holders of Company Common Shares.
(d) When the Holder provides the written notice of exercise of
the Option provided for in Section 3(b) and the tender of the applicable
purchase price in immediately available funds, the Holder shall be deemed
to be the holder of record of the Company Common Shares issuable upon such
exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such Company Common
Shares shall not then be actually delivered to the Holder.
5. Representations and Warranties of the Company. The
Company hereby represents and warrants to the Buyer as follows:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
execution, delivery and performance by the Company of this Agreement and
the consummation of the transactions contemplated hereby (i) are within the
Company's corporate powers, (ii) have been duly authorized by all necessary
corporate action, (iii) require no action by or in respect of, or filing
with, any Governmental Entity, except for compliance with any applicable
requirements of the HSR Act and pursuant to any applicable insurance laws,
(iv) do not contravene, or conflict with the certificate of incorporation
or by-laws of the Company, (v) assuming compliance with clause (iii) above,
contravene or conflict with or constitute a violation of any provision of
any law, regulation or judgment, injunction, order or decree binding upon
the Company or any of its subsidiaries and (vi) will not require any
consent, approval or notice under and will not conflict with, or result in
the breach or termination of any provision of or constitute a default (with
or without the giving of notice or the lapse of time or both) under, or
allow the acceleration of the performance of, any material obligation of
the Company or any of its Subsidiaries under, or result in the creation of
a lien, charge or encumbrance upon, any of the properties, assets or
business of the Company or any of its Subsidiaries under any indenture,
mortgage, deed of trust, lease, licensing agreement, contract, instrument
or other agreement to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or any of their
respective assets or properties is subject or bound other than, in the case
of each of (iii), (iv), (v) or (vi), any such items that would not,
individually or in the aggregate, be reasonably likely to have a Company
Material Adverse Effect or prevent or materially impair the ability of the
Company to consummate the transactions contemplated by this transaction.
This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding agreement of the Company subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws, now or
hereafter in effect, relating to or affecting creditors' rights and
remedies and to general principles of equity.
(b) Except for any filings required to be made under the
HSR Act and any approvals of any Commissioners of Insurance, the Company
has taken all necessary corporate and other action to authorize and reserve
and to permit it to issue, and at all times from the date hereof until such
time as the obligation to deliver Option Shares upon the exercise of the
Option terminates, will have reserved for issuance, upon any exercise of
the Option, the number of Company Common Shares subject to the Option (less
the number of Company Common Shares previously issued upon any partial
exercise of the Option or as to which the Option may no longer be
exercised). All of the Company Common Shares to be issued pursuant to the
Option are duly authorized and, upon issuance and delivery thereof pursuant
to this Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and free and clear of all claims, liens, charges,
encumbrances and security interests, and not subject to any preemptive
rights.
6. Representations and Warranties of the Purchaser. The
Buyer hereby represents and warrants to the Company as follows:
(a) The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey.
The execution, delivery and performance by the Buyer of this Agreement are
within the Buyer's corporate powers, have been duly authorized by all
necessary corporate action, require no action by or in respect of, or
filing with, any governmental body, agency or official, except for any
filings required to be made under the HSR Act and any applicable insurance
laws, and do not contravene, or constitute a default under, any provision
of applicable law or regulation or of the certificate of incorporation or
by-laws of the Buyer or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Buyer. This Agreement has been
duly executed and delivered by the Buyer and constitutes a valid and
binding agreement of the Buyer subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws, now or hereafter in effect,
relating to or affecting creditors' rights and remedies and to general
principles of equity.
(b) The Buyer is acquiring the Option and will acquire the
Option Shares for investment purposes only and not with a view to any
resale or distribution thereof, and will not sell any Option Shares
purchased pursuant to the Option except in compliance with the Securities
Act.
7. Adjustment upon Changes in Capitalization. (a) In the event
of any change in Company Common Shares by reason of stock dividends, stock
splits, split-ups, spin-offs, recapitalizations, recombinations,
extraordinary dividends or the like, the type and number of Option Shares,
and the Option Price, as the case may be, shall be adjusted appropriately
in such manner as shall fully preserve the economic benefits provided
hereunder and proper provision shall be made in any agreement governing any
such transaction to provide for such adjustment and the full satisfaction
of the Company's obligations hereunder.
(b) Without limiting the parties' relative rights and
obligations under the Merger Agreement, if the Company enters into an
agreement with respect to an Acquisition Proposal involving the exchange of
Company Common Shares for shares or other securities of the Company or
another person, then the agreement governing such transaction shall make
proper provision so that the Option shall, upon the consummation of any
such transaction and upon the terms and conditions set forth herein, be
converted into, or exchanged for, an option with identical terms
appropriately adjusted to acquire the number and class of shares or other
securities or property that Holder would have received in respect of
Company Common Shares if the Option had been exercised immediately prior to
the consummation of such Acquisition Proposal, or the record date therefor,
as applicable; provided that nothing in this Section 7(b) shall be deemed
to affect the ability of the Holder to exercise the Option pursuant to the
terms hereof.
8. Repurchase. (a) At any time when the Option is
exercisable pursuant to Section 3(a) hereof, at the request of the Holder, the
Company (or any successor entity thereof) shall repurchase the Option (or any
portion thereof) from the Holder together with any Company Common Shares
purchased by the Holder pursuant thereto which the Holder then beneficially
owns and has requested that the Company repurchase, at a price per share equal
to the higher of (x) the highest price per share at which a tender or exchange
offer has been made for Company Common Shares following the date hereof or (y)
the highest closing price per share of Company Common Shares as reported by
the NYSE Composite Tape for any day following the date on which an Acquisition
Proposal shall have been made, less in the case of each Option Share, the
Option Price.
(b) In the event Holder exercises its rights under this
Section 8, the Company shall, within 10 business days thereafter, pay the
required amount to Holder by wire transfer of immediately available funds
to an account designated by Holder and Holder shall surrender to the
Company the Option and any certificates evidencing the Company Common
Shares purchased thereunder with respect to which Holder then has
beneficial ownership.
(c) The period for exercise of the rights provided under
this Section 8 shall be extended: (i) to the extent necessary to obtain
all regulatory approvals for the exercise of such rights, for the
expiration of all statutory waiting periods, and to the extent required to
obtain any required stockholder approval or until such stockholder approval
is no longer required pursuant to the Company's certificate of
incorporation; and (ii) to the extent necessary to avoid liability under
Section 16(b) of the Exchange Act by reason of such exercise.
(d) If within 12 months after the date the Merger Agreement
was terminated pursuant to the terms thereof, neither the Holder nor any
other person has acquired more than fifty percent of the issued and
outstanding Company Common Shares, the Company will then have the right to
purchase (the "Repurchase Right") all, but not less than all, of the
Company Common Shares acquired upon exercise of this Option of which the
Holder is the beneficial owner on the date the Company gives written notice
of its intention to exercise the Repurchase Right, at a price per share
equal to the greater of the Option Price or the average of the closing
price per Company Common Share on the NYSE Composite Tape for the five
consecutive trading days ending on and including the trading date
immediately prior to the consummation of such repurchase of Company Common
Shares.
9. Registration Rights. At any time within 2 years after a
Closing, if requested by the Holder or any affiliate of the Holder who
is a beneficial owner of Company Common Shares issued upon exercise of the
Option (each a "Shareholder"), the Company shall, as expeditiously as
possible file a registration statement on a form for general use under the
Securities Act if necessary in order to permit the sale or other disposition
of the Company Common Shares that have been acquired upon exercise of the
Option in accordance with the intended method of sale or other disposition
requested by any such Shareholder. Each such Shareholder shall provide all
information reasonably requested by the Company for inclusion in any
registration statement to be filed hereunder. The Company shall use its
reasonable best efforts to cause such registration statement first to become
effective and then to remain effective for such period not in excess of 90
days from the day such registration statement first becomes effective as may
be reasonably necessary to effect such sales or other dispositions. The
registration effected under this Section 9 shall be at the Company's expense
except for underwriting commissions and the fees and disbursements of such
Shareholder's counsel attributable to the registration of such Company Common
Shares. In no event shall the Company be required to effect more than three
registrations hereunder. The filing of any registration statement required
hereunder may be delayed for such period of time (not to exceed 90 days) as
may reasonably be required to facilitate any public distribution by the
Company of Company Common Shares, if a special audit of the Company would
otherwise be required in connection therewith, at a time during which the
Company is in possession of material, non-public information concerning it, its
business affairs or a material transaction, in each case, the public
disclosure of which could have a material adverse effect on the Company or
significantly disrupt such material transaction or if, in the Company's
reasonable good faith judgement, such filing would require the disclosure of
material information that the Company has a bona fide business purpose for
preserving as confidential. If requested by any such Shareholder in
connection with such registration, the Company shall become a party to any
underwriting agreement relating to the sale of such shares on terms and
including obligations and indemnities that are customary for parties similarly
situated. Upon receiving any request for registration under this Section 9
from any Shareholder, the Company agrees to send a copy thereof to any other
person known to the Company to be entitled to registration rights under this
Section 9, in each case, by promptly mailing the same, postage prepaid, to the
address of record of the persons entitled to receive such copies.
10. Listing. If Company Common Shares or any other
securities to be acquired upon exercise of the Option are then-listed on
the NYSE or any other national securities exchange, upon the request of
Holder, the Company will promptly file an application to list the Company
Common Shares or other securities to be acquired upon exercise of the
Option on the NYSE or such other exchange and will use its best efforts to
obtain approval of such listings as soon as practicable.
11. Limitation on Profits. (a) Notwithstanding any other
provision contained herein or in the Merger Agreement to the contrary, in
no event shall Buyer's Total Profit (as defined below) exceed the amount of
the applicable Termination Fee and if it otherwise would exceed such
amount, the Holder shall repay the excess amounts to the Company in cash so
that the Total Profit shall not exceed the amount of the applicable
Termination Fee.
(b) Notwithstanding anything to the contrary contained
herein, the Option may not be exercised for a number of Company Common
Shares as would, as of the date of exercise, result in a Notional Total
Profit (as defined below) of more than the amount of the applicable
Termination Fee and if it otherwise would exceed such amount, the exercise
price for such shares will be increased so that the Notional Total Profit
shall not exceed the amount of the applicable Termination Fee;
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: the amount of the
Termination Fee received by the Buyer pursuant to Section 10.03 of the
Merger Agreement, the amount received by Buyer in connection with the
Company's repurchase of the Option (or any portion thereof) and/or Option
Share, as applicable, pursuant to Section 8 hereof, (x) the net cash
amounts received by Buyer pursuant to the sale of Option Shares (or any
other securities into which such Option Shares shall be converted or
exchanged) to any unaffiliated party, less (y) Buyer's Purchase Price for
such Option Shares, and any amounts received by Buyer on the transfer of
the Option (or any portion thereof) to any unaffiliated party.
(d) As used herein, the term "Notional Total Profit" with
respect to any number of shares as to which Buyer may propose to exercise
the Option shall be the Total Profit determined as of the date of such
proposed exercise assuming that the Option were exercised on such date for
such number of shares and assuming that each such share, together with each
other Option Share, held by Buyer and its affiliates as of such date, were
sold for cash at the closing market price on the NYSE Composite Tape for
one Company Common Share as of the close of business on the preceding
trading day (less customary brokerage commissions).
12. Transferability of the Option. Neither of the parties
hereto may assign any of its rights or obligations under this Option
Agreement or the Option created hereunder to any other person, without the
express written consent of the other party, except Buyer may assign, in
whole or in part, its rights and obligations hereunder to any wholly owned
subsidiary of Buyer, provided that no such assignment will relieve Buyer of
its obligations hereunder. Any purported assignment in violation hereof
shall be null and void.
13. Miscellaneous.
(a) Expenses. Each of the parties hereto shall pay all
costs and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
(b) Entire Agreement. This Option Agreement, the
Confidentiality Agreement and the Merger Agreement (including the exhibits
and schedules thereto) constitute the entire agreement between the parties
with respect to the subject matter hereto and supersede all prior
agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof and thereof.
(c) Successors; No Third-Party Beneficiaries. The terms
and conditions of this Option Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
permitted transferees and assigns. Nothing in this Option Agreement is
intended to confer upon any Person, other than the parties hereto, and
their respective successors and permitted assigns, any rights or remedies
hereunder.
(d) Severability. Any term, provision, covenant or
restriction contained in this Option Agreement held by any court of
competent jurisdiction to be invalid, void or unenforceable, shall be
ineffective to the extent of such invalidity, voidness or unenforceability,
but neither the remaining terms, provisions, covenants or restrictions
contained in this Option Agreement nor the validity or enforceability
thereof in any other jurisdiction shall be affected or impaired thereby.
Any term, provision, covenant or restriction contained in this Option
Agreement that is so found to be so broad as to be unenforceable shall be
interpreted to be as broad as is enforceable.
(e) Notices. All notices or other communications that are
required or permitted hereunder shall be in writing and sufficient if
delivered in accordance with Section 11.01 of the Merger Agreement (which
is incorporated herein by reference).
(f) Counterparts. This Option 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.
(g) Further Assurances. In the event of any exercise of
the Option by Holder, the Company and Holder shall execute and deliver all
other documents and instruments and take all other action that may be
reasonably necessary in order to consummate the transactions provided for
by such exercise.
(h) Specific Performance. The parties hereto agree that if
for any reason Holder or the Company shall have failed to perform its
obligations under this Option Agreement, then either party hereto seeking
to enforce this Option Agreement against such non-performing party shall be
entitled to specific performance and injunctive and other equitable relief,
and the parties hereto further agree to waive any requirement for the
securing or posting of any bond in connection with the obtaining of any
such injunctive or other equitable relief. This provision is without
prejudice to any other rights that either party hereto may have against the
other party hereto for any failure to perform its obligations under this
Option Agreement.
(i) Governing Law. This Option Agreement shall be
construed in accordance with and governed by the internal laws of the State
of Delaware without reference to its principles of conflicts of laws.
(j) Consent to Jurisdiction; Venue. Section 11.07 of the
Merger Agreement is hereby incorporated herein by reference.
(k) Section 16(b). Periods of time that otherwise would
run pursuant to Section 3 or 8 hereof shall also be extended to the extent
necessary for any Holder to avoid liability under Section 16(b) of the
Exchange Act.
(l) Waiver and Amendment. Any provision of this Option
Agreement may be waived at any time by the party that is entitled to the
benefits of such provision. This Option Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of
a written agreement executed by the parties hereto.
IN WITNESS WHEREOF, each of the parties hereto has executed
this Option Agreement as of the date first written above.
THE CHUBB CORPORATION
By: /s/ Dean R. O'Hare
--------------------------------------------
Name: Dean R. O'Hare
Title: Chairman and Chief Executive Officer
EXECUTIVE RISK INC.
By:/s/ Stephen J. Sills
--------------------------------------------
Name: Stephen J. Sills
Title: President and Chief Executive
Officer
EXHIBIT 99.4
CONFORMED COPY
VOTING AGREEMENT
AGREEMENT, dated as of February 6, 1999 between The Chubb
Corporation a New Jersey corporation ("Buyer"), and each other person set
forth on the signature pages hereof (each a "Stockholder" and collectively the
"Stockholders"). Capitalized terms used but not separately defined herein
shall have the meanings assigned to such terms in the Merger Agreement (as
defined below).
WHEREAS, in order to induce Buyer and Excalibur Acquisition,
Inc., a Delaware Corporation ("Merger Subsidiary") to enter into an Agreement
and Plan of Merger, dated as of the date hereof (as the same may be amended
from time to time, the "Merger Agreement"), with Executive Risk Inc., a
Delaware corporation (the "Company"), Buyer has requested the Stockholders,
and each Stockholder has agreed, to enter into this Agreement with respect to
shares of common stock, par value $.01 per share, of the Company (the "Common
Stock") that each Stockholder beneficially owns and shares of Common Stock
that each Stockholder may hereafter acquire (collectively, the "Shares").
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
Grant of Proxy; Voting Agreement
Section 1.1. Voting Agreement. (a) Each Stockholder hereby
irrevocably and unconditionally agrees to vote all Shares that each Stockholder
is entitled to vote, at the time of any vote to approve and adopt the Merger
Agreement, the Merger and all agreements related to the Merger and any actions
related thereto at any meeting of the stockholders of the Company, and at any
adjournment thereof, at which such Merger Agreement and other related
agreements (or any amended version thereof), or such other actions, are
submitted for the consideration and vote of the stockholders of the Company,
in favor of the approval and adoption of the Merger Agreement, the Merger and
the transactions contemplated by the Merger Agreement.
(b) Each Stockholder hereby agrees that it will not vote any
Shares in favor of the approval of any (i) Acquisition Proposal, (ii)
reorganization, recapitalization, liquidation or winding up of the Company or
any other extraordinary transaction involving the Company, (iii) corporate
action the consummation of which would frustrate the purposes, or prevent or
delay the consummation, of the transactions contemplated by the Merger
Agreement or (iv) other matter relating to, or in connection with, any of the
foregoing matters.
Section 1.2. Irrevocable Proxy. Each Stockholder hereby
revokes any and all previous proxies granted with respect to the Shares. By
entering into this Agreement, each Stockholder hereby grants a proxy
appointing Buyer as the Stockholder's attorney-in-fact and proxy, with full
power of substitution, for and in the Stockholder's name, to vote, express,
consent or dissent, or otherwise to utilize such voting power in the manner
contemplated by Section 1.1 above as Buyer or its proxy or substitute shall,
in Buyer's sole discretion, deem proper with respect to the Shares. The proxy
granted by each Stockholder pursuant to this Article 1 is irrevocable and is
granted in consideration of Buyer entering into this Agreement and the Merger
Agreement and incurring certain related fees and expenses. The proxy granted
by each Stockholder shall be revoked upon termination of this Agreement in
accordance with its terms.
ARTICLE 2
Representations and Warranties of Stockholders
Each Stockholder represents and warrants to Buyer that:
Section 2.1. Authorization. The execution, delivery and
performance by Stockholder of this Agreement and the consummation by
Stockholder of the transactions contemplated hereby are within the powers of
Stockholder. This Agreement constitutes a valid and binding Agreement of
Stockholder. If the Stockholder is married and the Shares set forth on the
signature page hereto opposite such Stockholder's name constitute community
property under applicable laws, this Agreement has been duly authorized,
executed and delivered by, and constitutes the valid and binding agreement of,
such Stockholder's spouse.
Section 2.2. Non-Contravention. The execution, delivery and
performance by Stockholder of this Agreement and the consummation of the
transactions contemplated hereby do not and will not, (i) violate any
applicable law, rule, regulation, judgment, injunction, order or decree, (ii)
require any consent or other action by any Person under, constitute a default
under, or give rise to any right of termination, cancellation or acceleration
or to a loss of any benefit to which Stockholder is entitled under any
provision of any agreement or other instrument binding on Stockholder or (iii)
result in the imposition of any Lien on any asset of Stockholder, other than,
in respect of each of clauses (i), (ii) and (iii), any such items as would
not, individually or in the aggregate, prevent or materially impair the
ability of Stockholder to consummate the transactions contemplated by this
Agreement.
Section 2.3. Ownership of Shares. Stockholder is the
beneficial owner of the Shares, free and clear of any Lien and any other
limitation or restriction (including any restriction on the right to vote or
otherwise dispose of the Shares). None of the Shares is subject to any voting
trust or other agreement or arrangement with respect to the voting of such
Shares.
Section 2.4. Total Shares. Except for the Shares, Stockholder
does not beneficially own any (i) shares of capital stock or voting securities
of the Company, (ii) securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company
or (iii) options or other rights to acquire from the Company any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of the Company.
Section 2.5. Finder's Fees. No investment banker, broker,
finder or other intermediary is entitled to a fee or commission from Buyer or
the Company in respect of this Agreement based upon any arrangement or
agreement made by or on behalf of Stockholder.
ARTICLE 3
Representations and Warranties of Buyer
Buyer represents and warrants to each Stockholder:
Section 3.1. Corporate Authorization. The execution, delivery
and performance by Buyer of this Agreement and the consummation by Buyer of
the transactions contemplated hereby are within the corporate powers of Buyer
and have been duly authorized by all necessary corporate action. This
Agreement constitutes a valid and binding Agreement of Buyer.
ARTICLE 4
Covenants of Stockholders
Each Stockholder hereby covenants and agrees that:
Section 4.1. No Proxies for or Encumbrances on Shares. Except
pursuant to the terms of this Agreement, Stockholder shall not, without the
prior written consent of Buyer, directly or indirectly, (i) grant any proxies
or enter into any voting trust or other agreement or arrangement with respect
to the voting of any Shares or (ii) sell, assign, transfer, encumber or
otherwise dispose of, or enter into any contract, option or other arrangement
or understanding with respect to the direct or indirect sale, assignment,
transfer, encumbrance or other disposition of, any shares of Common Stock
during the term of this Agreement; provided, however, that Stockholder may
sell such number of Shares as may be necessary to satisfy tax liabilities of
such Stockholder. Stockholder shall not seek or solicit any such acquisition
or sale, assignment, transfer, encumbrance or other disposition or any such
contract, option or other arrangement or understanding and agrees to notify
Buyer promptly, and to provide all details requested by Buyer, if Stockholder
shall be approached or solicited, directly or indirectly, by any Person with
respect to any of the foregoing.
Section 4.2. No Solicitation. (a) From the date hereof until
the termination hereof, Stockholder, in its capacity as a Stockholder, will
not, and will authorize or knowingly permit any investment bankers, attorneys,
accountants, consultants and other agents or advisors ("Representatives") of
Stockholder not to, directly or indirectly, (i) take any action to solicit,
initiate or facilitate or encourage the submission of any Acquisition
Proposal, (ii) engage in any negotiations regarding, or furnish to any person
any nonpublic information with respect to, or take any other action knowingly
to facilitate any inquiries or the making of any proposal that constitutes, or
may be reasonably expected to lead to, any Acquisition Proposal or (iii) grant
any waiver or release under any standstill or similar agreement to which
Stockholder is a party with respect to any class of equity securities of the
Company; provided, that notwithstanding any other provision of this
Agreement, Stockholder may take any action in its capacity as a director of the
Company that the Board of Directors would be permitted to take in accordance
with the terms and conditions of the Merger Agreement.
(b) Stockholder will notify Buyer promptly (but in no event
later than 24 hours) upon obtaining any knowledge of any Acquisition
Proposal or of any request for nonpublic information relating to the
Company or any of its Subsidiaries or for access to the properties, books
or records of the Company or any of its Subsidiaries or any request for a
waiver or release under any standstill or similar agreement by any Person
who indicates that it is considering making, or has made, an Acquisition
Proposal. The notice shall state the identity of the offer or and the
material terms and conditions of such proposal, inquiry, contact or
request. Stockholder shall keep Buyer reasonably apprised of any material
development with respect to such proposal. Stockholder shall, and shall
cause its Representatives to, cease immediately and cause to be terminated
all existing discussions or negotiations, if any, with any Persons
conducted heretofore with respect to, or that could reasonably expected to
lead to, any Acquisition Proposal.
ARTICLE 5
Miscellaneous
Section 5.1. Further Assurances. Buyer and each Stockholder
will execute and deliver, or cause to be executed and delivered, all further
documents and instruments and use their reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations, to
consummate and make effective the transactions contemplated by this Agreement.
Section 5.2. Amendments; Termination. Any provision of this
Agreement may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed, in the case of an amendment, by each party to
this Agreement or in the case of a waiver, by the party against whom the
waiver is to be effective. This Agreement shall terminate upon the termination
of the Merger Agreement in accordance with its terms.
Section 5.3. Expenses. All costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring such cost
or expense.
Section 5.4. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that no party may
assign, delegate or otherwise transfer any of its rights or obligations under
this Agreement without the consent of the other parties hereto, except that
Buyer may transfer or assign its rights and obligations to any Affiliate of
Buyer.
Section 5.5. Governing Law. This Agreement shall construed in
accordance with and governed by the laws of the State of Delaware.
Section 5.6. Counterparts; Effectiveness. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
Section 5.7. Severability. If any term, provision or covenant
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions and covenants of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
Section 5.8. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this
Agreement is 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 to which they are entitled at law or in equity.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
THE CHUBB CORPORATION
By: /s/ Dean R. O'Hare
--------------------------------------------
Name: Dean R. O'Hare
Title: Chairman and Chief Executive Officer
No. of shares of Common Stock
of the Company beneficially
owned as of February 1, 1999:(1)
/s/ Robert H. Kullas 143,930
- ---------------------------------
Name: Robert H. Kullas
/s/ Stephen J. Sills 485,824
- ---------------------------------
Name: Stephen J. Sills
/s/ Robert V. Deutsch 374,275
- ---------------------------------
Name: Robert V. Deutsch
/s/ Gary G. Benanav 15,687
- ---------------------------------
Name: Gary G. Benanav
/s/ Barbara G. Cohen 3,017
- ---------------------------------
Name: Barbara G. Cohen
/s/ John G. Crosby 16,748
- ---------------------------------
Name: John G. Crosby
/s/ Patrick A. Gerschel 736,147
- ---------------------------------
Name: Patrick A. Gerschel
/s/ Peter Goldberg 8,740
- ---------------------------------
Name: Peter Goldberg
/s/ Michael D. Rice 11,984
- ---------------------------------
Name: Michael D. Rice
/s/ Joseph D. Sargent 42,543
- ---------------------------------
Name: Joseph D. Sargent
/s/ Irving B. Yoskowitz 2,366
- ---------------------------------
Name: Irving B. Yoskowitz
_______________
(1) Please include shares of Common Stock subject to option.
