<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 23, 1996
REGISTRATION NO. -
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GENERAL RE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 6719 06-1026471
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
695 EAST MAIN STREET
STAMFORD, CONNECTICUT 06904
(203) 328-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
CHARLES F. BARR, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
GENERAL RE CORPORATION
695 EAST MAIN STREET
STAMFORD, CONNECTICUT 06904
(203) 328-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies to:
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JAMES C. FREUND, ESQ. MARY ELLEN BURNS, ESQ. MATTHEW NIMETZ, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM GENERAL COUNSEL PAUL, WEISS, RIFKIND, WHARTON & GARRISON
919 THIRD AVENUE NATIONAL RE CORPORATION 1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10022 777 LONG RIDGE ROAD NEW YORK, NEW YORK 10019-6064
(212) 735-3000 STAMFORD, CONNECTICUT 06904 (212) 373-3000
(203) 329-7700
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective and all other conditions to the Merger, pursuant to the Merger
Agreement described herein, have been satisfied or waived.
If the Securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE OFFERING PRICE REGISTRATION FEE(3)
<S> <C> <C> <C> <C>
Common Stock $.50 par value(4).................. 6,523,626 shares (2) (2) $299,390.59
</TABLE>
(1) Assumes that 16,616,894 shares of Common Stock, no par value, of National Re
Corporation ('National Re Common Stock'), are converted into shares of
General Re Corporation Common Stock, par value $.50 per share ('General Re
Common Stock'), at an exchange ratio of .39259 shares of General Re Common
Stock for each share of National Re Common Stock pursuant to the Merger.
(2) Estimated solely for the purpose of determining the registration fee in
accordance with Rule 457(f)(1). The proposed maximum aggregate offering
price is based upon the product of (a) $52.25 (the average of the high and
low sales prices of National Re Corporation Common Stock on August 19, 1996
on the New York Stock Exchange Consolidated Reporting System) times (b)
16,616,894 (the number of shares of National Re Common Stock outstanding).
(3) Pursuant to Rule 457(b), includes the fee of $172,192.52 previously paid in
connection with the filing with the Commission of the preliminary proxy
materials of National Re Corporation relating to the transactions described
herein on August 13, 1996.
(4) This Registration Statement also covers the associated preferred stock
purchase rights (the 'General Re Preferred Stock Purchase Rights') issued
pursuant to a Rights Agreement dated as of September 11, 1991 between the
Registrant and The Bank of New York, as rights agent. Until the occurrence
of certain prescribed events, the General Re Preferred Stock Purchase Rights
are not exercisable, are evidenced by the certificates for the General Re
Common Stock, and will be transferred along with and only with such
securities. Thereafter, separate certificates will be issued representing
one General Re Preferred Stock Purchase Rights for each share of General Re
Common Stock, subject to adjustment for dilution.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification of these securities under the securities laws
of such State.
SUBJECT TO COMPLETION, DATED AUGUST 23, 1996
NATIONAL RE CORPORATION
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 30, 1996
------------------------
GENERAL RE CORPORATION
PROSPECTUS
COMMON STOCK
------------------------
This Proxy Statement/Prospectus relates to the proposed merger (the
'Merger') of National Re Corporation, a Delaware corporation (the 'Company' or
'National Re'), with and into N Acquisition Corporation, a Delaware corporation
('Sub') and a wholly owned subsidiary of General Re Corporation, a Delaware
corporation ('General Re'), pursuant to an Agreement and Plan of Merger, dated
as of July 1, 1996 (the 'Merger Agreement'), by and among General Re, Sub and
the Company.
If the Merger is consummated, each share of common stock, no par value per
share (the 'National Re Common Stock'), of the Company (other than treasury
stock and shares that are owned by General Re or any direct or indirect wholly
owned subsidiary of General Re immediately prior to the Effective Time (as
defined herein) and shares as to which dissenters' rights have been exercised in
accordance with and subject to the provisions of the Delaware General
Corporation Law ('DGCL')) at the Effective Time will be converted, subject to
proration and the limitations described herein, at the election of such holder,
into the right to receive (i) the Conversion Fraction (as defined below) of a
share of General Re common stock, par value $.50 per share (the 'General Re
Common Stock'), together with the attached General Re Preferred Stock Purchase
Rights (as defined herein); provided that General Re will not issue more than
.39259 shares of General Re Common Stock nor less than .32121 shares of General
Re Common Stock (the 'Stock Consideration'), or (ii) $53 in cash, without any
interest thereon (the 'Cash Consideration'). The 'Conversion Fraction' will be a
fraction determined by dividing $53 by the average of the closing prices per
share of General Re Common Stock on the New York Stock Exchange ('NYSE') as
reported by the NYSE Composite Tape for the ten consecutive NYSE trading days
ending on and including the second NYSE trading day immediately preceding the
closing date of the Merger (the 'Average General Re Share Price'). Company
stockholders will be entitled to elect to receive Cash Consideration or Stock
Consideration in exchange for their shares of National Re Common Stock, but such
elections will be subject to certain proration procedures described more fully
in this Proxy Statement/Prospectus and in the Merger Agreement, which provide
generally that the Total Cash Consideration (as defined herein) cannot exceed
50% of the value of the outstanding shares of National Re Common Stock.
The Merger is subject to a number of conditions, including, among other
things, (i) approval of the Merger by the Company's stockholders, (ii) receipt
of all required governmental approvals, (iii) absence of any statute or
injunction that would restrain, enjoin or prohibit the consummation of the
Merger, (iv) absence of any change that would have a material adverse effect on
either General Re or the Company, (v) receipt by each of General Re and the
Company of tax opinions from their respective tax counsel and (vi) the Average
General Re Share Price not being less than $125.
General Re has entered into stockholders agreements with certain major
stockholders of the Company (collectively, the 'Stockholders Agreements'), who
owned in the aggregate approximately 22.76% of the issued and outstanding shares
of National Re Common Stock (excluding shares underlying stock options) on the
Record Date (as defined herein), pursuant to which such stockholders have
agreed, among other things, to vote their shares in favor of the approval and
adoption of the Merger Agreement. In addition, pursuant to a pre-existing
stockholders agreement, dated as of February 5, 1992, by and among Keystone,
Inc., a Texas corporation ('Keystone'), and certain other stockholders of the
Company (the 'Keystone Stockholders Agreement'), the holders of an additional
3.43% of the issued and outstanding shares of National Re Common Stock
(excluding shares underlying stock options) on the Record Date are obligated to
vote their shares in favor of the approval and adoption of the Merger Agreement.
On August 26, 1996, the most recent practicable date prior to the printing
of this Proxy Statement/Prospectus, the closing price of General Re Common Stock
on the NYSE was $ per share and the closing price of National Re Common Stock
on the NYSE was $ per share. THE MARKET VALUE OF THE
<PAGE>
GENERAL RE COMMON STOCK WILL DEPEND UPON, AND IS EXPECTED TO FLUCTUATE WITH,
AMONG OTHER THINGS, THE PERFORMANCE OF GENERAL RE, CONDITIONS (ECONOMIC OR
OTHERWISE) AFFECTING THE INSURANCE AND REINSURANCE INDUSTRIES, INTEREST RATES,
MARKET CONDITIONS AND OTHER FACTORS THAT GENERALLY INFLUENCE THE PRICES OF
SECURITIES. MOREOVER, THERE CAN BE NO ASSURANCE THAT AT OR AFTER THE EFFECTIVE
TIME THE MARKET VALUE OF THE STOCK CONSIDERATION AND THE CASH CONSIDERATION TO
BE RECEIVED IN THE MERGER WILL BE EQUAL. IF THE AVERAGE GENERAL RE SHARE PRICE
IS LESS THAN $135, THE STOCK CONSIDERATION RECEIVED BY COMPANY STOCKHOLDERS WILL
LIKELY BE WORTH LESS THAN THE $53 PER SHARE PAID TO STOCKHOLDERS WHO ELECT TO
RECEIVE THE CASH CONSIDERATION. BECAUSE THE TAX CONSEQUENCES OF RECEIVING CASH
OR GENERAL RE COMMON STOCK WILL DIFFER, COMPANY STOCKHOLDERS ARE URGED TO READ
CAREFULLY THE INFORMATION SET FORTH UNDER THE CAPTION 'THE MERGER--CERTAIN
FEDERAL INCOME TAX CONSEQUENCES.' IF THE AVERAGE GENERAL RE SHARE PRICE IS LESS
THAN $135 AND IF THE COMPANY STOCKHOLDERS ELECT TO RECEIVE CASH CONSIDERATION
SUCH THAT THE TOTAL CASH CONSIDERATION (AS DEFINED HEREIN) EXCEEDS 50% OF THE
VALUE OF THE OUTSTANDING SHARES OF NATIONAL RE COMMON STOCK, THEN, BY OPERATION
OF THE PRORATION PROCEDURES DESCRIBED HEREIN, THE COMPANY STOCKHOLDERS WHO ELECT
TO RECEIVE CASH CONSIDERATION WILL RECEIVE A PORTION OF THEIR CONSIDERATION IN
GENERAL RE COMMON STOCK WITH A MARKET VALUE WHICH WILL LIKELY BE LESS THAN THE
CASH CONSIDERATION THAT SUCH HOLDERS WOULD HAVE OTHERWISE RECEIVED.
This Proxy Statement/Prospectus is being furnished to the stockholders of
the Company in connection with the solicitation of proxies by the Board of
Directors of the Company for use at the Special Meeting to be held at the
Company's corporate headquarters, 777 Long Ridge Road, Stamford, Connecticut on
September 30, 1996, commencing at 10:00 a.m., local time, and any adjournments
or postponements thereof (the 'Special Meeting'), for the purposes described
herein.
This Proxy Statement/Prospectus also constitutes a prospectus of General Re
with respect to up to 6,523,626 shares of General Re Common Stock issuable to
the stockholders of the Company in the Merger. Unless the context otherwise
requires, all references in this Proxy Statement/Prospectus to General Re Common
Stock will include the corresponding General Re Preferred Stock Purchase Rights
issued pursuant to the General Re Preferred Stock Purchase Rights Plan (as
defined herein).
All information herein concerning General Re and Sub has been furnished by
General Re, and all information herein concerning the Company has been furnished
by the Company.
This Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to the stockholders of the Company on or about August 29,
1996.
THE PROPOSED MERGER TO BE ACTED UPON AT THE SPECIAL MEETING IS DESCRIBED IN
DETAIL IN THIS PROXY STATEMENT/PROSPECTUS. THE PROPOSED MERGER IS A COMPLEX
TRANSACTION. COMPANY STOCKHOLDERS ARE STRONGLY URGED TO READ AND CONSIDER
CAREFULLY THIS PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY.
------------------------
FOR NORTH CAROLINA INVESTORS: THE SECURITIES TO BE ISSUED IN CONNECTION
WITH THE MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSIONER OF
INSURANCE FOR THE STATE OF NORTH CAROLINA, NOR HAS THE COMMISSIONER OF INSURANCE
RULED UPON THE ACCURACY OR THE ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS.
------------------------
THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE MERGER HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION OR ANY STATE INSURANCE DEPARTMENT NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION OR ANY STATE
INSURANCE DEPARTMENT PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Proxy Statement/Prospectus is August 27, 1996.
2
<PAGE>
AVAILABLE INFORMATION
Each of General Re and the Company is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the 'Exchange
Act'), and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the 'Commission'). The
reports, proxy statements and other information filed by each of General Re and
the Company with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and should be available at the
Commission's Regional Offices at 7 World Trade Center, Thirteenth Floor, New
York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such materials may also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Additionally, copies of reports, proxy statements and other
information filed with the Commission electronically by each of General Re and
the Company may be inspected by accessing the Commission's Internet site at
http://www.sec.gov. National Re Common Stock and the General Re Common Stock are
each listed on the NYSE. Certain of the reports, proxy statements and other
information filed by each of General Re and the Company may be inspected at the
offices of the NYSE at 20 Broad Street, New York, New York 10005.
General Re has filed with the Commission a registration statement on Form
S-4 (together with any amendments thereto, the 'Registration Statement') under
the Securities Act of 1933, as amended (the 'Securities Act'), relating to the
shares of General Re Common Stock offered hereby. This Proxy
Statement/Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto filed by General Re, certain
portions of which have been omitted pursuant to the rules and regulations of the
Commission. The Registration Statement and exhibits thereto may be inspected
without charge at the offices of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies thereof may be obtained from the Commission
at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by General Re
(File No. 1-8026) pursuant to the Exchange Act are incorporated by reference in
this Proxy Statement/Prospectus:
1. General Re's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
2. General Re's 1996 Proxy Statement;
3. General Re's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1996 and June 30, 1996;
4. General Re's Current Report on Form 8-K, dated July 19, 1996; and
5. The description of capital stock of General Re, including General
Re Common Stock and General Re Preferred Stock Purchase Rights,
that is contained in General Re's Form 8-A, dated October 3, 1980,
and General Re's Form 8-A, dated September 18, 1991, filed under
the Exchange Act, including all amendments or reports filed for the
purpose of updating such description.
The following documents previously filed with the Commission by the Company
(File No. 1-10961) pursuant to the Exchange Act are incorporated by reference in
this Proxy Statement/Prospectus:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
2. The Company's 1996 Proxy Statement;
3. The Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1996 and June 30, 1996; and
4. The Company's Current Report on Form 8-K, dated July 8, 1996.
All documents filed by General Re and the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy
Statement/Prospectus and prior to the date of the Special Meeting shall be
deemed to be incorporated by reference in this Proxy Statement/Prospectus and be
a part hereof from the dates
3
<PAGE>
of filing such documents or reports. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Proxy Statement/Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement/Prospectus.
------------------------
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN
CERTAIN EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE TO SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE TO ANY
PERSON, INCLUDING ANY BENEFICIAL OWNER TO WHOM A COPY OF THIS PROXY
STATEMENT/PROSPECTUS HAS BEEN DELIVERED, UPON WRITTEN OR ORAL REQUEST, IN THE
CASE OF GENERAL RE DOCUMENTS, TO GENERAL RE CORPORATION, 695 EAST MAIN STREET,
STAMFORD, CONNECTICUT 06904-2351, ATTENTION: CORPORATE SECRETARY, TELEPHONE
NUMBER (203) 328-5000, AND, IN THE CASE OF COMPANY DOCUMENTS, TO NATIONAL RE
CORPORATION, 777 LONG RIDGE ROAD, P.O. BOX 10167, STAMFORD, CONNECTICUT
06904-2167, ATTENTION: CORPORATE SECRETARY, TELEPHONE NUMBER (203) 329-7700. IN
ORDER TO ENSURE DELIVERY PRIOR TO THE SPECIAL MEETING, REQUESTS SHOULD BE
RECEIVED BY SEPTEMBER 23, 1996.
------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS OR THE DOCUMENTS INCORPORATED
HEREIN BY REFERENCE IN CONNECTION WITH THE OFFERING AND THE SOLICITATIONS MADE
HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY GENERAL RE, SUB OR THE COMPANY. THIS
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF ANY OFFER TO PURCHASE, ANY SECURITIES, OR THE SOLICITATION OF A
PROXY IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF GENERAL RE COMMON STOCK MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF
GENERAL RE, SUB OR THE COMPANY SINCE THE DATE HEREOF.
------------------------
4
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
AVAILABLE INFORMATION................................................. 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................... 3
SUMMARY............................................................... 7
National Re Corporation.......................................... 7
General Re Corporation........................................... 7
The Special Meeting.............................................. 8
The Merger....................................................... 9
MARKET PRICE DATA AND DIVIDENDS....................................... 12
SELECTED HISTORICAL FINANCIAL DATA.................................... 13
UNAUDITED SELECTED PRO FORMA FINANCIAL INFORMATION.................... 16
UNAUDITED COMPARATIVE PER SHARE DATA.................................. 17
THE COMPANIES......................................................... 18
National Re Corporation.......................................... 18
General Re Corporation........................................... 18
Sub.............................................................. 18
THE SPECIAL MEETING................................................... 19
Purpose of the Meeting; Date, Time and Place..................... 19
Vote Required; Voting Procedures; Record Date.................... 19
THE MERGER............................................................ 21
General.......................................................... 21
Background of the Merger......................................... 21
Recommendation of the Company Board and the Company's Reasons for
the Merger...................................................... 24
Approval by the General Re Board and General Re's Reasons for the
Merger.......................................................... 25
Opinion of the Company's Financial Advisor....................... 26
Certain Projected Financial Information.......................... 29
Estimated Synergies.............................................. 31
Plans for the Company after the Merger........................... 31
Financing of the Merger.......................................... 32
Accounting Treatment............................................. 32
Election Procedures.............................................. 32
Interests of Certain Persons in the Merger....................... 35
Certain Federal Income Tax Consequences of the Merger............ 38
Dissenters' Rights............................................... 40
THE MERGER AGREEMENT.................................................. 43
The Merger....................................................... 43
Conversion of Shares............................................. 43
Treatment of Stock Options....................................... 44
Effective Time................................................... 44
Interim Operations of the Company................................ 44
Interim Operations of General Re................................. 45
Employee Matters................................................. 46
No Solicitation.................................................. 46
Directors' and Officers' Insurance and Indemnification........... 47
Agreements with Stockholders and Registration Rights
Agreements...................................................... 47
Representations and Warranties................................... 47
Conditions to the Merger......................................... 48
</TABLE>
5
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PAGE
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Termination...................................................... 49
Termination Fee.................................................. 49
THE STOCKHOLDERS AGREEMENTS........................................... 50
UNAUDITED PRO FORMA FINANCIAL INFORMATION............................. 52
OTHER MATTERS......................................................... 58
Regulatory Approvals............................................. 58
State Takeover Statutes.......................................... 58
DESCRIPTION OF GENERAL RE CAPITAL STOCK............................... 59
General.......................................................... 59
General Re Common Stock.......................................... 59
General Re Preferred Stock....................................... 59
Transfer Agent and Registrar..................................... 62
COMPARISON OF RIGHTS OF STOCKHOLDERS.................................. 62
Board of Directors............................................... 63
Advance Notice of Nominations for the Election of Directors...... 63
Stockholder Proposals............................................ 63
Stockholder Action by Written Consent............................ 64
Special Meetings................................................. 64
Business Combinations; Transactions with Interested
Stockholders.................................................... 64
Amendments to Charter and By-laws................................ 65
Stockholder Rights Plan.......................................... 65
LEGAL MATTERS......................................................... 65
EXPERTS............................................................... 65
STOCKHOLDER PROPOSALS................................................. 65
</TABLE>
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ANNEX I Agreement and Plan of Merger, dated as of July 1, 1996,
by and among General Re Corporation, N Acquisition
Corporation and National Re Corporation ................... I-1
ANNEX II Forms of Stockholders Agreements by and among General
Re Corporation, N Acquisition Corporation and certain
stockholders of National Re Corporation.................... II-1
ANNEX III Opinion of Goldman, Sachs & Co............................. III-1
ANNEX IV Opinion of Morgan Stanley & Co. Incorporated............... IV-1
ANNEX V Section 262 of the Delaware General Corporation Law........ V-1
</TABLE>
6
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained elsewhere
in this Proxy Statement/Prospectus, in the attached Annexes and in the documents
incorporated herein by reference. Stockholders are urged to review carefully all
of the information contained in this Proxy Statement/Prospectus and the Annexes
attached hereto. Certain capitalized terms used and not otherwise defined in
this summary shall have the meanings set forth elsewhere in the Proxy
Statement/Prospectus.
NATIONAL RE CORPORATION
National Re, through its wholly owned subsidiary, National Reinsurance
Corporation ('NRC'), is one of six major direct writers of property and casualty
reinsurance in the United States. As a reinsurer, NRC assumes or accepts parts
of various risks initially underwritten by primary insurers and self-insureds.
It writes reinsurance in the form of treaties and facultative certificates,
primarily on an excess of loss basis. Over 70% of 1995's premiums represented
casualty risk. As a direct writer, NRC provides reinsurance directly to primary
insurers without the assistance of reinsurance brokers.
NRC has pursued a business strategy of capitalizing on its position as a
direct writer of reinsurance, building long-term relationships with clients to
provide relative stability in its sources of revenue, adhering to underwriting
practices designed to limit NRC's exposure to more volatile risks and
catastrophic losses and adjusting its mix of business and contract terms to take
advantage of market conditions. A subsidiary of the Company, Fairfield Insurance
Company, writes primary alternative risk insurance.
GENERAL RE CORPORATION
General Re is a holding company for global reinsurance and related risk
assessment, risk transfer and risk management operations. General Re owns
General Reinsurance Corporation ('GRC'), the largest professional
property/casualty reinsurer domiciled in the United States, and also owns a
controlling interest in Kolnische Ruckversicherungs-Gesellschaft AG ('Cologne
Re'), a major international reinsurer.
General Re operates four principal businesses: United States
property/casualty reinsurance, international property/casualty reinsurance,
life/health reinsurance and financial services. General Re's United States
property/casualty subsidiaries principally write treaty and facultative
reinsurance underwritten on a direct basis throughout the United States and
Canada. GRC predominately writes excess-of-loss reinsurance across various lines
of business. In addition, General Re writes excess and surplus lines insurance
through General Star Management Company, provides alternative risk solutions
through Genesis Underwriting Management Company and provides reinsurance
brokerage services through Herbert Clough Inc. General Re's international
property/casualty reinsurance operations are comprised of both treaty
reinsurance and facultative reinsurance, with the majority of the premiums
derived from the treaty business. A majority of the international premiums are
written on a proportional basis.
General Re's life/health operations provide individual life, group,
long-term disability, individual health and finite risk reinsurance. Most of the
life/health business is written on a proportional treaty basis, with smaller
amounts written on a facultative basis.
General Re's financial services operations include derivative products
through its subsidiary, General Re Financial Products Corporation, insurance
brokerage and management, reinsurance brokerage and real estate management
operations, and investment management services through its subsidiary, General
Re-New England Asset Management, Inc. General Re's principal reinsurance
operations are based in the United States and Germany, with significant
additional operations in Europe, Australia, Asia and South America. Its
principal financial services operations are based in the United States with
subsidiaries located in London and Tokyo.
7
<PAGE>
THE SPECIAL MEETING
Date, Time, and Place. The Special Meeting will be held at 10:00 a.m.,
local time, on September 30, 1996 at the Company's corporate headquarters, 777
Long Ridge Road, Stamford, Connecticut.
Purpose of the Meeting. At the Special Meeting, holders of National Re
Common Stock will consider and vote upon a proposal to approve and adopt the
Merger Agreement.
Quorum. The presence, in person or by proxy, at the Special Meeting of the
holders of a majority of the shares of National Re Common Stock outstanding and
entitled to vote at the Special Meeting is necessary to constitute a quorum.
Vote Required; Voting Procedures; Record Date. The Merger requires
approval and adoption of the Merger Agreement by the affirmative vote of the
holders of a majority of the outstanding shares of National Re Common Stock. All
of the holders of National Re Common Stock at the close of business on August
26, 1996 (the 'Record Date') shall be entitled to notice of, and to vote at, the
Special Meeting. On the Record Date, there were outstanding shares of
National Re Common Stock held by holders of record. Company stockholders who
have delivered a proxy to the Company may revoke the proxy at any time prior to
its exercise at the Special Meeting by giving written notice to the Corporate
Secretary of the Company, by signing and returning a later dated proxy or by
voting in person at the Special Meeting.
Recommendation of the Company's Board of Directors. The Board of Directors
of the Company (the 'Company Board') believes that the terms of the Merger
Agreement are fair to, and in the best interests of, the Company and its
stockholders. BY A UNANIMOUS VOTE OF THE COMPANY BOARD AT A MEETING HELD ON JUNE
30, 1996, THE COMPANY BOARD APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT
COMPANY STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
Opinion of the Company's Financial Advisor. Goldman, Sachs & Co. ('Goldman
Sachs') has delivered its written opinion dated the date of this Proxy
Statement/Prospectus to the Company Board that, as of that date, the Cash
Consideration and the Stock Consideration, taken as a whole, to be received by
the Company's stockholders pursuant to the Merger Agreement is fair to such
stockholders.
The full text of the written opinion of Goldman Sachs, which sets forth
assumptions made, matters considered and limitations on the review undertaken in
connection with the opinion, is attached hereto as Annex III and is incorporated
herein by reference. THE COMPANY'S STOCKHOLDERS ARE URGED TO, AND SHOULD, READ
SUCH OPINION IN ITS ENTIRETY. See 'The Merger--Opinion of the Company's
Financial Advisor.'
Security Ownership of Management. As of the Record Date, directors and
executive officers of the Company (17 persons) and their affiliates were owners
of an aggregate of 4,395,768 shares (excluding 274,000 shares underlying stock
options) of National Re Common Stock, which is approximately 26.45% of all
outstanding National Re Common Stock.
The Stockholders Agreements. As of the Record Date, (i) William D. Warren,
Chairman, President and Chief Executive Officer of the Company, (ii) Peter A.
Cheney, Executive Vice President, Chief Financial Officer and a Director of the
Company, (iii) Robert W. Eager, Jr., Executive Vice President--Reinsurance
Operations and a Director of the Company, (iv) Timothy T. McCaffrey, Executive
Vice President--Legal and Corporate Services and a Director of the Company, (v)
Acadia Partners, L.P., a Delaware limited partnership ('Acadia'), and (vi)
Keystone collectively held 3,781,482 shares of National Re Common Stock,
representing approximately 22.76% of the outstanding National Re Common Stock on
such date. Pursuant to Stockholders Agreements by and among each such
stockholder, General Re and Sub, each such stockholder has agreed to vote for
the approval and adoption of the Merger Agreement at the Special Meeting. In
addition, pursuant to the Keystone Stockholders Agreement, the holders of an
additional 3.43% of the issued and outstanding shares of National Re Common
Stock (excluding shares underlying stock options) on the Record Date are
obligated to vote their shares in favor of the approval and adoption of the
Merger Agreement. Accordingly, the favorable vote of an additional
shares (or approximately %) of National Re Common Stock is necessary to
approve and adopt the Merger Agreement. See 'The Stockholders Agreements.'
8
<PAGE>
THE MERGER
Merger Consideration. As promptly as practicable (but in no event later
than two NYSE trading days) after the satisfaction or waiver of the conditions
set forth in the Merger Agreement, the Merger will be consummated by the filing
of a Certificate of Merger with the Secretary of State of the State of Delaware
in accordance with the DGCL (the time of such filing or such later time as is
specified in the Certificate of Merger being the 'Effective Time'). At the
Effective Time, the Company will be merged with and into Sub, and Sub will be
the surviving corporation (the 'Surviving Corporation') and a subsidiary of
General Re. If the Merger is consummated, each share of National Re Common Stock
(other than treasury stock and shares that are owned by General Re or any direct
or indirect wholly owned subsidiary of General Re immediately prior to the
Effective Time and shares as to which dissenters' rights have been exercised in
accordance with and subject to the provisions of the DGCL) at the Effective Time
will be converted, subject to the proration and other limitations described
herein, at the election of such holder, into the right to receive (i) the
Conversion Fraction of a share of General Re Common Stock, together with the
attached General Re Preferred Stock Purchase Rights; provided that General Re
will not issue more than .39259 shares of General Re Common Stock nor less than
.32121 shares of General Re Common Stock, or (ii) $53 in cash, without any
interest thereon. The Conversion Fraction will be a fraction determined by
dividing $53 by the average of the closing prices per share of General Re Common
Stock on the NYSE, as reported by the NYSE Composite Tape, for the ten
consecutive NYSE trading days ending on and including the second NYSE trading
day immediately preceding the closing date of the Merger. Company stockholders
will be entitled to elect to receive Cash Consideration or Stock Consideration
in exchange for their shares of National Re Common Stock, but such elections
will be subject to the proration and other limitations described more fully in
this Proxy Statement/Prospectus and in the Merger Agreement, which provide
generally that the Total Cash Consideration cannot exceed 50% of the value of
the outstanding shares of National Re Common Stock.
On August 26, 1996, the most recent practicable date prior to the printing
of this Proxy Statement/Prospectus, the closing price of General Re Common Stock
on the NYSE, as reported by the NYSE Composite Tape, was $ per share and
the closing price of National Re Common Stock on the NYSE, as reported by the
NYSE Composite Tape, was $ per share. THE MARKET VALUE OF THE GENERAL RE
COMMON STOCK WILL DEPEND UPON, AND IS EXPECTED TO FLUCTUATE WITH, AMONG OTHER
THINGS, THE PERFORMANCE OF GENERAL RE, CONDITIONS (ECONOMIC OR OTHERWISE)
AFFECTING THE INSURANCE AND REINSURANCE INDUSTRIES, INTEREST RATES, MARKET
CONDITIONS AND OTHER FACTORS THAT GENERALLY INFLUENCE THE PRICES OF SECURITIES.
MOREOVER, THERE CAN BE NO ASSURANCE THAT AT OR AFTER THE EFFECTIVE TIME THE
MARKET VALUE OF THE STOCK CONSIDERATION AND THE CASH CONSIDERATION TO BE
RECEIVED IN THE MERGER WILL BE EQUAL. IF THE AVERAGE GENERAL RE SHARE PRICE IS
LESS THAN $135, THE STOCK CONSIDERATION RECEIVED BY COMPANY STOCKHOLDERS WILL
LIKELY BE WORTH LESS THAN THE $53 PER SHARE PAID TO STOCKHOLDERS WHO ELECT TO
RECEIVE THE CASH CONSIDERATION. IF THE AVERAGE GENERAL RE SHARE PRICE IS LESS
THAN $135 AND IF THE COMPANY STOCKHOLDERS ELECT TO RECEIVE THE CASH
CONSIDERATION SUCH THAT THE TOTAL CASH CONSIDERATION EXCEEDS 50% OF THE VALUE OF
THE OUTSTANDING SHARES OF NATIONAL RE COMMON STOCK, THEN, BY OPERATION OF THE
PRORATION PROCEDURES DESCRIBED HEREIN, THE COMPANY STOCKHOLDERS WHO ELECT TO
RECEIVE THE CASH CONSIDERATION WILL RECEIVE A PORTION OF THEIR CONSIDERATION IN
GENERAL RE COMMON STOCK WITH A MARKET VALUE WHICH WILL LIKELY BE LESS THAN THE
CASH CONSIDERATION THAT SUCH HOLDERS WOULD HAVE OTHERWISE RECEIVED.
General Re Preferred Stock Purchase Rights. The General Re Preferred Stock
Purchase Rights have certain anti-takeover effects. Such rights will cause
substantial dilution to a person or group that attempts to acquire General Re on
terms not approved by the General Re Board, except pursuant to an offer
conditioned on a substantial number of General Re Preferred Stock Purchase
Rights being acquired or such rights being redeemed or invalidated. See
'Description of General Re Capital Stock--General Re Preferred Stock--General Re
Preferred Stock Purchase Rights.'
Election Procedures. The Merger Agreement provides that each holder of
shares of National Re Common Stock has the right, subject to the proration and
other limitations described herein, to submit a request specifying the number of
shares of National Re Common Stock owned by such holder which such holder
desires to have converted into either (i) shares of General Re Common Stock or
(ii) cash. All elections must be made on the Form of Election/Letter of
Transmittal (the 'Form of Election'), a copy of which is being mailed
simultaneously with this Proxy Statement/Prospectus, and must be received and
accepted by the Election Deadline, which is
9
<PAGE>
September 30, 1996. The purpose of the election procedures is to permit holders
of shares of National Re Common Stock to express their preferences for the type
of consideration they wish to receive in the Merger, provided that the Total
Cash Consideration cannot exceed 50% of the value of the outstanding shares of
National Re Common Stock. Failure of a holder of shares of National Re Common
Stock to complete properly and to return the Form of Election, together with
certificates representing such holder's shares of National Re Common Stock to
the Exchange Agent (as defined herein) by the Election Deadline, or an
appropriate guarantee of delivery of certificates for such shares of National Re
Common Stock to the Exchange Agent by the Election Deadline, or failure to
comply with the election procedures described in this Proxy Statement/Prospectus
and Form of Election (including the instructions thereto), will cause such
holder's shares of National Re Common Stock to be converted into the Stock
Consideration without regard to the preference of such holder.
Any Company stockholder may revoke his election by submitting to the
Exchange Agent written notice and a properly completed and signed revised Form
of Election, by withdrawing his certificates for shares of National Re Common
Stock or by withdrawing the guarantee of delivery of such certificates
previously deposited with the Exchange Agent, provided that the Exchange Agent
receives all necessary materials prior to the Election Deadline.
Regulatory Approvals. Consummation of the Merger requires the approvals of
the Insurance Commissioners of the States of Delaware and Connecticut.
Applications for such approvals have been filed, and General Re has obtained
approval from the Insurance Commissioner of the State of Delaware. The Company
and General Re believe that approval from the Insurance Commissioner of the
State of Connecticut should be obtained during the third or fourth quarter of
1996. However, there can be no assurance that such approval will be granted.
Assuming receipt of the approval of the Merger by the Company's stockholders,
the Merger will be consummated promptly after receipt of the required regulatory
approvals and the satisfaction or waiver of the other conditions of the Merger.
The applicable waiting period for the approval of the Merger under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the 'HSR Act'), has
expired. See 'Other Matters--Regulatory Approvals.'
Conditions to the Merger; Termination; Fees and Expenses. The obligations
of General Re and the Company to consummate the Merger are subject to a number
of conditions, including, among other things, (i) approval of the Merger by the
Company's stockholders, (ii) receipt of all required governmental approvals,
(iii) absence of any statute or injunction that would restrain, enjoin or
prohibit the consummation of the Merger, (iv) absence of any change that would
have a material adverse effect on either General Re or the Company, (v) receipt
by each of General Re and the Company of tax opinions from their respective tax
counsel and (vi) the Average General Re Share Price not being less than $125.
See 'The Merger Agreement--Conditions to the Merger.'
The Merger Agreement may be terminated, and the Merger abandoned, at any
time prior to the Effective Time, whether or not stockholder approval has been
obtained, (i) by mutual consent of the General Re Board of Directors (the
'General Re Board') and the Company Board or (ii) by either the General Re Board
or the Company Board (a) if the Merger is not consummated on or prior to
December 31, 1996 or (b) in certain other circumstances. See 'The Merger
Agreement--Termination.'
The Company has agreed that if the Merger Agreement is terminated under
certain circumstances, it will pay General Re a fee of $25 million. See 'The
Merger Agreement--Termination Fee.'
Accounting Treatment. The Merger will be accounted for under the purchase
method of accounting in accordance with generally accepted accounting
principles, whereby the purchase price will be allocated based on the fair value
of the assets acquired and the liabilities assumed. See 'The Merger--Accounting
Treatment.'
Interests of Certain Persons in the Merger. Pursuant to certain employment
agreements between the Company and 25 senior executives, any such Executive (as
defined herein) whose employment is terminated without Cause (as defined herein)
or who leaves for Good Reason (as defined herein) in connection with the Merger
will be entitled to certain severance payments. In connection with the Merger,
the Company adopted a severance benefits proposal (the 'Benefits Proposal') for
all employees that includes a severance and stay protection plan for employees
terminated within the first 90 days after the Effective Time. Additionally, all
outstanding options to purchase National Re Common Stock and all outstanding
'restricted' National Re
10
<PAGE>
Common Stock (including all options held by the executive officers and directors
of National Re) will vest upon approval of the Merger Agreement by the Company's
stockholders. For a description of these and other matters, see 'The
Merger--Interests of Certain Persons in the Merger.'
Certain Federal Income Tax Consequences. The Merger has been structured
with the intent that it be treated as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the 'Code'). In
general, if pursuant to the Merger (i) a holder exchanges all of the shares of
National Re Common Stock actually owned by it solely for cash, it will recognize
capital gain or loss equal to the difference between the amount of cash received
and its adjusted tax basis in the shares of National Re Common Stock
surrendered, (ii) a holder exchanges all of the shares of National Re Common
Stock actually owned by it solely for shares of General Re Common Stock, it will
not recognize any gain or loss except in respect of cash received in lieu of
fractional shares of General Re Common Stock, and (iii) a holder exchanges all
of the shares of National Re Common Stock actually owned by it for a combination
of shares of General Re Common Stock and cash, it will recognize gain equal to
the lesser of (A) the amount of cash received and (B) the difference between (1)
the sum of the cash received and the fair market value of the General Re Common
Stock received and (2) its adjusted tax basis in the shares of National Re
Common Stock surrendered. Certain exceptions or other considerations may apply.
See 'The Merger--Certain Federal Income Tax Consequences.'
Dissenters' Rights. Pursuant to Section 262 of the DGCL, Company
stockholders may exercise dissenters' rights in connection with the Merger. See
'The Merger--Dissenters' Rights' and Annex V.
Listing. The shares of General Re Common Stock to be issued in the Merger
will be authorized for listing and trading on the NYSE.
11
<PAGE>
MARKET PRICE DATA AND DIVIDENDS
General Re Common Stock is listed and traded on the NYSE under the symbol
'GRN.' National Re Common Stock is listed and traded on the NYSE under the
symbol 'NRE.' The table below sets forth, for the quarters indicated, (i) the
quarterly per share cash dividends paid to holders of General Re Common Stock,
(ii) the quarterly per share cash dividends paid to holders of National Re
Common Stock, (iii) the high and low closing prices of General Re Common Stock
as reported by the NYSE Composite Tape, and (iv) the high and low closing prices
of National Re Common Stock, as reported by the NYSE Composite Tape.
<TABLE>
<CAPTION>
DIVIDENDS PRICE OF DIVIDENDS
PRICE OF DECLARED NATIONAL RE DECLARED
GENERAL RE PER COMMON PER
COMMON STOCK GENERAL RE STOCK NATIONAL RE
------------ COMMON ----------- COMMON
HIGH LOW SHARE HIGH LOW SHARE
---- ---- ---------- --- --- -----------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1994:
First Quarter............... $114 $102 1/2 $ 0.48 $30 3/4 $27 1/2 $0.04
Second Quarter.............. 125 3/8 105 3/4 0.48 30 1/2 25 7/8 0.04
Third Quarter............... 115 5/8 104 7/8 0.48 27 23 5/8 0.04
Fourth Quarter.............. 128 1/2 105 0.48 26 3/4 22 1/2 0.04
Year ended December 31, 1995:
First Quarter............... 134 1/8 122 7/8 0.49 30 1/2 25 7/8 0.04
Second Quarter.............. 137 5/8 125 1/2 0.49 33 1/2 28 1/2 0.04
Third Quarter............... 152 1/8 129 7/8 0.49 35 3/8 31 3/8 0.04
Fourth Quarter.............. 157 7/8 142 7/8 0.49 38 32 0.05
Year ended December 31, 1996:
First Quarter............... 156 142 3/8 0.51 38 30 1/2 0.05
Second Quarter.............. 153 1/4 139 1/8 0.51 37 3/4 31 5/8 0.05
Third Quarter (through
August 26, 1996)......... -- 0.05
</TABLE>
On June 28, 1996, the last full trading day prior to the announcement by
General Re and the Company that they had entered into the Merger Agreement, the
closing prices of General Re Common Stock and National Re Common Stock, as
reported by the NYSE Composite Tape, were $152 1/4 per share and $37 3/4 per
share, respectively. The closing prices of General Re Common Stock and National
Re Common Stock on August 26, 1996, the most recent practicable date prior to
the printing of this Proxy Statement/Prospectus, as reported by the NYSE
Composite Tape, were $ per share and $ per share, respectively.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS. See also 'The
Merger--Election Procedures.'
On August 26, 1996, there were approximately 3,936 holders of record of
General Re Common Stock and approximately holders of record of National Re
Common Stock.
12
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following tables set forth selected historical financial data of
General Re and National Re for the last five fiscal years and for the six months
ended June 30, 1996 and 1995. The selected historical financial data of General
Re and National Re have been derived from, and should be read in conjunction
with, the historical consolidated financial statements of General Re or National
Re, as the case may be, including the notes thereto, which are incorporated
herein by reference. The financial statements presented herein for unaudited
interim periods are not necessarily indicative of results which may be expected
for any other interim or annual period. See 'Incorporation of Certain Documents
by Reference,' 'Available Information,' 'Unaudited Selected Pro Forma Financial
Information,' 'Unaudited Pro Forma Financial Information' and 'Unaudited
Comparative Per Share Data.'
13
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF GENERAL RE (1)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------ -----------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------- ------- ------- ------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT
INFORMATION:
Total Revenues..................... $ 4,016 $ 3,137 $ 7,210 $ 3,837 $ 3,560 $ 3,387 $ 3,207
Net Premiums Written............... 3,299 2,815 6,102 3,001 2,524 2,349 2,249
After-Tax Income before Accounting
Changes(2)(3).................... 461 397 825 665 697 596 657
Per Share........................ 5.67 4.78 9.92 7.97 8.11 6.84 7.46
Net Income......................... 461 397 825 665 711 657 657
Per Share........................ 5.67 4.78 9.92 7.97 8.28 7.55 7.46
After-Tax Income, excluding
Realized Gains(3)................ 426 376 788 621 604 465 563
Per Share........................ 5.23 4.52 9.47 7.43 7.01 5.30 6.37
Investment Income before Tax....... 573 449 1,017 749 755 755 752
Investment Income after Tax........ 433 357 787 622 619 620 618
CONSOLIDATED BALANCE SHEET
INFORMATION:
Investments........................ 24,746 22,824 23,494 18,898 14,346 11,532 10,842
Total Assets(4).................... 37,813 34,810 35,946 29,597 19,419 14,700 12,416
Long-Term Debt..................... 154 156 155 157 192 199 301
Common Stockholders' Equity........ 6,297 5,708 6,587 4,859 4,761 4,227 3,911
COMMON STOCKHOLDERS' INFORMATION:
Average Common Shares
Outstanding...................... 80.4 82.0 82.1 82.1 84.5 85.7 87.1
Cost of Common Share Repurchases... $ 547 $ 0 $ 35 $ 207 $ 134 $ 179 $ 59
Common Stockholders' Equity per
Share............................ 80.15 69.59 80.22 59.35 56.92 49.89 45.14
</TABLE>
- ------------------
(1) Only continuing operations are presented. Balance sheet data are as of the
end of the relevant period. International property/casualty operations are
reported on a one-quarter lag. The International property/ casualty
operations include Cologne Re for balance sheet amounts in 1995 and 1994.
Only one quarter and nine months of Cologne Re's 1995 results are included
in General Re's results for the six months ended June 30, 1995 and the year
ended December 31, 1995, respectively, due to the one-quarter reporting lag.
(2) Excludes cumulative effect of accounting changes. The balance sheet data in
the table above reflects the adoption of Statement of Financial Accounting
Standards No. 115, Accounting for Certain Investments in Debt and Equity
Securities in 1994 and the adoption of Statement of Financial Accounting
Standards No. 113, Accounting and Reporting for Reinsurance of
Short-Duration and Long-Duration Contracts in 1993, with reclassifications
made for 1992. Adoption of Statement of Financial Accounting Standards No.
113 did not affect results from operations or common stockholders' equity.
In 1993, General Re adopted the accounting prescribed by the Emerging Issues
Task Force for multiple-year, retrospectively rated reinsurance contracts.
The cumulative effect from prior years recorded in 1993 increased net income
by $14 million or $.17 per share. In 1992, General Re adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes. The
cumulative effect from prior years recorded in 1992 increased net income by
$61 million or $.71 per share.
(3) After deducting minority interest.
(4) In 1994, General Re adopted FASB Interpretation No. 39, Offsetting of
Amounts Related to Certain Contracts, and FASB Interpretation No. 41,
Offsetting of Amounts Related to Certain Repurchase and Reverse Repurchase
Agreements. The combined effect of adopting the Interpretations increased
reported assets and liabilities at December 31, 1994 and 1993 by $950
million and $1,747 million, respectively, and had no effect on results from
operations or common stockholders' equity.
14
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF NATIONAL RE (1)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------------- ----------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------ ------ ------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT
INFORMATION:
Total Revenues..................... $ 235 $ 192 $ 391 $ 378 $ 401 $ 344 $ 368
Net Premiums Written............... 191 171 334 311 333 252 260
Net Income......................... 28 21 48 22 59 14 17
Per Share........................ 1.69 1.27 2.84 1.27 3.42 0.86 2.37
After-Tax Income, excluding
Realized Gains and Losses (2).... 26 22 47 40 36 18 15
Per Share........................ 1.52 1.33 2.8 2.35 2.11 1.11 2.15
Investment Income before Tax....... 41 37 76 63 66 73 75
Investment Income after Tax........ 30 28 58 49 49 51 51
CONSOLIDATED BALANCE SHEET
INFORMATION:
Investments........................ 1,300 1,199 1,275 1,093 1,093 993 930
Total Assets....................... 1,767 1,642 1,725 1,522 1,535 1,396 1,308
Long-Term Debt..................... 211 186 211 186 187 200 280
Common Stockholders' Equity........ 375 376 381 290 314 243 24
COMMON STOCKHOLDERS' INFORMATION:
Average Common Shares
Outstanding...................... 17 17 17 17 17 16 7
Cost of Common Share Repurchases... $ 9 $ 4 $ 4 $ 4 -- -- --
Common Stockholders' Equity per
Share............................ 22.56 20.51 22.58 17.05 $18.28 $14.22 N/A
</TABLE>
- ------------------
(1) The balance sheet data in the table above reflects the adoption of Statement
of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities in 1993 and the adoption of
Statement of Financial Accounting Standards No. 113, Accounting and
Reporting for Reinsurance of Short-Duration and Long-Duration Contracts in
1993, with reclassifications made for 1992 and 1991. Adoption of Standard
No. 113 did not affect results from operations or common stockholders'
equity. In 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. The $14.0 million cumulative
effect from prior years was recognized as a reduction of goodwill, with a
corresponding increase in deferred tax assets.
(2) Excludes extraordinary losses in 1994 and 1992 and preferred dividends in
1992 and 1991.
15
<PAGE>
UNAUDITED SELECTED PRO FORMA FINANCIAL INFORMATION
The following unaudited selected pro forma financial information for
General Re gives effect to the Merger, and is derived from the unaudited pro
forma financial information appearing elsewhere in this Proxy
Statement/Prospectus. The unaudited pro forma financial statements are provided
for informational purposes only and do not purport to represent what General
Re's results of operations actually would have been had the Merger and related
transactions in fact occurred on the assumed dates, or to project General Re's
results of operations and financial position for any future period. The Merger
will be accounted for under the purchase method of accounting. See 'The
Merger--Accounting Treatment.' The unaudited pro forma financial statements are
based on the historical consolidated financial statements of General Re and the
Company and the unaudited selected pro forma financial information should be
read in conjunction with (i) such historical financial statements and the notes
thereto, which are incorporated by reference in this Proxy Statement/Prospectus,
(ii) the unaudited pro forma financial information and unaudited comparative per
share data, including the notes thereto appearing elsewhere in this Proxy
Statement/Prospectus and (iii) the selected historical financial data of General
Re and the Company appearing elsewhere in this Proxy Statement/Prospectus. See
'Incorporation of Certain Documents by Reference,' 'Available Information,'
'Unaudited Pro Forma Financial Information,' 'Unaudited Comparative Per Share
Data' and 'Selected Historical Financial Data.'
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF INCOME INFORMATION:
Total Revenues..................... $4,234 $ 7,567
Income before Taxes and Minority
Interest......................... 685 1,139
Net Income......................... 474 842
UNAUDITED PRO FORMA CONSOLIDATED
BALANCE SHEET INFORMATION:
Total Assets....................... 39,685 (a)
Total Liabilities and Net
Cumulative
Convertible Preferred Stock...... 32,918 (a)
Total Common Stockholders'
Equity........................... 6,767 (a)
</TABLE>
- ------------------
(a) Not required.
16
<PAGE>
UNAUDITED COMPARATIVE PER SHARE DATA
The following table sets forth for the Company and General Re certain
historical and pro forma equivalent per share data at June 30, 1996 and for the
six months ended June 30, 1996 and at December 31, 1995 and for the year ended
December 31, 1995. The information presented herein should be read in
conjunction with the selected historical financial data and the unaudited pro
forma financial information appearing elsewhere in this Proxy
Statement/Prospectus. See 'Incorporation of Certain Documents by Reference,'
'Available Information,' 'Selected Historical Financial Data,' 'Unaudited
Selected Pro Forma Financial Information' and 'Unaudited Pro Forma Financial
Information.'
<TABLE>
<CAPTION>
AT OR FOR
SIX MONTHS AT OR FOR
ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
<S> <C> <C>
NATIONAL RE COMMON STOCK
Income from Continuing Operations per
Share:
Historical......................... $ 1.69 $ 2.84
Pro Forma Equivalent(a)............ 1.96 3.41
Book Value per Share:
Historical......................... 22.56 22.58
Pro Forma Equivalent(a)............ 28.96 (b)
Cash Dividends per Share:
Historical......................... 0.10 0.17
Pro Forma Equivalent(a)............ 0.36 0.69
GENERAL RE COMMON STOCK
Income from Continuing Operations per
Share:
Historical......................... 5.67 9.92
Combined Pro Forma................. 5.61 9.76
Book Value per Share:
Historical......................... 80.15 80.22
Combined Pro Forma................. 82.86 (b)
Cash Dividends per Share:
Historical......................... 1.02 1.96
Combined Pro Forma................. 1.02 1.96
</TABLE>
- ------------------
(a) The pro forma equivalent per share data is calculated by multiplying .34954,
which is the assumed exchange ratio for the conversion of National Re Common
Stock into General Re Common Stock, by General Re's pro forma income per
share, book value per share and cash dividends per share, which have been
prepared using adjustments included in the Unaudited Pro Forma Financial
Information contained elsewhere in this Proxy Statement/Prospectus. The pro
forma equivalent calculation does not give effect to the portion of the
total consideration consisting of the Cash Consideration. The actual number
of shares of General Re Common Stock to be received with respect to each
share of National Re Common Stock by stockholders of National Re who elect
the Stock Consideration will be determined by dividing $53 by the Average
General Re Share Price, but will not be more than .39259 nor less than
.32121 shares of General Re Common Stock.
(b) Not required.
17
<PAGE>
THE COMPANIES
NATIONAL RE CORPORATION
National Re, through its wholly owned subsidiary, NRC, is one of six major
direct writers of property and casualty reinsurance in the United States. As a
reinsurer, NRC assumes or accepts parts of various risks initially underwritten
by primary insurers and self-insureds. It writes reinsurance in the form of
treaties and facultative certificates, primarily on an excess of loss basis.
Over 70% of 1995's premiums represented casualty risk. As a direct writer, NRC
provides reinsurance directly to primary insurers without the assistance of
reinsurance brokers.
NRC has pursued a business strategy of capitalizing on its position as a
direct writer of reinsurance, building long-term relationships with clients to
provide relative stability in its sources of revenue, adhering to underwriting
practices designed to limit NRC's exposure to more volatile risks and
catastrophic losses and adjusting its mix of business and contract terms to take
advantage of market conditions. A subsidiary of the Company, Fairfield Insurance
Company, writes primary alternative risk insurance.
The principal executive offices of the Company are located at 777 Long
Ridge Road, Stamford, Connecticut 06904, and its telephone number is (203)
329-7700.
GENERAL RE CORPORATION
General Re is a holding company for global reinsurance and related risk
assessment, risk transfer and risk management operations. General Re owns GRC,
the largest professional property/casualty reinsurer domiciled in the United
States, and also owns a controlling interest in Cologne Re, a major
international reinsurer.
General Re operates four principal businesses: United States
property/casualty reinsurance, international property/casualty reinsurance,
life/health reinsurance and financial services. General Re's United States
property/casualty subsidiaries principally write treaty and facultative
reinsurance underwritten on a direct basis throughout the United States and
Canada. GRC predominately writes excess-of-loss reinsurance across various lines
of business. In addition, General Re writes excess and surplus lines reinsurance
through General Star Management Company, provides alternative risk solutions
through Genesis Underwriting Management Company and provides reinsurance
brokerage services through Herbert Clough Inc. General Re's international
property/casualty reinsurance operations are comprised of both treaty
reinsurance and facultative reinsurance, with the majority of the premiums
derived from the treaty business. A majority of the international premiums are
written on a proportional basis.
General Re's life/health operations provide international life, group,
long-term disability, individual health and finite risk reinsurance. Most of the
life/health business is written on a proportional treaty basis, with smaller
amounts written on a facultative basis.
General Re's financial services operations include derivative products
through its subsidiary General Re Financial Products Corporation, insurance
brokerage and management, reinsurance brokerage and real estate management
operations, and investment management services through its subsidiary, General
Re-New England Asset Management, Inc. General Re's principal reinsurance
operations are based in the United States and Germany, with significant
additional operations in Europe, Australia, Asia and South America. Its
principal financial services operations are based in the United States with
subsidiaries located in London and Tokyo.
The principal executive offices of General Re are located at 695 East Main
Street, Stamford, Connecticut 06904, and its telephone number is (203) 328-5000.
SUB
Sub is a Delaware corporation organized in 1996. Sub has not carried on any
significant activities other than activities undertaken in connection with the
Merger Agreement, the Stockholders Agreements and the transactions contemplated
thereby. The mailing address and telephone number of Sub are the same as those
for General Re.
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THE SPECIAL MEETING
PURPOSE OF THE MEETING; DATE, TIME AND PLACE
The Special Meeting of Stockholders of the Company will be held at 10:00
a.m., local time, on September 30, 1996 at the Company's corporate headquarters,
777 Long Ridge Road, Stamford, Connecticut. At the Special Meeting, the holders
of National Re Common Stock will consider and vote upon the approval and
adoption of the Merger Agreement.
VOTE REQUIRED; VOTING PROCEDURES; RECORD DATE
The close of business on August 26, 1996 has been fixed by the Company
Board as the Record Date for the determination of stockholders entitled to
notice of, and to vote at, the Special Meeting. All holders of record of
National Re Common Stock at the close of business on the Record Date will be
entitled to notice of, and to vote at, the Special Meeting.
A majority of the outstanding shares of National Re Common Stock entitled
to vote, represented in person or by proxy, is required for a quorum at the
Special Meeting. Approval and adoption of the Merger Agreement requires the
affirmative vote of the holders of a majority of the outstanding shares of
National Re Common Stock as of the Record Date. At the Record Date,
shares of National Re Common Stock were issued and outstanding and entitled to
vote at the Special Meeting.
Shares of National Re Common Stock which are represented by properly
executed proxies, unless such proxies shall have previously been properly
revoked, will be voted in accordance with the instructions indicated in such
proxies. If no contrary instructions are indicated, such shares will be voted
FOR approval and adoption of the Merger Agreement, and in the discretion of the
persons named in the proxy as proxy appointees, as to any other matter which may
properly come before the Special Meeting and of which the Company is not
presently aware. Under the rules of the NYSE, while brokers who hold shares in
'street' name have the authority to vote on certain items when they have not
received instructions from beneficial owners, brokers will not be entitled to
vote on the Merger Agreement absent instructions. Brokers who do not receive
instructions but who are present, in person or by proxy, at the Special Meeting
will be counted as present for quorum purposes. Because the approval and
adoption of the Merger Agreement by stockholders of National Re requires the
affirmative vote of a majority of the shares of National Re Common Stock
outstanding as of the Record Date, failure to submit a proxy, abstentions and
broker non-votes will have the same effect as a vote against approval of the
Merger Agreement.
It is not expected that any matters other than those referred to in this
Proxy Statement will be brought before the Special Meeting. If, however, other
matters are properly presented, the persons named as proxy appointees will vote
in accordance with their best judgment on such matters. The grant of a proxy
will also confer discretionary authority on the persons named in the proxy to
vote in accordance with their best judgment on matters incident to the conduct
of the Special Meeting. The Special Meeting may be adjourned to another date
and/or place for any proper purpose, including, without limitation, for the
purposes of soliciting additional proxies.
Any stockholder may revoke a proxy at any time before it is voted by filing
with the Corporate Secretary of the Company an instrument revoking the proxy or
by returning a duly executed proxy bearing a later date, or by attending the
Special Meeting and voting in person. Any such filing should be made to the
attention of Anne M. Quinn, Corporate Secretary, National Re Corporation, 777
Long Ridge Road, Stamford, Connecticut 06904. Attendance at the Special Meeting
will not by itself constitute revocation of a proxy.
In addition to the solicitation of proxies by use of the mails, proxies may
also be solicited by the Company and its directors, officers and employees (who
will receive no additional compensation therefor) by telephone, telegram,
facsimile transmission and other electronic communication methods or personal
interview. The Company will reimburse banks, brokerage houses, custodians and
other fiduciaries who hold shares of National Re Common Stock in their name or
in custody, or in the name of nominees for others, for their out-of-pocket
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expenses incurred in forwarding copies of the proxy materials to those persons
for whom they hold such shares. The Company will bear the costs of the Special
Meeting and of soliciting proxies therefor, including the cost of mailing this
Proxy Statement/Prospectus and related materials. Costs incurred in connection
with printing this Proxy Statement/Prospectus and the Registration Statement, as
well as the filing fees relating thereto, will be shared equally by the Company
and General Re.
D.F. King & Co., Inc. ('D.F. King') will assist in the solicitation of
proxies by the Company for a fee of $3,000 plus reasonable out-of-pocket
expenses. If you require additional copies of this Proxy Statement/Prospectus,
the Company proxy card or the Form of Election, or you have questions, please
contact D.F. King at (800) 669-5550.
On the Record Date, the current directors and executive officers of the
Company and their respective affiliates beneficially owned a total of 4,395,768
shares of National Re Common Stock, constituting approximately 26.45% of the
outstanding shares of National Re Common Stock entitled to vote at the Special
Meeting (excluding shares underlying stock options). Some of the major
shareholders, directors and executive officers of the Company have agreed with
General Re to vote the shares as to which they had voting power on the
Record Date (approximately % of the outstanding shares of National Re Common
Stock entitled to vote at the Special Meeting) FOR the approval and adoption of
the Merger Agreement. In addition, pursuant to the Keystone Stockholders
Agreement, the holders of an additional 3.43% of the issued and outstanding
shares of National Re Common Stock (excluding shares underlying stock options)
on the Record Date are obligated to vote their shares in favor of the approval
and adoption of the Merger Agreement. Accordingly, the favorable vote of an
additional shares (or approximately %) of National Re Common Stock is
necessary to approve and adopt the Merger Agreement. See 'The Stockholders
Agreements.' To the knowledge of General Re, no executive officer or director of
General Re owns any shares of National Re Common Stock.
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THE MERGER
GENERAL
The Company Board has unanimously approved the Merger Agreement, which
provides for the Merger to be consummated at the Effective Time. Pursuant to the
terms of the Merger Agreement, subject to the satisfaction or waiver of certain
conditions, including, among other things, the requisite approval of the Merger
Agreement by the holders of National Re Common Stock, General Re will acquire
the Company through the Merger of the Company with and into Sub. Following the
Merger, Sub will be the surviving corporation (the 'Surviving Corporation') and
will continue in existence as a subsidiary of General Re.
If the Merger is consummated, each share of National Re Common Stock (other
than treasury stock and shares that are owned by General Re or any direct or
indirect wholly owned subsidiary of General Re immediately prior to the
Effective Time and shares as to which dissenters' rights have been exercised in
accordance with and subject to the provisions of the DGCL) at the Effective Time
will be converted, subject to the proration and other limitations described
herein, at the election of the holder, into the right to receive (i) the
Conversion Fraction of a share of General Re Common Stock, together with the
attached General Re Preferred Stock Purchase Rights; provided that General Re
will not issue more than .39259 shares of General Re Common Stock nor less than
.32121 shares of General Re Common Stock, or (ii) $53 in cash, without any
interest thereon. The Conversion Fraction will be a fraction determined by
dividing $53 by the average of the closing prices per share of General Re Common
Stock on the NYSE, as reported by the NYSE Composite Tape, for the ten
consecutive NYSE trading days ending on and including the second NYSE trading
day immediately preceding the closing date of the Merger. See 'The
Merger--Election Procedures' and 'The Merger Agreement-- Conversion of Shares.'
The Company Board believes that the Merger is fair to, and in the best
interests of, the Company and its stockholders and unanimously recommends that
the stockholders of the Company vote to approve and adopt the Merger Agreement
and the transactions contemplated thereby. Neither the Company nor the Company
Board makes any recommendation as to whether stockholders should elect to
receive the Cash Consideration or the Stock Consideration or any combination
thereof in the Merger. Each stockholder must make his or her own decision with
respect to such election.
BACKGROUND OF THE MERGER
In late May 1996, David Bonderman, a member of the Company Board, was
contacted by a representative of a financial advisor who was acting on behalf of
Employers Reinsurance Corporation ('Employers Re'), an indirect subsidiary of
General Electric Company ('GE'). Mr. Bonderman was informed that Employers Re
was interested in acquiring the Company for $45 per share payable in cash or GE
common stock contingent upon an agreement to negotiate exclusively with
Employers Re, completion of due diligence and negotiation of definitive
agreements. Mr. Bonderman reported this proposal to William D. Warren, the
Company's Chairman, President and Chief Executive Officer. After discussions
among the members of the Executive Committee of the Company and certain other
directors (Messrs. Bonderman, Peter A. Cheney, J. Taylor Crandall, Robert W.
Eager, Jr., Steven Gruber, Timothy T. McCaffrey and Warren), the Company decided
to investigate its strategic alternatives, including a possible sale of the
Company. In order to test the appropriateness of Employers Re's proposal and to
gauge other possible market interest, the Company contacted a small number of
potential strategic buyers of the Company (including General Re and Swiss
Reinsurance Company ('Swiss Re')) to ascertain their interest in acquiring the
Company. On June 4, 1996, the members of the Executive Committee of the Company
and certain other directors of the Company held a conference call in which Mr.
Warren reported on his contacts with the possible strategic buyers (including
General Re and Swiss Re). Mr. Warren informed such directors that each company
that he contacted had expressed an interest in acquiring National Re. Therefore,
the Company determined that agreeing to negotiate exclusively with Employers Re
was premature. On June 7, 1996, Mr. Warren met with Ronald E. Ferguson, Chairman
and Chief Executive Officer of General Re, in the morning, and Heidi Hutter,
Chairman, President and Chief Executive Officer of Swiss Reinsurance America
Corporation ('Swiss Re America'), a subsidiary of Swiss Re, in the afternoon, to
discuss further a possible transaction. On June 8, 1996, Mr. Warren, certain
directors (including the members of the Executive Committee) and Mary Ellen
Burns, Senior Vice President and General Counsel of the Company, participated in
a conference call in which
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Mr. Warren reported on his meetings. There was a consensus that the Company
should pursue the various indications of interest further, pending a full
meeting of the Company Board.
On June 11, 1996, the Company Board held a special meeting to consider the
Employers Re proposal and the alternatives available to the Company. Also
participating in the meeting was Matthew Nimetz, a partner of Paul, Weiss,
Rifkind, Wharton & Garrison, counsel to the Company. After receiving a full
report on the Employers Re proposal and the other indications of interest, the
Company Board authorized a continuing examination of the various proposals and
agreed that the indications of share price warranted consideration. The Company
Board authorized the retention of Goldman Sachs as the Company's investment
banker. The Company Board also appointed a special committee (the 'Special
Committee') consisting of Messrs. Bancroft, Bonderman, Boscia, Crandall, Gruber
and Warren to monitor the process and to supervise the negotiation process.
Meetings of the Special Committee were scheduled to occur at least once each
week. Representatives of the Company, after discussions with Goldman Sachs and
consideration of alternatives available to the Company, determined that a
limited auction process with a limited number of strategic bidders was the best
way to maximize stockholder value. Goldman Sachs undertook a study to
familiarize itself with the Company and the potential cost savings that a
strategic buyer might realize.
On June 14, 1996, Mr. Warren had further conversations with James E.
Gustafson, President and Chief Operating Officer of General Re, and Ms. Hutter,
of Swiss Re America, about a possible transaction. On June 18, 1996, Goldman
Sachs informed the Company that, in its judgment, more than $45 per share could
be realized if the Company were to be sold. On June 21, 1996, the Special
Committee met to ratify the terms of the engagement of Goldman Sachs and, after
discussions with its advisors, decided to initiate a limited auction process.
On June 24, 1996, Employers Re stated its unwillingness to participate in
the auction process when its proposal for exclusive negotiations at $45 per
share was not accepted. Also on June 24, 1996, Mr. Gustafson met at the
Company's offices with Mr. Warren and, later, with other senior executives of
the Company. On June 25, 1996, Messrs. Cheney, Eager and McCaffrey of the
Company and representatives of the Company's financial and legal advisors met
with Mr. Gustafson and Joseph P. Brandon, Vice President and Chief Financial
Officer of General Re, and representatives of General Re's financial and legal
advisors in New York City. After a discussion, General Re proposed to pay $50
per share in cash or a combination of cash and stock, subject to the completion
of expedited due diligence, the negotiation of definitive agreements and
approval of both companies' Boards of Directors. On June 26, 1996, Messrs.
Cheney, Eager and McCaffrey of the Company and representatives of the Company's
legal and financial advisors met with representatives of Swiss Re and its legal
and financial advisors in New York City. Subject to completion of due diligence
and the negotiation of definitive agreements, Swiss Re proposed a potential bid
of $52 per share in cash, but also proposed in general terms a transaction by
which a limited number of large stockholders who preferred receiving publicly
traded securities exchangeable for Swiss Re common stock in a nontaxable
transaction would be able to do so. The proposals of both General Re and Swiss
Re were contingent upon receiving an exclusive due diligence and negotiation
period and obtaining voting agreements from certain significant stockholders of
the Company.
On June 26, 1996, there was a Special Committee meeting to discuss the two
proposals, including the prices proposed, the length of the due diligence
periods and other terms and conditions of the proposals. Following a discussion
of the proposals, the Special Committee voted to inquire whether General Re
would increase the per share price in its proposal. The Company's financial
advisors communicated the Special Committee's position to General Re.
On June 27, 1996, in response to the Company's inquiry, General Re proposed
that it be given an exclusive period through June 30, 1996 to conduct due
diligence and negotiate a definitive merger agreement on the basis of a $53 per
share price payable in cash or in a nontaxable exchange of National Re Common
Stock for General Re Common Stock. During the exclusive period, the Company
would agree not to solicit or negotiate with any other party and would be
obligated to inform General Re of any other acquisition proposal received by the
Company. The definitive merger agreement would contain no financing conditions,
no due diligence conditions and would provide for a $30 million termination fee
plus reimbursement of expenses if the merger agreement were to terminate due to
certain events. The General Re proposal also required an agreement from certain
significant stockholders of the Company to vote in favor of the proposed merger.
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Later on June 27, the Special Committee met and agreed to move forward on
the basis of the General Re proposal (including the exclusive period). However,
the Special Committee did not agree to the size of the termination fee. After
negotiations, General Re agreed to reduce the termination fee to $25 million
(without reimbursement of expenses). Swiss Re was notified by Goldman Sachs that
another party was being granted a limited exclusive negotiating period. On June
28 and 29, 1996, representatives of General Re and its financial advisors
conducted due diligence with respect to the Company and met with Company
personnel.
On June 28, 1996, counsel for General Re delivered to the Company and its
advisors a draft merger agreement. Such counsel also delivered a draft
stockholders agreement to be entered into by each of Acadia and Keystone.
General Re requested that Messrs. Warren, Cheney, Eager and McCaffrey also enter
into similar stockholders agreements.
Also on June 28, the Company received a letter from Swiss Re expressing
disappointment over the decision to allow another party an exclusive due
diligence and negotiation period and asserting that it would consider making a
higher all cash bid (between $54 and $55 and possibly higher, depending on the
results of its due diligence) if it were allowed to conduct its own due
diligence over a one week period. The Company advised General Re of the receipt
of such letter.
On June 29, 1996, a special meeting of the Company Board was held to
consider the General Re proposal and the Swiss Re letter. The Company's
financial and legal advisors described the various outstanding proposals to the
Company Board and recounted in detail the negotiations that had occurred over
the previous two weeks. The Company Board was advised that given the level of
bids under discussion the other invited parties had dropped out of the limited
auction process, and that General Re could offer a transaction in which Company
stockholders could receive cash or stock while Swiss Re could only offer cash
(except for a stock transaction that might be available to certain, but not all,
stockholders). The Company Board was aware that there were several large
stockholders of the Company for whom a nontaxable transaction was economically
attractive and who were unlikely to support an all cash transaction or to enter
into voting agreements to support such a transaction. The Company Board decided
to allow General Re's due diligence to continue, to continue negotiation of
definitive agreements and to await General Re's final offer on the following
day, June 30, 1996.
Later on June 29, representatives of the Company and its financial and
legal advisors and representatives of General Re and its financial and legal
advisors met to negotiate the proposed merger agreement. As a result of the
negotiations, General Re agreed, among other things, to (i) make certain changes
to the proposed 'no solicitation' covenant and (ii) limit further the
circumstances under which the $25 million termination fee would be payable. Also
on June 29, counsel for Acadia and Keystone and counsel for General Re
negotiated by conference call the proposed stockholders agreements.
On June 30, 1996, representatives of the Company and General Re met to
finalize the merger agreement. Also, counsel for Acadia and Keystone and counsel
for General Re negotiated by conference call to finalize the proposed
stockholders agreements. The parties also finalized a draft press release.
General Re indicated to the Company that in view of press inquiries over the
weekend, it intended, if its proposal was not accepted, to issue a press release
at the opening of business on Monday, July 1, stating that discussions between
the Company and General Re had terminated.
In the evening of June 30, the Company Board held a special meeting to
review, with the advice and assistance of the Company's financial and legal
advisors, the proposed merger agreement and the transactions contemplated
thereby, including the Merger and the Benefits Proposal (as defined herein). At
such meeting, the Company's management and financial and legal advisors made
presentations to the Company Board concerning the transaction. The Board
discussed the relative risks and benefits in rejecting the final General Re
offer and commencing a negotiating and due diligence process with Swiss Re.
During a recess of the meeting, Mr. Warren spoke to Mr. Ferguson of General Re
and General Re agreed to alter the proposed 'collar' provisions relating to the
stock consideration in the proposed merger agreement (i.e., the minimum and
maximum number of shares of General Re Common Stock issuable in the Merger) and
agreed that the Company would have a closing condition that General Re Common
Stock be at least $125 per share. The Company's financial advisor, Goldman
Sachs, rendered to the Company Board an oral opinion (which was subsequently
confirmed in writing) to the effect that as of such date, the Cash Consideration
and the Stock Consideration, taken as a whole, to be received by the Company's
stockholders pursuant to the Merger Agreement was fair to the Company's
stockholders. Following
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the Company Board's review of the transaction, the Company Board unanimously
approved the proposed merger agreement and the transactions contemplated thereby
and authorized the execution and delivery of the Merger Agreement. The Company
Board also approved the Benefits Proposal.
Separately, six stockholders of the Company, Messrs. Warren, Cheney, Eager,
McCaffrey, Acadia and Keystone, agreed to enter into the proposed stockholders
agreements.
On July 1, 1996, the General Re Board held a special meeting to review,
with the advice and assistance of General Re's financial and legal advisors, the
proposed merger agreement, the proposed stockholders agreements and the
transactions contemplated thereby, including the Merger. At such meeting,
General Re's management and financial and legal advisors made presentations to
the General Re Board concerning the transaction, and General Re's financial
advisor, Morgan Stanley & Co. Incorporated ('Morgan Stanley'), rendered to the
General Re Board an oral opinion (which was subsequently confirmed in writing)
to the effect that, as of such date, the consideration to be paid by General Re
in the Merger was fair to General Re from a financial point of view. Following
the General Re Board's review of the transaction, the General Re Board
unanimously approved the proposed merger agreement, the proposed stockholders
agreements and the transactions contemplated thereby, and authorized the
execution and delivery of the Merger Agreement and the Stockholders Agreements.
On July 1, 1996, the Merger Agreement and the Stockholders Agreements were
executed and delivered by all parties thereto, and each of the Company and
General Re issued press releases announcing the Merger Agreement.
RECOMMENDATION OF THE COMPANY BOARD AND THE COMPANY'S REASONS FOR THE MERGER
The Company Board has unanimously approved the Merger Agreement and the
transactions contemplated thereby. In reaching its conclusion to approve the
Merger Agreement, the Company Board considered many factors, including, but not
limited to, the following:
(i) the presentations by management of the Company (at the June 30,
1996 Company Board meeting and at previous Company Board meetings)
regarding the financial condition, results of operations, business and
prospects of the Company;
(ii) General Re's financial condition and credit ratings and its
ability to consummate the Merger on an expedited basis;
(iii) the uncertainty, if the General Re offer was rejected, of
negotiating an alternative transaction on as favorable a basis with Swiss
Re or another party within a reasonable time frame;
(iv) the ability of General Re to finance the Cash Consideration
needed for the Merger from available cash and working capital;
(v) the oral opinion received by the Company Board from Goldman Sachs
on June 30, 1996 to the effect that, as of such date, the Cash
Consideration and the Stock Consideration, taken as a whole, to be received
by the Company's stockholders pursuant to the Merger Agreement was fair;
(vi) the historical trading of the shares of National Re Common Stock
and that the $53 per share to be paid in the Merger represents a premium of
65.6% over the June 21, 1996 closing market price of $32 per share and
40.4% over the June 28, 1996 closing market price of $37.75 per share;
(vii) the compatibility of the business and operating strategies of
the Company and General Re, including the fact that both the Company and
General Re are direct writers of reinsurance, seek to achieve an
underwriting profit, and concentrate on providing working layer treaty
reinsurance and facultative reinsurance;
(viii) the expectation that General Re would be able to integrate
quickly the Company due to, among other factors, the similarity of
operating styles, corporate cultures and the proximity of their corporate
headquarters and branch offices;
(ix) the potential efficiencies and synergies to be realized by
combining the operations of the Company and General Re;
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(x) the regulatory approvals required to consummate the Merger and the
favorable prospects for receiving all such approvals;
(xi) the ability of all stockholders of the Company to maintain an
ownership stake in the combined entity by electing to receive General Re
Common Stock and potentially realize the benefits from the Merger;
(xii) the opportunity for certain Company stockholders to receive
General Re Common Stock in an exchange that is nontaxable for federal
income tax purposes (except to the extent of any cash received);
(xiii) the fact that certain large non-management Company stockholders
were unlikely to vote in favor of a transaction that did not qualify as a
nontaxable reorganization under the Code, and had expressed a willingness
to enter into the proposed Stockholders Agreements; and
(xiv) the terms and conditions of the Merger Agreement, including,
among other things, the fact that the Merger Agreement permits the Company
Board, in the exercise of its fiduciary duties, to engage in negotiations
with or to furnish information to third parties in response to unsolicited
takeover proposals and to terminate the Merger Agreement in order to enter
into a definitive agreement relating to an alternative takeover proposal,
upon payment of a $25 million termination fee.
Based on this analysis, the Company Board determined that the Merger is
fair to, and in the best interests of, the Company's stockholders. The foregoing
discussion of the information and factors considered by the Company Board is not
intended to be exhaustive, and such were considered collectively by the Company
Board in connection with its review of the Merger Agreement and the proposed
transactions. In view of the variety of factors considered in connection with
its evaluation of the Merger, the Company Board did not find it practicable to,
and did not, quantify or otherwise assign relative weights to the specific
factors considered in reaching its determination. In addition, individual
members of the Company Board may have given different weights to different
factors. For a discussion of the interests of certain members of the Company's
management and directors in the Merger, see '--Interests of Certain Persons in
the Merger.'
The full text of the written opinion of Goldman Sachs, which sets forth the
assumptions made, matters considered and limitations on the review undertaken in
connection with the opinion, is attached hereto as Annex III and is incorporated
herein by reference. THE COMPANY'S STOCKHOLDERS ARE URGED TO, AND SHOULD, READ
SUCH OPINION IN ITS ENTIRETY. See also '--Opinion of the Company's Financial
Advisor.'
APPROVAL BY THE GENERAL RE BOARD AND GENERAL RE'S REASONS FOR THE MERGER
The General Re Board has unanimously approved the Merger Agreement and the
transactions contemplated thereby. The Merger does not require the approval of
General Re's stockholders. In reaching its conclusion to approve the Merger
Agreement, the General Re Board considered many factors, including, but not
limited to, the following:
(i) the compatibility of the business and operating strategies of
General Re and the Company, including the fact that both General Re and the
Company market on a direct basis, seek to achieve an underwriting profit,
and concentrate on providing working layer treaty reinsurance and
facultative reinsurance;
(ii) the Company's revenue and financial condition, including its
conservative loss reserves, underwriting results, results of operations,
cash flows and returns on equity;
(iii) the Company's quality book of business which has minimal overlap
with General Re's treaty clients and its strong franchise with regional and
specialty insurers;
(iv) the expectation that General Re would be able to integrate
quickly the Company due to, among other factors, the similarity of
operating styles, corporate cultures and the proximity of their corporate
headquarters and branch offices;
(v) the potential efficiencies and synergies to be realized by
combining the operations of General Re and the Company (see '--Estimated
Synergies');
(vi) the enhancement of General Re's market leadership position and
its longer term competitiveness, both in the United States and
internationally;
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(vii) the opinion received by the General Re Board from Morgan Stanley
to the effect that the consideration to be paid to the Company's
stockholders in the Merger is fair to General Re from a financial point of
view. The full text of the written opinion of Morgan Stanley, which sets
forth the assumptions made, the matters considered and limitations on the
review undertaken in connection with such opinion, is attached hereto as
Annex IV and is incorporated herein by reference. THE COMPANY'S
STOCKHOLDERS ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY;
and
(viii) the regulatory approvals required to consummate the Merger and
the favorable prospects for receiving all such approvals.
The foregoing discussion of the information and factors considered by the
General Re Board is not intended to be exhaustive and, as such, were considered
collectively by the General Re Board in connection with its review of the Merger
Agreement and the proposed transactions. In view of the variety of factors
considered in connection with its evaluation of the Merger, the General Re Board
did not find it practicable to, and did not, quantify or otherwise assign
relative weights to the specific factors considered in reaching its
determination. In addition, individual members of the General Re Board may have
given different weights to different factors. Based on this analysis, the
General Re Board determined that the Merger is consistent with and in
furtherance of General Re's long-term business strategy and General Re's goal of
becoming the premier global reinsurer and the first-choice provider of risk
assessment and risk transfer solutions.
OPINION OF THE COMPANY'S FINANCIAL ADVISOR
On June 30, 1996, Goldman Sachs delivered its oral opinion to the Company
Board that as of that date, the Cash Consideration and the Stock Consideration,
taken as a whole, to be received by Company stockholders pursuant to the Merger
Agreement was fair to such stockholders. Goldman Sachs subsequently confirmed
its earlier opinion by delivery of its written opinion dated as of the date of
this Proxy Statement/Prospectus.
The full text of the written opinion of Goldman Sachs, which sets forth
assumptions made, matters considered and limitations on the review undertaken in
connection with the opinion, is attached hereto as Annex III to this Proxy
Statement/Prospectus and is incorporated herein by reference. Company
stockholders are urged to, and should, read such opinion in its entirety.
In connection with its opinion, Goldman Sachs reviewed, among other things,
(i) the Merger Agreement; (ii) the Registration Statement on Form S-4 (including
this Proxy Statement/Prospectus); (iii) the Loss and Loss Adjustment Expense
Reserve Analysis as of December 31, 1995 of NRC and its wholly-owned subsidiary,
Fairfield Insurance Company, prepared by KPMG Peat Marwick LLP (the 'Reserve
Analysis'); (iv) the Annual Reports to Stockholders and Annual Reports on Form
10-K of the Company and General Re for the five years ended December 31, 1995;
(v) certain interim reports to stockholders and Quarterly Reports on Form 10-Q
of the Company and General Re; (vi) certain other communications from the
Company and General Re to their respective stockholders; and (vii) certain
internal financial analyses and forecasts for the Company prepared by its
management. Goldman Sachs also held discussions with members of the senior
management of the Company and General Re regarding the past and current business
operations, financial condition, and future prospects of their respective
companies. In addition, Goldman Sachs reviewed the reported price and trading
activity for the National Re Common Stock and the General Re Common Stock,
compared certain financial and stock market information for the Company and
General Re with similar information for certain other companies the securities
of which are publicly traded, reviewed the financial terms of certain recent
business combinations and performed such other studies and analyses as it
considered appropriate.
Goldman Sachs relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by it for
purposes of its opinion. In addition, Goldman Sachs has not made an independent
evaluation or appraisal of the assets and liabilities (including the loss and
loss adjustment expense reserves) of the Company or General Re or any of their
respective subsidiaries and, except for the Reserve Analysis mentioned above,
Goldman Sachs has not been furnished with any such evaluation or appraisal.
The following is a summary of certain of the financial analyses used by
Goldman Sachs in connection with providing its oral opinion to the Company Board
on June 30, 1996. Goldman Sachs utilized substantially the same type of
financial analyses in connection with providing the written opinion attached
hereto as Annex III.
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(i) Historical Stock Trading Analysis. Goldman Sachs reviewed the
historical trading prices and volumes for National Re Common Stock. In
addition, Goldman Sachs analyzed the consideration to be received by
Company stockholders pursuant to the Merger Agreement in relation to the
closing market price of National Re Common Stock on June 21, 1996 and June
28, 1996. Such analysis indicated that a price of $53.00 per share of
National Re Common Stock represented a premium of 65.6% over the June 21,
1996 closing market price of $32.00 per share and 40.4% over the June 28,
1996 closing market price of $37.75 per share.
(ii) Selected Companies Analysis. Goldman Sachs reviewed and compared
certain financial information relating to the Company to corresponding
financial information, ratios and public market multiples for four large
capitalization (more than $1 billion) publicly-traded reinsurance
companies: General Re, American Re Corporation, Transatlantic Holdings,
Inc. and Everest Reinsurance Holdings, Inc. (the 'Large Cap Selected
Companies') and for four smaller capitalization (less than $1 billion)
publicly-traded reinsurance companies: Zurich Reinsurance Centre Holdings,
Inc., NAC Re Corp., Trenwick Group Inc. and Chartwell Re Corporation (the
'Small Cap Selected Companies' and, together with the Large Cap Selected
Companies, the 'Selected Companies'). The Selected Companies were chosen
because they are publicly-traded reinsurance companies with operations that
are similar to the Company. Goldman Sachs calculated and compared various
financial multiples and ratios. The multiples of the Company were
calculated using a price of $37.75 per share, the closing price of National
Re Common Stock on the NYSE on June 28, 1996. The multiples and ratios for
the Company and the Selected Companies were based on the most recent
publicly available information. Goldman Sachs used median earnings
estimates for 1996 and 1997 for the Company and the Selected Companies as
provided by Institutional Brokers Estimate System ('IBES') as of June 28,
1996. With respect to the Selected Companies, Goldman Sachs considered
estimated calendar year 1996 and 1997 price/earnings ratios, which ranged
from 11.2x to 14.5x for the Large Cap Selected Companies and 9.9x to 30.0x
for the Small Cap Selected Companies, in each case as estimated for
calendar year 1996, and which ranged from 10.0x to 13.0x for the Large Cap
Selected Companies and from 9.0x to 20.9x for the Small Cap Selected
Companies, in each case as estimated for calendar year 1997, compared to
11.8x and 10.8x, respectively, for the Company; and a 1996-1997 earnings
per share growth rate ranging from 11.2% to 20.5% for the Large Cap
Selected Companies and 9.9% to 43.8% for the Small Cap Selected Companies
compared to 9.4% for the Company. The review also indicated price to stated
book value ratios ranging from 1.61x to 2.52x for the Large Cap Selected
Companies and from 1.05x to 1.40x for the Small Cap Selected Companies
compared to 1.69x for the Company and ratios of price to book value
adjusted to exclude unrealized gains and losses on portfolio investments
ranging from 1.42x to 2.59x for the Large Cap Selected Companies and from
1.03x to 1.46x for the Small Cap Selected Companies compared to 1.74x for
the Company.
(iii) Selected Transactions Analysis. Goldman Sachs analyzed certain
information relating to selected transactions in the reinsurance industry
since 1990 (the 'Selected Transactions'). Such analysis indicated that for
the Selected Transactions (a) consideration as a multiple of latest twelve
months ('LTM') net income ranged from 8.8x to 17.9x, as compared to 18.3x
for the consideration to be received in the Merger assuming a price of
$53.00 per share and (b) consideration as a multiple of tangible book value
ranged from 1.0x to 1.8x, as compared to 2.41x for the consideration to be
paid in the Merger assuming a price of $53.00 per share.
(iv) Analysis at Various Prices. Goldman Sachs calculated alternative
values for aggregate equity consideration, aggregate levered consideration
(i.e., aggregate equity consideration plus outstanding debt as of March 31,
1996 of $211 million) and certain multiples based upon ten price per share
values ranging from $46.00 to $56.00 per share of National Re Common Stock.
These calculations were based on 16,678,594 shares of National Re Common
Stock outstanding and 1,118,000 options to purchase shares of National Re
Common Stock outstanding with an assumed exercise price of $30.5823. These
calculations yielded aggregate levered consideration values ranging from
$989 million to $1.163 billion for the Company. Goldman Sachs' analyses
indicated multiples of the Company's LTM net operating earnings per share
ranging from 15.9x to 19.3x, with a multiple of 18.3x based on a price per
share of National Re Common Stock of $53.00; multiples of estimated
calendar year 1996 net operating earnings per share, based on management
estimates as of June 28, 1996, that ranged from 14.2x to 17.2x, with a
multiple of 16.3x based
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on a price per share of $53.00 and multiples of estimated calendar year
1997 net operating earnings per share of National Re Common Stock, based on
management estimates as of June 28, 1996, from 12.0x to 14.6x, with a
multiple of 13.8x based on a price per share of $53.00. Goldman Sachs'
analyses also indicated multiples of estimated calendar year 1996 net
operating earnings per share, based on IBES median earnings estimates as of
June 26, 1996, that ranged from 14.4x to 17.5x, with a multiple of 16.6x
based on a price per share of $53.00, and estimated calendar year 1997 net
operating earnings per share, based on IBES median earnings estimates as of
June 26, 1996, that ranged from 13.1x to 16.0x, with a multiple of 15.1x
based on a price per share of $53.00. Goldman Sachs' analyses also
indicated multiples of March 31, 1996 stated book value ranging from 2.06x
to 2.51x, with a multiple of 2.38x based on a price per share of $53.00 and
multiples of March 31, 1996 tangible book value ranging from 2.10x to
2.55x, with a multiple of 2.42x based on a price per share of $53.00. While
Goldman Sachs performed the mathematical exercise necessary to calculate
the foregoing ranges of values, this analysis was of no probative value in
Goldman Sachs' fairness determinations. In presenting the analysis at
various prices to the Company Board, Goldman Sachs focused on the multiples
derived from a $53.00 per share consideration. These multiples were then
used by Goldman Sachs for comparative purposes in connection with other of
its various analyses.
(v) Net Present Value Analysis. Goldman Sachs performed a net present
value analysis using the Company's management projections for 1996 and 1997
earnings per share and applying the following three growth rates
thereafter: 5%, 10% and 15%. Goldman Sachs calculated a net present value
of estimated dividends to be received by Company stockholders for the years
1996 through 2000 using discount rates ranging from 10.0% to 15.0%. Goldman
Sachs calculated the Company's terminal values in the year 2000 based on
multiples of year 2000 estimated net income ranging from 8.0x to 14.0x.
These terminal values were then discounted to present value using discount
rates from 10.0% to 15.0%. Based on this analysis, the implied values per
share of National Re Common Stock ranged from $19.90 to $53.60.
(vi) Pro Forma Merger Analysis. Goldman Sachs prepared a pro forma
analysis of the financial impact of the Merger assuming (a) total
consideration consisting of 50% Stock Consideration (consisting of 0.34811
of a share of General Re Common Stock for each share of National Re Common
Stock) and 50% Cash Consideration, (b) a 50 basis point increase in pretax
yield on the Company's investment portfolio and (c) $16.5 million of pretax
cost savings. For comparison purposes, Goldman Sachs also prepared a pro
forma analysis of the financial impact of the Merger assuming 100% Cash
Consideration. Using management's earnings estimates for the Company and
IBES median earnings estimates for General Re for 1997, Goldman Sachs
compared the earnings per share of General Re Common Stock, on a standalone
basis, to the earnings per share of General Re Common Stock on a pro forma
basis. Based on this analysis, under both scenarios the proposed
transaction would be marginally accretive to holders of General Re Common
Stock on an earnings per share basis in 1997.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is completely comparable
to the Company or General Re or the contemplated transaction. The analyses were
prepared solely for purposes of Goldman Sachs' providing its opinion to the
Company Board as to the fairness of the Cash Consideration and the Stock
Consideration, taken as a whole, to be received by Company stockholders and do
not purport to be appraisals or necessarily reflect the prices at which
businesses or securities actually may be sold. Analyses based upon forecasts of
future results are not necessarily indicative of actual future results, which
may be significantly more or less favorable than suggested by such analyses.
Because such analyses are inherently subject to uncertainty, being based upon
numerous factors or events beyond the control of the parties or their respective
advisors, none of the Company, General Re, Goldman Sachs or any other person
assumes responsibility if future results are materially different from those
forecast. As described above, Goldman Sachs' opinion to the Company Board was
one of many factors taken into consideration by the Company Board in making its
determination to approve the Merger Agreement. The foregoing summary does not
purport to be a complete description of the analysis performed by Goldman Sachs
and is qualified by reference to the written opinion of Goldman Sachs set forth
in Annex III hereto.
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Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. The Company selected
Goldman Sachs as its financial advisor because it is a nationally recognized
investment banking firm that has substantial experience in transactions similar
to the Merger. From time to time, Goldman Sachs has been engaged by General Re
to provide it with certain investment banking services, and may be so engaged by
General Re in the future.
Pursuant to a letter agreement dated June 25, 1996 (the 'Engagement
Letter'), the Company engaged Goldman Sachs to act as its financial advisor in
connection with the contemplated transaction. Pursuant to the terms of the
Engagement Letter, the Company has agreed to pay Goldman Sachs upon consummation
of the Merger a transaction fee equal to (i) 0.50% of the aggregate
consideration in the Merger up to and including $45.00 per share plus (ii) 3.00%
of the aggregate consideration paid in the Merger between $45.01 and $50.00 per
share plus (iii) 3.50% of the aggregate consideration paid in the Merger in
excess of $50.00 per share. At a transaction price of $53.00 per share, the
amount so calculated is approximately $8.5 million. The Company has agreed to
reimburse Goldman Sachs for its reasonable out-of-pocket expenses, including
attorneys' fees, and to indemnify Goldman Sachs against certain liabilities,
including certain liabilities under the federal securities laws.
CERTAIN PROJECTED FINANCIAL INFORMATION
In the course of its discussions with General Re in June 1996, the Company
provided General Re with certain business and financial information which
General Re and the Company believe was not publicly available. The Company does
not as a matter of course publicly disclose internal projections as to future
revenues, earnings or financial condition. Such information included, among
other things, certain financial projections for 1996 and 1997 prepared by the
management of the Company (the 'Projections'). The Projections do not take into
account any of the potential effects of the transactions contemplated by the
Merger. The Projections were prepared prior to and not in contemplation of the
discussions leading to the Merger, and were considered reasonable by National Re
at the time they were prepared. Because the Merger has been announced, National
Re believes that the Projections would not be achieved if it were to continue to
operate as an independent company. In addition, General Re did not rely on the
forecasted future operating results contained in the Projections to determine
the value of National Re.
The Projections forecasted net income available to common stockholders of
$54 million ($3.25 per share) in 1996 increasing to $64 million ($3.83 per
share) in 1997. The projections included net premiums written of $403 million in
1996 and $464 million in 1997. The Projections were based on National Re
achieving a statutory combined ratio of 97.5% in 1996 and 98.0% in 1997.
National Re also furnished General Re with certain projected balance sheet data
for the years 1995 and 1996. Such balance sheets projected total invested assets
increasing from $1,335 million in 1996 to $1,478 million in 1997, and common
stockholders' equity increasing from $423 million in 1996 to $483 million in
1997.
The following material assumptions were used by the Company in preparing
the 1996 and 1997 Projections: (i) the Company is operating as an independent
public company; no costs or other effects associated with the proposed Merger
have been reflected in the accompanying Projections; (ii) net written premium in
1996 and 1997 increase 21% and 15%, respectively; (iii) no material shift in
investment portfolio composition in 1996 and 1997; no realized capital gains or
losses recognized in 1996 and 1997; no changes in unrealized gains or losses
recognized in 1996 and 1997; (the balance of unrealized gain included in
stockholders' equity at December 31, 1995 was $30 million, after-tax); (iv) no
buy-back of National Re Common Stock in 1997; (v) no change in debt levels or
interest payable under the Company's bank credit agreement in 1996 and 1997;
(vi) no material change in effective income tax rates in 1996 and 1997 and no
changes in tax rates as currently enacted; (vii) no change in dividends payable
on the National Re Common Stock in 1996 and 1997; (viii) no material change in
the ratio of paid losses to incurred losses for 1996 and 1997; and (ix) the
occurrence of no significant disasters or other catastrophes in 1996 and 1997.
THE PROJECTIONS SET FORTH ABOVE WERE NOT PREPARED WITH A VIEW TO PUBLIC
DISCLOSURE OR IN COMPLIANCE WITH PUBLISHED GUIDELINES OF THE COMMISSION OR THE
GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF
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CERTIFIED PUBLIC ACCOUNTANTS. THE PROJECTIONS ARE INCLUDED IN THIS PROXY
STATEMENT/PROSPECTUS ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO GENERAL RE.
WHILE PRESENTED WITH NUMERICAL SPECIFICITY, THESE PROJECTIONS ARE BASED UPON A
VARIETY OF ASSUMPTIONS (CERTAIN OF WHICH ARE SET FORTH ABOVE) RELATING TO THE
BUSINESS OF THE COMPANY, ALL OF WHICH ARE SUBJECT TO MATERIAL RISKS AND
UNCERTAINTIES. ALTHOUGH SUCH PROJECTIONS AND ASSUMPTIONS WERE CONSIDERED
REASONABLE BY THE COMPANY AT THE TIME THEY WERE PREPARED, THE PROJECTIONS ARE
SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND
THE CONTROL OF THE COMPANY, INCLUDING THE POTENTIAL EFFECTS OF THE TRANSACTIONS
CONTEMPLATED BY THE MERGER. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE
PROJECTIONS WILL BE REALIZED, AND ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE
SHOWN. ALSO, BECAUSE THE MERGER HAS NOW BEEN ANNOUNCED, THE COMPANY BELIEVES
THAT THE PROJECTIONS WOULD NOT BE ACHIEVED IF IT WERE TO CONTINUE TO OPERATE AS
AN INDEPENDENT COMPANY. THE INCLUSION OF SUCH PROJECTIONS HEREIN SHOULD NOT BE
REGARDED AS AN INDICATION THAT THE COMPANY, GENERAL RE, SUB OR ANY OTHER PERSON
WHO RECEIVED ANY SUCH INFORMATION CONSIDERS IT AN ACCURATE PREDICTION OF FUTURE
EVENTS. NONE OF THE COMPANY, GENERAL RE, SUB OR ANY PERSON INTENDS PUBLICLY TO
UPDATE OR OTHERWISE PUBLICLY REVISE THE PROJECTIONS SET FORTH ABOVE EVEN IF
EXPERIENCE OR FUTURE CHANGES MAKE IT CLEAR THAT SUCH PROJECTIONS WILL NOT BE
REALIZED.
THE PROJECTIONS HAVE NOT BEEN EXAMINED OR COMPILED BY THE COMPANY'S OR
GENERAL RE'S INDEPENDENT PUBLIC ACCOUNTANTS NOR HAVE THEY APPLIED ANY PROCEDURES
THERETO. ACCORDINGLY, SUCH ACCOUNTANTS DO NOT EXPRESS AN OPINION OR ANY OTHER
FORM OF ASSURANCE ON THEM.
THE PROJECTED FINANCIAL INFORMATION SET FORTH ABOVE IS FORWARD-LOOKING
INFORMATION.
The Private Securities Litigation Reform Act of 1995 provides a 'safe
harbor' for forward-looking statements to encourage companies to provide
prospective information about themselves without fear of litigation so long as
those statements are identified as forward-looking and are accompanied by
meaningful cautionary statements identifying important factors which could cause
actual results to differ materially from those projected in the statement.
Accordingly, the Company hereby identifies the following important factors which
could cause the Company's actual results to differ materially from any such
results that might be projected, forecasted, estimated or budgeted by the
Company in forward-looking statements, including, without limitation, the
Projections. Most of these factors are not unique to the Company but are
generally applicable to all reinsurers and property and casualty insurers.
(a) Changes in the level of competition in the reinsurance or primary
insurance markets that impact the volume or profitability of the
property-casualty reinsurance business. These changes include, but are not
limited to, the intensification of price competition, the entry of new
competitors, existing competitors exiting the market and the development of
new products by new and existing competitors;
(b) Changes in the demand for reinsurance, including changes related
to changes in ceding companies' retentions and changes in the demand for
excess and surplus lines insurance coverages in the United States;
(c) Significant catastrophe losses in the United States;
(d) Adverse development on property-casualty loss reserves related to
business written in prior years;
(e) Unexpected changes in inflation that affect the profitability of
the current property-casualty business or the adequacy of the
property-casualty loss reserves related to prior years' business;
(f) Lower than estimated retrocessional recoveries on unpaid losses,
including the effects of losses due to a decline in the creditworthiness of
the Company's retrocessionaires;
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(g) Increases in interest rates, which cause a reduction in the market
value of the Company's interest rate sensitive investments, including its
fixed income investment portfolio;
(h) Decreases in interest rates causing a reduction of income earned
on new cash flow from operations and the reinvestment of the proceeds from
sales, calls or maturities of existing investments; and
(i) Adverse results in significant litigation matters, including
litigation related to environmental, asbestos and other potential mass tort
claims.
In addition to the factors outlined above that are directly related to the
Company's business, the Company is also subject to general business risks,
including, but not limited to, adverse state, federal or foreign legislation and
regulation, adverse publicity or news coverage, changes in general economic
factors and the loss of key employees.
ESTIMATED SYNERGIES
General Re regards the Merger as an opportunity to achieve certain
synergies. Based on a preliminary review of the Company's business and
operations, General Re currently estimates that the Merger will result in
approximately $13 to $18 million of quantifiable annual after-tax synergies,
resulting from, among other things, reduced overhead expenses, increased
investment income, reduced investment management fees and adjustments to the
Company's retrocessional program. The annual quantifiable synergies do not
include any amounts related to the increased growth of the Company's business as
a result of the Merger. As a result of the quantifiable synergies described
above, the Merger is expected to be non-dilutive to General Re's 1997 results of
operations.
THE ESTIMATES OF SYNERGIES SET FORTH ABOVE WERE NOT PREPARED WITH A VIEW TO
PUBLIC DISCLOSURE. THE ESTIMATES ARE BASED UPON A VARIETY OF ASSUMPTIONS
RELATING TO THE BUSINESS OF THE COMPANY AND GENERAL RE WHICH MAY NOT BE REALIZED
AND ARE SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES, ALL OF WHICH ARE
SUBJECT TO MATERIAL RISKS AND UNCERTAINTIES AND MANY OF WHICH ARE BEYOND THE
CONTROL OF THE COMPANY AND GENERAL RE. ACCORDINGLY, THERE CAN BE NO ASSURANCE
THAT THE ESTIMATED SYNERGIES WILL BE REALIZED, AND ACTUAL SYNERGIES, IF ANY, MAY
VARY MATERIALLY FROM THOSE SHOWN. THE INCLUSION OF SUCH ESTIMATES HEREIN SHOULD
NOT BE REGARDED AS AN INDICATION THAT THE COMPANY, GENERAL RE OR ANY OTHER
PERSON INTENDS PUBLICLY TO UPDATE OR OTHERWISE PUBLICLY REVISE THE ESTIMATED
SYNERGIES SET FORTH ABOVE EVEN IF EXPERIENCE OR FUTURE CHANGES MAKE IT CLEAR
THAT SUCH SYNERGIES WILL NOT BE REALIZED.
THE INDEPENDENT ACCOUNTANTS FOR THE COMPANY AND GENERAL RE HAVE NOT
EXAMINED OR COMPILED THESE ESTIMATES AND ACCORDINGLY DO NOT EXPRESS AN OPINION
OR ANY OTHER FORM OF ASSURANCE ON THEM.
PLANS FOR THE COMPANY AFTER THE MERGER
Based on its current knowledge of the Company, except as described in this
Proxy Statement/Prospectus, General Re has no present plans or proposals
involving the Company or any of its subsidiaries which relate to or would result
in any extraordinary corporate transaction, such as a merger, reorganization,
liquidation, sale or transfer of a material amount of assets, nor does it plan
any material changes in the Company's businesses. However, General Re is
continuing its review of the Company and its assets, operations, properties,
policies, management and personnel, and General Re reserves the right, subject
to the terms and conditions of the Merger Agreement and any required regulatory
approvals, to effect any such plans and proposals in connection there-with.
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FINANCING OF THE MERGER
General Re estimates that the maximum amount of funds required to pay the
Cash Consideration and to pay all related costs and expenses of the Merger will
be approximately $475 million.
General Re plans to obtain the necessary funds from available cash and
investment securities.
ACCOUNTING TREATMENT
The Merger will be accounted for under the purchase method of accounting in
accordance with generally accepted accounting principles, whereby the purchase
price will be allocated based on the fair value of the assets acquired and the
liabilities assumed. Such allocations will be based upon valuations that have
not been finalized. The excess of such purchase price over the amounts so
allocated will be recorded as goodwill. See 'Unaudited Pro Forma Financial
Information.'
ELECTION PROCEDURES
Elections. The Merger Agreement provides that each holder of shares of
National Re Common Stock (other than treasury stock and shares that are owned by
General Re or any direct or indirect wholly owned subsidiary of General Re,
which shares will be canceled and retired, without consideration, at the
Effective Time, and shares as to which dissenters' rights have been exercised in
accordance with and subject to the provisions of the DGCL) has the right,
subject to the proration and other limitations described below, to submit a
request (an 'Election') specifying the number of shares of National Re Common
Stock owned by such holder which such holder desires to have converted into
either:
(i) the Conversion Fraction of a validly issued, fully paid and
nonassessable share of General Re Common Stock, together with the attached
General Re Preferred Stock Purchase Rights; provided that General Re will
not issue more than .39259 nor less than .32121 shares of General Re Common
Stock per share of National Re Common Stock (the 'Stock Election'); or
(ii) $53 in cash, without any interest thereon (the 'Cash Election').
The 'Conversion Fraction' will be a fraction determined by dividing $53 by
the average of the closing prices per share of General Re Common Stock on the
NYSE, as reported by the NYSE Composite Tape, for the ten consecutive NYSE
trading days ending on and including the second NYSE trading day immediately
preceding the closing date of the Merger. All Stock Elections and Cash Elections
must be made on the Form of Election, a copy of which is being mailed
simultaneously with this Proxy Statement/Prospectus, and must be received and
accepted by the Election Deadline. Additional copies of the Form of Election
will be available upon request from American Stock Transfer & Trust Company,
which will be serving as the exchange agent (the 'Exchange Agent'), by calling
(800) 937-5449.
The purpose of the Election is to permit holders of shares of National Re
Common Stock to express their preferences for the type of consideration they
wish to receive in the Merger, provided that the Total Cash Consideration cannot
exceed 50% of the value of the outstanding shares of National Re Common Stock.
'Total Cash Consideration' means the sum of (i) the fair market value of shares
of National Re Common Stock to be converted into the right to receive the Cash
Consideration, (ii) cash paid in lieu of fractional shares, and (iii) cash paid
for dissenting shares. As discussed below, subject to the proration and other
limitations described herein, the Stock Elections and Cash Elections made by
holders of National Re Common Stock will be honored in issuing the Stock
Consideration and the Cash Consideration after the Effective Time.
ALTHOUGH THERE CAN BE NO ASSURANCE THAT A HOLDER OF SHARES OF NATIONAL RE
COMMON STOCK WHO DESIRES TO RECEIVE THE CASH CONSIDERATION WILL RECEIVE SUCH
CONSIDERATION AS TO ALL OF HIS SHARES, A HOLDER OF SHARES OF NATIONAL RE COMMON
STOCK HAVING A PREFERENCE FOR THE CASH CONSIDERATION SHOULD MAKE AN ELECTION
BECAUSE SHARES AS TO WHICH AN ELECTION HAS NOT BEEN MADE WILL RECEIVE THE STOCK
CONSIDERATION IN THE MERGER. NEITHER THE COMPANY BOARD NOR THE GENERAL RE BOARD
MAKES ANY RECOMMENDATION AS TO WHETHER STOCKHOLDERS SHOULD ELECT TO RECEIVE THE
CASH CONSIDERATION OR THE STOCK CONSIDERATION IN THE MERGER. EACH STOCKHOLDER
MUST MAKE HIS OWN DECISION WITH RESPECT TO SUCH ELECTION.
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Failure of a holder of shares of National Re Common Stock to complete
properly and to return the Form of Election, together with certificates
representing such holder's shares of National Re Common Stock to the Exchange
Agent by the Election Deadline, or an appropriate guarantee of delivery of
certificates for such shares of National Re Common Stock to the Exchange Agent
by the Election Deadline, or failure to comply with the election procedures
described in this Proxy Statement/Prospectus and the Form of Election (including
the instructions thereto), will cause such holder's shares of National Re Common
Stock to be converted into the Stock Consideration without regard to the
preference of such holder.
On August 26, 1996, the most recent practicable date prior to the printing
of this Proxy Statement/Prospectus, the closing price of General Re Common Stock
on the NYSE, as reported by the NYSE Composite Tape, was $ per share and the
closing price of National Re Common Stock on the NYSE, as reported by the NYSE
Composite Tape, was $ per share. THE MARKET VALUE OF THE GENERAL RE COMMON
STOCK AFTER THE EFFECTIVE TIME WILL DEPEND UPON, AND IS EXPECTED TO FLUCTUATE
WITH, AMONG OTHER THINGS, THE PERFORMANCE OF GENERAL RE, CONDITIONS (ECONOMIC OR
OTHERWISE) AFFECTING THE INSURANCE AND REINSURANCE INDUSTRIES, INTEREST RATES,
MARKET CONDITIONS AND OTHER FACTORS THAT GENERALLY INFLUENCE THE PRICES OF
SECURITIES. MOREOVER, THERE CAN BE NO ASSURANCE THAT AT OR AFTER THE EFFECTIVE
TIME THE MARKET VALUE OF THE GENERAL RE COMMON STOCK AND THE CASH CONSIDERATION
TO BE RECEIVED IN THE MERGER WILL BE EQUAL. IF THE AVERAGE GENERAL RE SHARE
PRICE IS LESS THAN $135, THE STOCK CONSIDERATION RECEIVED BY COMPANY
STOCKHOLDERS WILL LIKELY BE WORTH LESS THAN THE $53 PER SHARE PAID TO
STOCKHOLDERS WHO ELECT TO RECEIVE THE CASH CONSIDERATION. BECAUSE THE TAX
CONSEQUENCES OF RECEIVING CASH OR GENERAL RE COMMON STOCK WILL DIFFER, COMPANY
STOCKHOLDERS ARE URGED TO READ CAREFULLY THE INFORMATION SET FORTH UNDER THE
CAPTION 'THE MERGER--CERTAIN FEDERAL INCOME TAX CONSEQUENCES.' FINALLY, IF THE
AVERAGE GENERAL RE SHARE PRICE IS LESS THAN $135 AND IF THE COMPANY STOCKHOLDERS
ELECT TO RECEIVE CASH CONSIDERATION SUCH THAT THE TOTAL CASH CONSIDERATION
EXCEEDS 50% OF THE VALUE OF THE OUTSTANDING SHARES OF NATIONAL RE COMMON STOCK,
THEN, BY OPERATION OF THE PRORATION PROCEDURES DESCRIBED HEREIN, THE COMPANY
STOCKHOLDERS WHO ELECT TO RECEIVE CASH CONSIDERATION WILL RECEIVE A PORTION OF
THEIR CONSIDERATION IN GENERAL RE COMMON STOCK WITH A MARKET VALUE WHICH WILL
LIKELY BE LESS THAN THE CASH CONSIDERATION THAT SUCH HOLDERS WOULD HAVE
OTHERWISE RECEIVED.
Completing the Form of Election. To make a proper Election, a holder of
shares of National Re Common Stock must have delivered to the Exchange Agent at
the address specified in the Form of Election, prior to the Election Deadline
the following:
(i) a Form of Election properly completed in accordance with the
instructions thereon and signed by the record holder of the shares of
National Re Common Stock as to which such Election is being made; and
(ii) either (a) the certificates for such shares or (b) an appropriate
guarantee of delivery of certificates for such shares.
A form of the guarantee of delivery accompanies the Form of Election, and,
unless stock certificates are submitted with the Form of Election, a guarantee
of delivery must be properly executed by a firm which is a member of any
registered national securities exchange or a member of the National Association
of Securities Dealers, Inc. or a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the Securities
Transfer Agent's Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program, and
certificates for the shares covered by such guarantee must in fact be received
by the Exchange Agent by the time specified in such guarantee for a valid Form
of Election to have been deemed submitted.
Withdrawal and Change of Elections. Any Company stockholder may revoke his
or her Election by submitting to the Exchange Agent written notice and a
properly completed and signed revised Form of Election, by withdrawing his or
her certificates for shares of National Re Common Stock, or by withdrawing the
guarantee of delivery of such certificates previously deposited with the
Exchange Agent, provided that the Exchange Agent receives all necessary
materials prior to the Election Deadline.
All Elections will be revoked automatically if the Exchange Agent is
notified in writing by General Re or the Company that the Merger Agreement has
been terminated. Any Company stockholder who has deposited certificates for
shares of National Re Common Stock with the Exchange Agent will have the right
to withdraw
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such certificates by written notice received by the Exchange Agent and thereby
revoke his or her Election as of the Election Deadline if the Merger will not
have been consummated prior thereto.
Other Rules. General Re has the right to make rules, not inconsistent with
the terms of the Merger Agreement, governing the validity of any Form of
Election, the manner and extent to which Elections are to be taken into account
in making the determinations required by the Merger Agreement, the issuance and
delivery of certificates for General Re Common Stock for shares of National Re
Common Stock converted into such stock in the Merger and the payment of cash for
shares of National Re Common Stock converted into the right to receive the Cash
Consideration in the Merger.
Proration. The Total Cash Consideration cannot exceed 50% of the value of
all outstanding shares of National Re Common Stock. If the Total Cash
Consideration is 50% or less of the value of the outstanding shares of National
Re Common Stock, each share for which a Cash Election is received will be
converted in the Merger into the right to receive the Cash Consideration. If the
Total Cash Consideration would (but for the adjustment in the following
sentence) exceed 50% of the value of the outstanding shares of National Re
Common Stock, the shares for which Cash Elections are received will be converted
into the right to receive the Cash Consideration and the Stock Consideration in
the following manner: (i) the Exchange Agent will distribute the Cash
Consideration for a fraction of such shares for which a Cash Election has been
made, the numerator of which fraction will be 50% of the value (based on the
closing price of the shares of National Re Common Stock on the last full trading
day prior to the Effective Time) of the outstanding shares of National Re Common
Stock and the denominator of which will be the value (based on the closing price
of the shares of National Re Common Stock on the last full trading day prior to
the Effective Time) of the aggregate number of shares for which a Cash Election
has been made plus cash to be paid for fractional shares or shares for which
appraisal rights are exercised under Section 262 of the DGCL; and (ii) the
Exchange Agent will distribute the Stock Consideration for any shares of
National Re Common Stock for which a Cash Election has been made and which are
not fully converted into the right to receive the Cash Consideration.
General Re will pay to each former stockholder of the Company who otherwise
would be entitled to receive a fractional share of General Re Common Stock, in
lieu of any fractional share of General Re Common Stock, an amount in cash
determined by multiplying (i) the Average General Re Share Price, but not more
than $165 nor less than $135, by (ii) the fractional interest in a share of
General Re Common Stock to which such holder would otherwise be entitled.
In the event that between the date of the Merger Agreement and the
Effective Time, the number of issued and outstanding shares of General Re Common
Stock is changed into a different number of shares or a different class of
shares as a result of a stock split, reverse stock split, stock dividend,
spin-off, extraordinary dividend, recapitalization, reclassification or other
similar transaction with a record date within such period, the Conversion
Fraction will be appropriately adjusted.
In the event that either (i) an opinion of nationally recognized tax
counsel to the Company, to the effect that the Merger will qualify as a
reorganization within the meaning of Section 368 of the Code (the 'Company Tax
Opinion'), cannot be rendered (as reasonably determined by such nationally
recognized tax counsel to the Company) or (ii) an opinion of nationally
recognized tax counsel to General Re, to the effect that the Merger will qualify
as a reorganization within the meaning of Section 368 of the Code (the 'General
Re Tax Opinion'), cannot be rendered (as reasonably determined by such
nationally recognized tax counsel to General Re), as a result of the Merger
potentially failing to satisfy continuity of interest requirements under
applicable federal income tax principles relating to reorganizations under
Section 368(a) of the Code, then General Re will reduce the Cash Consideration
to the minimum extent necessary to enable the relevant tax opinion or opinions,
as the case may be, to be rendered, and correspondingly increase the Stock
Consideration; holders who make Cash Elections will receive less cash on a pro
rata basis.
AS A RESULT OF THE PRORATION AND OTHER LIMITATIONS DESCRIBED HEREIN AND IN
THE MERGER AGREEMENT, HOLDERS OF SHARES OF NATIONAL RE COMMON STOCK WHO ELECT TO
RECEIVE THE CASH CONSIDERATION MAY RECEIVE SHARES OF GENERAL RE COMMON STOCK OR
THE CASH CONSIDERATION IN AMOUNTS THAT MAY VARY FROM THE AMOUNTS SUCH HOLDERS
ELECT TO RECEIVE. SUCH HOLDERS WILL NOT BE ABLE TO CHANGE THE AMOUNTS OF GENERAL
RE COMMON STOCK OR THE CASH CONSIDERATION
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ALLOCATED TO THEM. IN ADDITION, IF THE AVERAGE GENERAL RE SHARE PRICE IS LESS
THAN $135, THE STOCK CONSIDERATION RECEIVED BY COMPANY STOCKHOLDERS WILL LIKELY
BE WORTH LESS THAN THE $53 PER SHARE PAID TO STOCKHOLDERS WHO ELECT TO RECEIVE
THE CASH CONSIDERATION.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Employment Agreements. The Company and its subsidiary, NRC, have entered
into employment agreements (the 'Employment Agreements') with 25 senior
executives (the 'Executives') (including all the executive officers of the
Company, William D. Warren, Peter A. Cheney, Robert W. Eager, Jr., Timothy T.
McCaffrey, Mary Ellen Burns, John F. Ahearn and James B. Lockhart) to assure the
Company and NRC of the Executives' continued services and loyalty. The
Employment Agreements, among other things, provide the Executive with certain
payments and benefits if the Executive's employment is terminated by the Company
with or without Cause (as defined below) or if the Executive terminates his or
her employment for Good Reason (as defined below). Although none of the
Employment Agreements was entered into in conjunction with the proposed Merger,
certain provisions of the Employment Agreements have been supplemented by the
Benefits Proposal (as described below).
Pursuant to each Employment Agreement, upon termination of employment of
the Executive with Cause or if the Executive terminates his or her employment
without Good Reason, the Executive is entitled to payment of: (i) salary through
such termination date; (ii) amounts accrued under benefit plans in which the
Executive is a participant as of such termination date and rights under stock
incentive plans as may be determined by the Compensation Committee of the
Company Board from time to time; and (iii) such bonus, if any, to which the
Executive would have been entitled had he or she remained an employee of the
Company through the end of the calendar year during which the termination
occurs, prorated through such termination date, payable at such time as other
bonuses, if any, are paid pursuant to the Company's executive bonus program then
in effect.
If any of Messrs. Warren, Cheney, Eager and McCaffrey is terminated without
Cause or if any one of them terminates his employment for Good Reason, after a
change in control, then such Executive will receive, in addition to the amounts
described in clauses (i) and (ii) in the immediately preceding paragraph, (i) a
lump sum amount equal to three times the total compensation paid to such
Executive by the Company during the calendar year ended immediately prior to the
date of termination (as reflected on such Executive's Form W-2 for that year),
and (ii) the immediate vesting of all amounts under benefit and stock plans
(including outstanding awards under the stock incentive plans) in which such
Executive is a participant. Messrs. Warren, Cheney, Eager and McCaffrey will be
reimbursed on a grossed-up after-tax basis for all excise taxes payable by the
Executive under section 4999 of the Code as a result of the payments and
benefits referred to above.
Each of the other Executives, if terminated without Cause or if he or she
terminates his or her employment for Good Reason, irrespective of a change in
control, will receive (i) a lump sum amount equal to the total compensation paid
to such Executive by the Company during the calendar year ended immediately
prior to the date of expiration or termination (as reflected on such Executive's
Form W-2 for that year) or, in the case of an Executive hired in 1996, the total
of his annual salary and 50% of his 1996 bonus payment and (ii) the immediate
vesting of all amounts under benefit and stock plans (including outstanding
awards under the stock incentive plans) in which the Executive is a participant.
If any Executive is terminated without Cause or terminates his or her
employment for Good Reason, the Company will provide continuing life and health
insurance coverage for a one-year period after termination, as well as legal
fees incurred in enforcing, if necessary, the Employment Agreement.
As used in the Employment Agreements, 'Cause' is defined as: (i) the
continued failure of the Executive to perform substantially his or her duties
with the Company, NRC or any of their subsidiaries (other than any such failure
resulting from disability) after a demand for substantial performance is
delivered in writing to the Executive by the chief executive officer of the
Company, NRC, or any of their subsidiaries, or by the Company Board if the
Executive is the chief executive officer, which specifically identifies the
manner in which the Executive has not substantially performed his duties; (ii)
the engaging by the Executive in willful, reckless or grossly negligent
misconduct which is materially injurious to the Company, NRC or any of their
subsidiaries, monetarily or otherwise; or (iii) the Executive's conviction of a
felony. Notwithstanding the foregoing, the
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Executive shall not be deemed to have been terminated for 'Cause' unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than two-thirds of the entire
membership of the Company Board at a meeting of the Company Board (after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard by the Company Board),
finding that, in the good faith opinion of the Company Board, the Executive was
guilty of conduct set out in the immediately preceding sentence and specifying
the particulars thereof in detail.
As used in the Employment Agreements, 'Good Reason' is defined as (i) a
substantial and adverse change in the Executive's status or position as a key
employee of the Company, NRC or any of their subsidiaries when compared to the
Executive's status and position as in effect immediately prior to the Closing
Date, or a substantial reduction in the duties and responsibilities previously
exercised by the Executive, or any removal of the Executive from or any failure
to reappoint or re-elect the Executive to such position, except in connection
with the termination of the Executive's employment for Cause or disability, or
as a result of the Executive's death; or (ii) a reduction (other than for Cause)
by the Company, NRC or any of their subsidiaries in the Executive's
compensation, except a reduction in bonus compensation attributable to
deteriorating operating performance of the Company.
The Company Board has confirmed that the Merger would constitute 'Good
Reason' under the Employment Agreements for the Executives who have titled
positions with the Company (the 'Holding Company Executives'). The following are
the lump sum payment obligations under their Employment Agreements, which
amounts are payable at the Effective Time upon termination without Cause or for
Good Reason (excluding excise tax payments which are described below):
$2,427,448 would be payable to Mr. Warren, $1,508,578 would be payable to Mr.
Cheney, $1,563,873 would be payable to Mr. Eager, $1,519,274 would be payable to
Mr. McCaffrey, $230,298 would be payable to Miss Burns, $178,726 would be
payable to Mr. Ahearn and $256,250 would be payable to Mr. Lockhart. Such
amounts are calculated assuming the Merger closes in 1996. Any one or more of
such Holding Company Executives may be offered the amounts payable upon
termination of employment under such Executive's Employment Agreement (in the
form of a lump-sum cash payment or equivalent benefits payable in a combination
of General Re restricted stock and stock options as agreed to by such
Executives) if such Holding Company Executive continues as an employee of the
Company or General Re following the Merger.
Benefits Proposal. In connection with the Merger Agreement, the Company
adopted a severance benefits proposal (the 'Benefits Proposal') for its
employees. The Benefits Proposal includes a salary protection plan whereby
employees terminated within the first 90 days after the Effective Time (unless
terminated for Cause, the definition of which is similar to that in the
Employment Agreements described above) will receive their salary until the end
of such 90-day period. As more fully described in the Benefits Proposal,
employees without Employment Agreements who are terminated or terminate under
certain specified circumstances within one year after the Effective Time will
receive a lump-sum cash severance payment. The amount of such payment for an
employee without an Employment Agreement depends on employment status at the
Effective Time. For Executives who have Employment Agreements, the lump sum
amount will be determined in accordance with the Executive's Employment
Agreement.
For those employees who do not receive health or life benefits under an
Employment Agreement, the Company will also pay continued medical ('COBRA')
premiums for the first 12 months after termination for the employee and his
dependents (provided that the employee is covered at the Effective Time) and
life insurance premiums for one year of term life for such employee at base
salary at termination.
Under the Benefits Proposal, each participant in NRC's 1996 Management
Incentive Plan ('MIP') will receive 100% of his or her bonus payment under such
plan within 90 days after the Effective Time, but no later than December 31,
1996. Under the Benefits Proposal, bonus payments of $571,501 would be payable
to Mr. Warren, $257,280 would be payable to Mr. Cheney, $265,200 would be
payable to Mr. Eager, $258,240 would be payable to Mr. McCaffrey, $89,650 would
be payable to Miss Burns, $56,400 would be payable to Mr. Ahearn and $102,500
would be payable to Mr. Lockhart.
Under the Benefits Proposal, if any of Messrs. Warren, Cheney, Eager and
McCaffrey are subject to an excise tax under section 4999 of the Code, as a
result of any payment or benefit received from the Company or any of its
subsidiaries, or affiliates, whether pursuant to their Employment Agreements or
otherwise, the
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Company will make an additional payment to reimburse him, on a grossed up
after-tax basis, for the excise tax. These amounts are presently estimated to be
$946,179 for Mr. Cheney and $773,221 for Mr. McCaffrey.
With respect to restricted National Re Common Stock which vests upon
approval of the Merger Agreement by Company stockholders, employees will be
reimbursed for any income taxes incurred upon vesting under the Benefits
Proposal. None of the executive officers of the Company owns any restricted
stock.
With respect to the National Re Corporation Performance Incentive Plan
('PIP'), under the Benefits Proposal, each participant in such plan will receive
a cash PIP payout equal to 50% of his or her four-year performance period award
(or 25% for each year of participation), with maximum targets deemed attained
and the 24-month vesting requirement waived. The PIP payout will be paid
December 31, 1996 provided that Executives who have titled positions with the
Company and who receive severance under their Employment Agreement because the
Merger is Good Reason are entitled to their PIP payout at the Merger unless
General Re notifies the Executives at or before the Merger that they require
their services further. In such event, the PIP payout shall be paid upon the
earlier of 90 days after the Effective Time, December 31, 1996 or the date the
Executive's employment is terminated without Cause or by the Executive for Good
Reason. Under the Benefits Proposal, a lump sum payment of $369,875 would be
made to Mr. Warren, $178,875 would be made to Mr. Cheney, $178,875 would be made
to Mr. Eager, $178,875 would be made to Mr. McCaffrey, $94,375 would be made to
Miss Burns, $61,875 would be made to Mr. Ahearn and $62,437 would be made to Mr.
Lockhart.
With respect to the National Reinsurance Corporation Employees Retirement
Plan, under the Benefits Proposal, all terminated employees will have vesting
and benefit service credit immediately rounded up to the next whole year.
With respect to the National Reinsurance Corporation Employees Supplemental
Pension Benefit Plan, the National Reinsurance Corporation Employees Excess
Pension Benefit Plan and the Salary Continuation Plan for Executives of National
Reinsurance Corporation and Affiliates, under the Benefits Proposal, all
benefits will vest 100% at the Effective Time and it is expected that such
benefits will be funded in a rabbi trust. All the executive officers of the
Company are already vested in the plans for which they are eligible except the
Salary Continuation Plan for Mr. Cheney and Mr. Eager whose lump sum equivalents
as of October 1, 1996 of the amount which will vest upon approval of the Merger
are $205,260 and $198,116, respectively.
With respect to the National Reinsurance 401(k) Savings Plan, under the
Benefits Proposal, all employer contributions will vest 100% at the Effective
Time. Under the Benefits Proposal, Mr. Lockhart will receive $4,612.50. All
other executive officers of the Company have previously vested.
Under the Benefits Proposal, following the Merger, each employee (i) will
receive his or her accumulated unused vacation (and would be paid for unused
vacation time if terminated within 90 days after the Effective Time), and (ii)
will be entitled to a reasonable and customary relocation package if moved more
than 35 miles from his or her work place. The Company has also agreed to pay
costs of outplacement services for terminated employees up to $20,000 per
employee or 20% of the employee's salary, whichever is greater.
Equity Awards. On the date on which the Merger Agreement is approved by
the Company's stockholders, (i) each outstanding share of restricted stock of
the Company granted to the Company's employees will become fully vested and such
employee will be entitled to elect to receive the Cash Consideration or Stock
Consideration in the Merger, and (ii) each outstanding stock option for National
Re Common Stock will become fully vested and exercisable. See 'The Merger
Agreement--Treatment of Stock Options' for information concerning treatment of
stock options for National Re Common Stock upon consummation of the Merger. The
number of shares of National Re Common Stock subject to options held by each
executive officer of the Company that will vest and become exercisable upon
approval of the Merger Agreement by the Company's stockholders, the weighted
average exercise price for such options held by such person and the aggregate
value of such options (i.e., $53 minus the weighted average exercise price
multipled by the number of options that will vest) for such officer of the
Company is as follows: Mr. Warren (44,400 shares, $31.383, $959,795), Mr. Cheney
(29,000 shares, $31.642, $619,382), Mr. Eager (29,000 shares, $31.642,
$619,382), Mr. McCaffrey (29,000 shares, $31.642, $619,382), Miss Burns (13,200
shares, $31.415, $284,922), Mr. Ahearn (11,400 shares, $31.27, $247,722) and Mr.
Lockhart (10,000 shares, $33.50, $195,000).
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Each of the nonmanagement directors has options to purchase 1,000 shares of
National Re Common Stock at $33.75 per share which will vest and become
exercisable upon approval of the Merger Agreement.
Stockholders Agreements. Simultaneously with the execution of the Merger
Agreement, certain stockholders of the Company (Acadia, Keystone and Messrs.
Warren, Cheney, Eager and McCaffrey) entered into Stockholders Agreements with
General Re and Sub. Under the Stockholders Agreements, each such stockholder has
agreed to vote or cause to be voted all shares of National Re Common Stock owned
by such stockholder in favor of the approval and adoption of the Merger
Agreement and the transactions contemplated thereby (subject to certain
exceptions) and against approval of any proposal made in opposition to or in
competition with the Merger or any of the other transactions contemplated by the
Merger Agreement. On the Record Date, such stockholders beneficially owned in
the aggregate approximately 22.76% of the National Re Common Stock (excluding
shares underlying options). In addition, pursuant to the Keystone Stockholders
Agreement, the holders of an additional 3.43% of the issued and outstanding
shares of National Re Common Stock (excluding shares underlying stock options)
on the Record Date are obligated to vote their shares in favor of the approval
and adoption of the Merger Agreement. See 'The Stockholders Agreements.'
Certain directors of the Company are officers of Keystone or are otherwise
related to Keystone or Acadia. The managing general partner of Acadia FW
Partners, L.P., the sole general partner of Acadia, is Acadia MGP, Inc., a
corporation controlled by Mr. Crandall. Mr. Crandall, who is a director of the
Company, is an officer of Keystone. Mr. Kent, a director of the Company,
provides investment, accounting and risk management services to Keystone. Mr.
Doctoroff and Mr. Gruber, who are directors of the Company, provide investment
advisory services to Acadia as officers of Oak Hill Partners, Inc. and are also
officers of Keystone. Mr. Barnum, a director of the Company, is an officer and
director of American Savings Bank, F.A., in which Acadia and certain related
parties indirectly own a majority interest.
Indemnification of Officers and Directors. In the Merger Agreement,
General Re has agreed that at all times after the Effective Time, it will
indemnify each person who is, or has been prior to the date of the Merger
Agreement, a director or officer of the Company or of any of the Company's
subsidiaries, or person otherwise entitled to indemnification (each, an
'Indemnified Party'), to the same extent and in the same manner as is now
provided in the respective charters or by-laws of the Company and its
subsidiaries or otherwise in effect on the date of the Merger Agreement, with
respect to any claim, liability, loss, damage, cost or expense (whenever
asserted or claimed) (each, an 'Indemnified Liability') based in whole or in
part on, or arising in whole or in part out of, any matter existing or occurring
at or prior to the Effective Time. The Merger Agreement also provides that
General Re will, or will cause Sub to, maintain in effect for not less than six
years after consummation of the Merger the current policies of directors' and
officers' liability insurance maintained by the Company and its subsidiaries on
the date of execution of the Merger Agreement (provided that General Re may
substitute therefor policies having at least the same coverage and containing
terms and conditions which are no less advantageous to the persons currently
covered by such policies and with carriers comparable to the Company's existing
carriers in terms of creditworthiness) with respect to matters existing or
occurring at or prior to the Effective Time.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion is a summary of certain material U.S. federal
income tax consequences of the Merger to a stockholder of National Re that holds
its shares of National Re Common Stock as a capital asset (a 'Holder'). The
discussion is based on laws, regulations, rulings and decisions in effect in the
date hereof, all of which are subject to change (possibly with retroactive
effect) and differing interpretations. This discussion is for general
information only, and does not address all aspects of federal taxation and does
not address aspects of federal income taxation that may be applicable to a
Holder subject to special treatment under the Code (including banks, tax-exempt
organizations, insurance companies, dealers in securities or foreign currency,
and holders who are not U.S. persons (as defined in section 7701(a)(30) of the
Code). In addition, the discussion does not address the state, local or foreign
tax consequences of the Merger.
EACH HOLDER OF NATIONAL RE COMMON STOCK IS URGED TO CONSULT ITS TAX ADVISOR
WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
MERGER.
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Consummation of the Merger is conditioned upon the receipt by National Re
and General Re of the opinions of Paul, Weiss, Rifkind, Wharton & Garrison,
counsel to National Re, and Skadden, Arps, Slate, Meagher & Flom, counsel to
General Re, each dated as of the Effective Time, substantially to the effect
that, on the basis of facts, representations and assumptions set forth or
referred to in such opinions, the Merger will be treated as a 'reorganization'
within the meaning of Section 368(a) of the Code. If either or both of National
Re or General Re are unable to obtain an opinion from tax counsel because of a
concern that the Merger would not satisfy the 'continuity of interest'
requirement for reorganization treatment, the number of shares of General Re
Common Stock to be issued in the Merger will be increased the minimum extent
necessary to enable such opinion(s) to be issued and the amount of Cash
Consideration will be reduced accordingly. Under the Merger Agreement there are
certain limitations on the number of General Re Common Stock shares that General
Re would be required to issue. See '--Election Procedures.'
Exchange of National Re Common Stock. As discussed below, the U.S. federal
income tax consequences of the Merger to a Holder generally will depend on
whether the Holder exchanges its National Re Common Stock for cash, General Re
Common Stock, or a combination thereof.
Exchange Solely for Cash. In general, if pursuant to the Merger a Holder
exchanges all of the shares of National Re Common Stock actually owned by it
solely for cash (including pursuant to the exercise of its right to dissent and
seek an appraisal), such Holder will recognize gain or loss equal to the
difference between the amount of cash received and its adjusted tax basis in the
shares of National Re Common Stock surrendered, which gain or loss generally
will be long-term capital gain or loss if the Holder's holding period with
respect to the stock is more than one year, and otherwise will be short-term
capital gain. If, however, any such Holder constructively owns shares of
National Re Common Stock that are exchanged for shares of General Re Common
Stock in the Merger or owns shares of General Re Common Stock actually or
constructively after the Merger, the consequences to such Holder may be similar
to the consequences described below under the heading 'Exchange for General Re
Common Stock and Cash,' except that the amount of consideration, if any, treated
as a dividend may not be limited to the amount of such Holder's gain.
Exchange Solely for General Re Common Stock. If pursuant to the Merger a
Holder exchanges all of the shares of National Re Common Stock actually owned by
it solely for shares of General Re Common Stock, such Holder will not recognize
any gain or loss except in respect of cash received in lieu of a fractional
share of General Re Common Stock (as discussed below). The aggregate adjusted
tax basis of the shares of General Re Common Stock received (including
fractional shares) in that exchange will be equal to the aggregate adjusted tax
basis of the shares of National Re Common Stock surrendered therefor, and the
holding period of such General Re Common Stock will include the period during
which such shares of National Re Common Stock were held. If the Holder has
differing bases or holding periods in respect of its shares of National Re
Common Stock, it should consult its tax advisor prior to the exchange with
regard to identifying the bases or holding periods of the particular shares of
General Re Common Stock received in the exchange.
Exchange for General Re Common Stock and Cash. If pursuant to the Merger a
Holder exchanges all of the shares of National Re Common Stock actually owned by
it for a combination of General Re Common Stock and cash, such holder will
realize gain or loss equal to the difference between (i) the sum of cash and the
fair market value of General Re Common Stock received and (ii) its adjusted tax
basis in the shares of National Re Common Stock surrendered. Such gain will only
be recognized to the extent of the cash received, however, and no loss will be
recognized on the exchange. For this purpose, gain or loss must be calculated
separately for each identifiable block of shares surrendered in the exchange,
and a loss realized on one block of shares cannot be used to offset a gain
realized on another block of shares. Any recognized gain will generally be
long-term capital gain or loss if the Holder's holding period with respect to
the stock is more than one year, and otherwise will be short-term capital gain.
If, however, the cash received has the effect of the distribution of a dividend,
the gain would be treated as a dividend to the extent of the Holder's ratable
share of National Re's accumulated earnings and profits. See 'Possible Treatment
of Cash as a Dividend.'
The aggregate tax basis of General Re Common Stock received by a Holder
that exchanges its shares of National Re Common Stock for a combination of
General Re Common Stock and cash pursuant to the Merger will be equal to the
aggregate adjusted tax basis of the shares of National Re Common Stock
surrendered therefor, decreased by the cash received and increased by any
recognized gain (whether capital gain or ordinary
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income). The holding period of such General Re Common Stock will include the
holding period of the shares of National Re Common Stock surrendered therefor.
If a Holder has differing bases or holding periods in respect of its shares of
National Re Common Stock, it should consult its tax advisor prior to the
exchange to identify the particular shares of National Re Common Stock to be
surrendered in the exchange and the particular bases or holding periods of the
particular shares of General Re Common Stock it receives in the exchange.
Possible Treatment of Cash as a Dividend. In general, the determination of
whether the gain recognized in the exchange will be treated as capital gain or
dividend income depends upon whether and to what extent the exchange reduces the
Holder's deemed percentage stock ownership of General Re. For purposes of this
determination, the Holder is treated as if it first exchanged all of its shares
of National Re Common Stock solely for General Re Common Stock and then General
Re immediately redeemed (the 'deemed redemption') a portion of such General Re
Common Stock in exchange for the cash the holder actually received. The gain
recognized in the exchange followed by a deemed redemption will be treated as
capital gain if the deemed redemption is (i) 'substantially disproportionate'
with respect to the holder or (ii) 'not essentially equivalent to a dividend.'
The deemed redemption, generally, will be 'substantially disproportionate'
with respect to a Holder if the percentage described in (ii) below is less than
80 percent of the percentage described in (i) below. Whether the deemed
redemption is 'not essentially equivalent to a dividend' with respect to a
Holder will depend upon the Holder's particular circumstances. At a minimum,
however, in order for the deemed redemption to be 'not essentially equivalent to
a dividend,' the deemed redemption must result in a 'meaningful reduction' in
the Holder's deemed percentage stock ownership of General Re. In general, that
determination requires a comparison of (i) the percentage of the outstanding
stock of General Re that the Holder is deemed actually and constructively to
have owned immediately before the deemed redemption and (ii) the percentage of
the outstanding stock of General Re that is actually and constructively owned by
the Holder immediately after the deemed redemption. In applying the foregoing
tests, a stockholder is deemed to own stock owned and, in some cases,
constructively owned by certain family members, certain estates and trusts of
which the Holder is a beneficiary, certain affiliated entities, and stock
subject to an option actually or constructively owned by the shareholder or such
other persons. As these rules are complex, each Holder that may be subject to
these rules should consult its tax advisor. The Internal Revenue Service has
ruled that a relatively minor reduction in the percentage stock ownership of a
minority stockholder in a publicly held corporation whose relative stock
interest is minimal and who exercises no control with respect to corporate
affairs is a 'meaningful reduction.' Accordingly, in most circumstances, gain
recognized by a Holder that exchanges its shares of National Re Common Stock for
a combination of General Re Common Stock and cash generally will be long-term
capital gain or loss if the Holder's holding period with respect to the stock is
more than one year, and otherwise will be short-term capital gain.
Cash Received in Lieu of a Fractional Share. Cash received in lieu of a
fractional share of General Re Common Stock will be treated as received in
redemption of such fractional share and gain or loss will be recognized, equal
to the difference between the amount of cash received and the portion of the
basis of the share of National Re Common Stock allocable to such fractional
interest. Such gain or loss will be capital gain or loss, and will be long-term
capital gain or loss if the holding period for such share of National Re Common
Stock was greater than one year as of the date of the exchange.
Backup Withholding. Unless a Holder complies with certain reporting or
certification procedures or is an 'exempt recipient' (i.e., in general,
corporations and certain other entities), the Holder may be subject to
withholding tax of 31% with respect to any cash payments received pursuant to
the Merger. A foreign Holder should consult its tax advisor with respect to the
application of withholding rules to it with respect to any cash payments
received pursuant to the Merger.
DISSENTERS' RIGHTS
Record holders of National Re Common Stock are entitled to appraisal rights
under Section 262 of the DGCL ('Section 262') in connection with the Merger. The
following discussion is not a complete statement of the law pertaining to
appraisal rights under the DGCL and is qualified in its entirety by reference to
the full text
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of Section 262 which is reprinted in its entirety as Annex V to this Proxy
Statement/ Prospectus. Except as set forth herein, stockholders of the Company
will not be entitled to appraisal rights in connection with the Merger.
Under Section 262, record holders of shares of National Re Common Stock who
follow the procedures set forth therein and who have not voted in favor of the
Merger will be entitled to have their shares of National Re Common Stock
appraised by the Delaware Court of Chancery and to receive payment of the 'fair
value' of such shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, as determined by such court.
Under Section 262, where a merger agreement is to be submitted for approval
and adoption at a meeting of stockholders, as in the case of the Special
Meeting, not less than 20 days prior to the meeting, the Company must notify
each of the holders of National Re Common Stock at the close of business on the
Record Date that such appraisal rights are available and include in each such
notice a copy of Section 262. This Proxy Statement/Prospectus constitutes such
notice. Any such stockholder who wishes to exercise appraisal rights should
review the following discussion and Annex V carefully because failure to comply
timely and properly with the procedures specified in Section 262 will result in
the loss of appraisal rights under the DGCL.
A holder of shares of National Re Common Stock wishing to exercise
appraisal rights must deliver to the Company, before the vote is taken on the
approval and adoption of the Merger Agreement at the Special Meeting, a written
demand for appraisal of such holder's shares of National Re Common Stock. In
addition, a holder of shares of National Re Common Stock wishing to exercise
appraisal rights must hold of record such shares on the date the written demand
for appraisal is made and must continue to hold such shares through the
Effective Time.
Only a holder of record of shares of National Re Common Stock is entitled
to assert appraisal rights for the shares of National Re Common Stock registered
in that holder's name. A demand for appraisal should be executed by or on behalf
of the holder of record fully and correctly, as the holder's name appears on the
stock certificates.
If the shares of National Re Common Stock are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, execution of
the demand should be made in that capacity, and if the shares of National Re
Common Stock are owned of record by more than one person, as in a joint tenancy
or tenancy in common, the demand should be executed by or on behalf of all joint
owners. An authorized agent, including one or more joint owners, may execute a
demand for appraisal on behalf of a holder of record; however, the agent must
identify the record owner or owners and expressly disclose the fact that, in
executing the demand, the agent is agent for such owner or owners. A record
holder such as a broker who holds National Re Common Stock as nominee for
several beneficial owners may exercise appraisal rights with respect to the
National Re Common Stock held for one or more beneficial owners while not
exercising such rights with respect to the National Re Common Stock held for
other beneficial owners; in such case, the written demand should set forth the
number of shares as to which appraisal is sought and where no number of shares
is expressly mentioned the demand will be presumed to cover all National Re
Common Stock held in the name of the record owner. Holders of National Re Common
Stock who hold their shares in brokerage accounts or other nominee forms and who
wish to exercise appraisal rights are urged to consult with their brokers to
determine the appropriate procedures for the making of a demand for appraisal by
such nominee. All written demands for appraisal of National Re Common Stock
should be mailed or delivered to Anne M. Quinn, Corporate Secretary, National Re
Corporation, 777 Long Ridge Road, Stamford, Connecticut 06904 so as to be
received before the vote is taken on the approval and adoption of the Merger
Agreement at the Special Meeting.
Within 10 days after the Effective Time, the Surviving Corporation must
send a notice as to the effectiveness of the Merger to each person who has
satisfied the appropriate provisions of Section 262. Within 120 days after the
Effective Time, but not thereafter, the Surviving Corporation, or any holder of
shares of National Re Common Stock entitled to appraisal rights under Section
262 and who has complied with the foregoing procedures, may file a petition in
the Delaware Court of Chancery demanding a determination of the fair value of
such shares. The Company is not under any obligation, and has no present
intention, to file a petition with respect to the appraisal of the fair value of
the shares of National Re Common Stock. Accordingly, it is the obligation of the
stockholders to initiate all necessary action to perfect their appraisal rights
within the time prescribed in Section 262.
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Within 120 days after the Effective Time, any record holder of shares of
National Re Common Stock who has complied with the requirements for exercise of
appraisal rights will be entitled, upon written request, to receive from the
Surviving Corporation a statement setting forth the aggregate number of shares
of the National Re Common Stock with respect to which demands for appraisal have
been received and the aggregate number of holders of such shares. Such
statements must be mailed within 10 days after a written request therefor has
been received by the Surviving Corporation.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine the holders of shares of
National Re Common Stock entitled to appraisal rights and will appraise the
'fair value' of the shares of National Re Common Stock, exclusive of any element
of value arising from the accomplishment or expectation of the Merger, together
with a fair rate of interest, if any, to be paid upon the amount determined to
be the fair value. Holders considering seeking appraisal should be aware that
the fair value of their shares of National Re Common Stock as determined under
Section 262 could be more than, the same as or less than the value of the
consideration that they would otherwise receive in the Merger if they did not
seek appraisal of their shares of National Re Common Stock. The Delaware Supreme
Court has stated that 'proof of value by any techniques or methods which are
generally considered acceptable in the financial community and otherwise
admissible in court' should be considered in the appraisal proceedings. More
specifically, the Delaware Supreme Court has stated that: 'Fair value, in an
appraisal context, measures that which has been taken from [the shareholder],
viz., his proportionate interest in a going concern. In the appraisal process
the corporation is valued as an entity, not merely as a collection of assets or
by the sum of the market price of each share of its stock. Moreover, the
corporation must be viewed as an on-going enterprise, occupying a particular
market position in the light of future prospects.' In addition, Delaware courts
have decided that the statutory appraisal remedy, depending on factual
circumstances, may or may not be a dissenter's exclusive remedy. The Court will
also determine the amount of interest, if any, to be paid upon the amounts to be
received by persons whose shares of National Re Common Stock have been
appraised. The costs of the action may be determined by the Court and taxed upon
the parties as the Court deems equitable. The Court may also order that all or a
portion of the expenses incurred by any holder of shares of National Re Common
Stock in connection with an appraisal, including, without limitation, reasonable
attorneys' fees and the fees and expenses of experts utilized in the appraisal
proceeding, be charged pro rata against the value of all of the shares of
National Re Common Stock entitled to appraisal.
Any holder of shares of National Re Common Stock who has duly demanded an
appraisal in compliance with Section 262 will not, after the Effective Time, be
entitled to vote the shares of National Re Common Stock subject to such demand
for any purpose or be entitled to the payment of dividends or other
distributions on those shares (except dividends or other distributions payable
to holders of record of shares of National Re Common Stock as of a date prior to
the Effective Time).
If any holder of shares of National Re Common Stock who demands appraisal
of shares under Section 262 fails to perfect, or effectively withdraws or loses,
the right to appraisal, as provided in the DGCL, the shares of National Re
Common Stock of such holder will be converted into the Stock Consideration in
accordance with the Merger Agreement. A holder of shares of National Re Common
Stock will fail to perfect, or effectively lose, the right to appraisal if no
petition for appraisal is filed within 120 days after the Effective Time. A
holder may withdraw a demand for appraisal by delivering to the Company a
written withdrawal of the demand for appraisal and acceptance of the Merger,
except that any such attempt to withdraw made more than 60 days after the
Effective Time will require the written approval of the Surviving Corporation.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 FOR PERFECTING
APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
IN VIEW OF THE COMPLEXITIES OF THE FOREGOING PROVISIONS OF THE DGCL,
COMPANY STOCKHOLDERS WHO ARE CONSIDERING DISSENTING FROM THE MERGER MAY WISH TO
CONSULT LEGAL COUNSEL.
The foregoing is a summary of certain of the provisions of Section 262 and
is qualified in its entirety by reference to the full text of such Section 262,
a copy of which is attached hereto as Annex V.
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THE MERGER AGREEMENT
The following is a summary of the material provisions of the Merger
Agreement not summarized elsewhere in this Proxy Statement/Prospectus. This
summary does not purport to be complete and is qualified in its entirety by
reference to the Merger Agreement, a copy of which is attached hereto as Annex I
and is incorporated herein by reference. Capitalized terms used and not
otherwise defined herein or in the following summary shall have the meanings set
forth in the Merger Agreement.
THE MERGER
The Merger Agreement provides that, subject to the terms and conditions
thereof and in accordance with the DGCL, the Company, General Re and Sub will
consummate the Merger pursuant to which the Company will merge with and into
Sub, the separate corporate existence of the Company will thereupon cease and
Sub will continue in existence as the Surviving Corporation.
Pursuant to the Merger Agreement, the Certificate of Incorporation of Sub,
as in effect immediately prior to the Effective Time, will be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended, and the
Bylaws of Sub, as in effect immediately prior to the Effective Time, will be the
Bylaws of the Surviving Corporation until thereafter amended. The directors and
officers of Sub at the Effective Time will, from and after the Effective Time,
be the initial directors and officers, respectively, of the Surviving
Corporation until their successors have been duly elected, appointed or
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and Bylaws. The
Merger will have the effects set forth in the DGCL.
CONVERSION OF SHARES
The Merger Agreement provides that each holder of shares of National Re
Common Stock (other than treasury stock and shares that are owned by General Re
or any direct or indirect wholly owned subsidiary of General Re, immediately
prior to the Effective Time, and shares as to which dissenters' rights have been
exercised in accordance with and subject to the provisions of the DGCL), will
have the right, as of the Effective Time, to elect to have such holder's shares
of National Re Common Stock converted into either (i) a fraction of a validly
issued, fully paid and nonassessable share of General Re Common Stock,
determined by dividing $53 by the Average General Re Share Price and rounding
the result to the nearest one one-hundred thousandth of a share; provided,
however, that General Re will not issue more than .39259 nor less than .32121
shares of General Re Common Stock per share of National Re Common Stock (such
fraction, subject to such limitations, being referred to as the 'Conversion
Fraction') or (ii) $53 in cash, without any interest thereon. Pursuant to the
Merger Agreement, the Total Cash Consideration cannot exceed 50% of the value of
all outstanding shares of National Re Common Stock. If the Total Cash
Consideration is 50% or less of the value of the outstanding shares of National
Re Common Stock, each share for which a Cash Election is received will be
converted in the Merger into the right to receive the Cash Consideration. If the
Total Cash Consideration exceeds 50% of the value of the outstanding shares of
National Re Common Stock, each share for which Cash Elections are received will
be converted into the right to receive the Cash Consideration and the Stock
Consideration in the manner discussed in the section of this Proxy
Statement/Prospectus entitled 'The Merger--Election Procedures.'
General Re will pay to each former stockholder of the Company who otherwise
would be entitled to receive a fractional share of General Re Common Stock, in
lieu of any fractional share of General Re Common Stock, an amount in cash
determined by multiplying (i) the Average General Re Share Price, but not more
than $165 nor less than $135, by (ii) the fractional interest in a share of
General Re Common Stock to which such holder would otherwise be entitled.
In the event that between the date of the Merger Agreement and the
Effective Time, the issued and outstanding shares of General Re Common Stock is
changed into a different number of shares or a different class of shares as a
result of a stock split, reverse stock split, stock dividend, spin-off,
extraordinary dividend, recapitalization, reclassification or other similar
transaction with a record date within such period, the Conversion Fraction will
be appropriately adjusted.
In the event that either (i) an opinion of nationally recognized tax
counsel to the Company, to the effect that the Merger will qualify as a
reorganization within the meaning of Section 368 of the Code (the 'Company Tax
Opinion'), cannot be rendered (as reasonably determined by nationally recognized
tax counsel to the Company)
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or (ii) an opinion of nationally recognized tax counsel to General Re, to the
effect that the Merger will qualify as a reorganization within the meaning of
Section 368 of the Code (the 'General Re Tax Opinion'), cannot be rendered (as
reasonably determined by nationally recognized tax counsel to General Re), in
either case as a result of the Merger potentially failing to satisfy continuity
of interest requirements under applicable federal income tax principles relating
to reorganizations under Section 368(a) of the Code, then General Re will reduce
the Cash Consideration to the minimum extent necessary to enable the relevant
tax opinion or opinions, as the case may be, to be rendered, and correspondingly
increase the Stock Consideration.
TREATMENT OF STOCK OPTIONS
The Merger Agreement provides that each option granted to a Company
employee or director to acquire shares of National Re Common Stock ('National Re
Stock Option'), outstanding as of the Effective Time, whether or not then vested
or exercisable, will, as of the Effective Time, become an option (i) for the
number of shares of General Re Common Stock (a 'Substitute Option'), rounded up
to the nearest whole share, determined by multiplying (x) the number of shares
of National Re Common Stock subject to such National Re Stock Option immediately
prior to the Effective Time by (y) the Conversion Fraction and (ii) at an
exercise price per share equal to the exercise price per share pursuant to such
National Re Stock Option divided by the Conversion Fraction; provided, however,
that in the case of any National Re Stock Option to which Section 421 of the
Code applies by reason of its qualification as an incentive stock option under
Section 422 of the Code, the conversion formula will be adjusted if necessary to
comply with Section 424(a) of the Code. After the Effective Time, except as
otherwise provided in the Merger Agreement, each Substitute Option will be
exercisable upon the same terms and conditions as were applicable to the related
National Re Stock Option immediately prior to the Effective Time. The Merger
Agreement further provides that, notwithstanding any other provision thereof,
the Company and the holder of any National Re Stock Option may amend such
National Re Stock Option so that the holder of such National Re Stock Option (if
it is outstanding at the Effective Time) may elect to receive, in settlement
thereof, an amount in cash equal to the excess of $53 over the exercise price of
such National Re Stock Option multiplied by the number of shares of National Re
Common Stock subject to such National Re Stock Option. The Company is required
to use all reasonable efforts to (i) obtain any consents from holders of
National Re Stock Options and (ii) amend the terms of its equity incentive plans
or arrangements, as is necessary in each case to give effect to the Merger
Agreement's treatment of National Re Stock Options.
EFFECTIVE TIME
The Merger Agreement provides that the Merger will become effective,
following the satisfaction or waiver (where permissible) of the conditions set
forth in the Merger Agreement, upon the date on which the certificate of merger
(the 'Certificate of Merger') with respect to the Merger has been duly filed
with the Secretary of State of the State of Delaware, or such time as is agreed
upon by the parties and specified in the Certificate of Merger.
INTERIM OPERATIONS OF THE COMPANY
In the Merger Agreement, the Company has agreed that, except as expressly
provided in the Merger Agreement (including, without limitation, implementing
the Benefits Proposal) or consented to in writing by General Re, prior to the
Effective Time: (i) the business of the Company and its subsidiaries will be
conducted only in the ordinary course of business consistent with past practice
and each of the Company and its subsidiaries will use its reasonable best
efforts to preserve its business organization intact and maintain its existing
relations with material retrocessionaires, suppliers, employees, creditors and
business partners; (ii) the Company will not, directly or indirectly, split,
combine or reclassify the outstanding National Re Common Stock or any
outstanding capital stock of any of its subsidiaries; (iii) neither the Company
nor any of its subsidiaries will: (a) amend its certificate of incorporation or
by-laws or similar organizational documents; (b) declare, set aside or pay any
dividend or other distribution payable in cash, stock or property with respect
to its capital stock other than dividends paid by the Company's wholly-owned
subsidiaries to the Company or its wholly owned subsidiaries and other than
ordinary quarterly cash dividends by the Company not to exceed $.05 per quarter;
(c) issue, sell, transfer, pledge, dispose of or encumber any additional shares
of, or securities convertible into or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of capital stock
of any class of the Company or its subsidiaries, other than issuances pursuant
to exercise of stock-based awards outstanding on the date of the Merger
Agreement as disclosed in the Merger Agreement or with respect to any
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shares issued under the Company's Employee Stock Purchase Plan prior to its
termination in accordance with the Merger Agreement; (d) transfer, lease,
license, sell, mortgage, pledge, dispose of, or encumber any assets that are
material to the Company and its subsidiaries taken as a whole other than sales
of investment assets in the ordinary course of business consistent with past
practice; (e) redeem, purchase or otherwise acquire directly or indirectly any
of its capital stock; (f) grant any increase in the compensation payable or to
become payable by the Company or any of its subsidiaries to any officer or
employee other than scheduled annual increases in the ordinary course of
business consistent with past practice in an amount not to exceed 10% for any
individual; (g) adopt any new, amend, otherwise increase or accelerate the
payment or vesting of the amounts payable or to become payable under any
existing, bonus, incentive compensation, deferred compensation, severance,
profit sharing, stock option, stock purchase, insurance, pension, retirement or
other employee benefit plan agreement or arrangement; (h) enter into any, or
amend any existing, employment, consulting or severance agreement with or,
except in accordance with the existing written policies of the Company, grant
any severance or termination pay to any officer, director or employee of the
Company or any of its subsidiaries; (i) make any additional contributions to any
grantor trust created by the Company to provide funding for non-tax-qualified
employee benefits or compensation; (j) provide any severance program to any
subsidiary of the Company which does not have a severance program as of the date
of the Merger Agreement; (k) modify, amend or terminate any material agreement
or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which any of them or any of their properties or
assets may be bound or waive, release or assign any material rights or claims,
except in the ordinary course of business consistent with past practice; (l)
permit any material insurance policy naming it as a beneficiary or a loss
payable payee to be cancelled or terminated, except in the ordinary course of
business consistent with past practice; (m) incur or assume any debt except for
borrowings under existing credit facilities in an amount not to exceed $10
million; (n) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person, except in the ordinary course of business consistent with past
practice; (o) make any loans, advances or capital contributions to, or
investments in, any other person (other than to wholly-owned subsidiaries of the
Company or customary loans or advances to employees in accordance with past
practice and other than as to such matters related to the Company's or any of
its subsidiaries' investment portfolios in the ordinary course of business
consistent with past practice); (p) enter into any material commitment
(including, but not limited to, any capital expenditure or purchase of assets)
other than in the ordinary course of business consistent with past practice; (q)
change any of the accounting principles used by it unless required by Statutory
Accounting Principles or GAAP; (r) pay, discharge or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction of
any such claims, liabilities or obligations, reflected or reserved against it,
or contemplated by, the consolidated financial statements (or the notes thereto)
of the Company and its consolidated subsidiaries, incurred in the ordinary
course of business consistent with past practice or which are legally required
to be paid, discharged or satisfied; (s) adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other material reorganization of the Company or any of its subsidiaries or
any agreement relating to a Takeover Proposal (as defined below) other than the
Merger Agreement and the confidentiality agreements provided for by the Merger
Agreement; (t) engage in any transaction with, or enter into any agreement,
arrangement, or understanding with, directly or indirectly, any of the Company's
affiliates, including, without limitation, any transactions, agreements,
arrangements or understandings with any affiliate or other person covered under
Item 404 of Regulation S-K under the Securities Act that would be required to be
disclosed under such Item 404 other than such transactions of the same general
nature, scope and magnitude as are disclosed in the Company's filings with the
Commission; (u) except upon the prior written consent of General Re, the Company
will not make any tax election that would have a material adverse effect on the
Company or any of its subsidiaries, except in the ordinary course of business
consistent with past practice; and (v) neither the Company nor any of its
subsidiaries will enter into an agreement, contract, commitment or arrangement
to do any of the foregoing, or to authorize, recommend, propose or announce an
intention to do any of the foregoing.
INTERIM OPERATIONS OF GENERAL RE
In the Merger Agreement, General Re has agreed that, except as expressly
provided in the Merger Agreement, or with the prior written consent of the
Company, after the date of the Merger Agreement and prior to the Effective Time:
(i) the business of General Re and its subsidiaries, including, without
limitation,
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investment practices and policies, will be conducted in the ordinary course of
business consistent with past practice; (ii) General Re will not, directly or
indirectly, split, combine or reclassify the outstanding General Re Common
Stock; (iii) General Re will not (a) amend its certificate of incorporation or
by-laws; or (b) declare, set aside or pay any dividend or other distribution
payable in cash, stock or property with respect to its capital stock except for
quarterly cash dividends consistent in amount and timing with past practice,
provided that General Re may increase its dividend rate consistent with prior
practice; (iv) neither General Re nor any of its subsidiaries will change any of
the accounting principles used by it unless required by GAAP or Statutory
Accounting Principles; and (v) neither General Re nor any of its subsidiaries
will enter into an agreement, contract, commitment or arrangement to do any of
the foregoing, or to authorize, recommend, propose or announce an intention to
do any of the foregoing.
EMPLOYEE MATTERS
The Merger Agreement provides that, after the Effective Time, General Re
will either continue the Company's existing employee benefits plans or will
provide, or will cause Sub to provide, employee benefit plans that are no less
favorable in the aggregate to such employees than those provided pursuant to
General Re's benefit plans. For purposes of determining eligibility to
participate, vesting, and entitlement to benefits, including for severance
benefits, vacation entitlement and service awards (but not for accrual of
pension benefits), service with the Company or any of its subsidiaries will be
treated as service with General Re or its subsidiaries; provided, however, that
such service will not be recognized to the extent that such recognition would
result in a duplication of benefits. Such service also will apply for purposes
of satisfying any waiting periods, evidence of insurability requirements, or the
application of any preexisting condition limitations.
The Merger Agreement requires that the Company terminate its Employee Stock
Purchase Plan as soon as practicable, but in no event after August 1, 1996. The
Company terminated its Employee Stock Purchase Plan, effective as of July 1,
1996.
The Merger Agreement provides for the Company to adopt a severance and stay
protection plan and other changes to employee benefit plans described in the
Benefit Proposals at or before the Effective Time. General Re has agreed to
cause Sub to honor such plan according to its terms. See 'The Merger--Interests
of Certain Persons in the Merger' for a description of such plan.
NO SOLICITATION
In the Merger Agreement, the Company has agreed that it and its
subsidiaries and affiliates will not, and it and its subsidiaries and affiliates
will use their reasonable best efforts to ensure that their respective officers,
directors, employees, investment bankers, attorneys, accountants and other
agents will not, directly or indirectly (i) initiate, solicit, encourage, or
(except as described below) take any action to facilitate the making of, any
offer or proposal which constitutes or is reasonably likely to lead to any
Takeover Proposal of the Company or any of its subsidiaries or an inquiry with
respect thereto, or, (ii) in the event of an unsolicited bona fide Takeover
Proposal for the Company or any of its subsidiaries, engage in negotiations or
discussions with, or provide any information or data to any corporation,
partnership, person or other entity or group (other than General Re, Sub or any
of their affiliates or representatives) relating to any Takeover Proposal,
except to the extent that the Company Board determines, after having received
the advice of its outside legal counsel and its financial advisor, that the
failure to engage in such negotiations or discussions or provide such
information is reasonably likely to result in a breach of the Company Board's
fiduciary duties under applicable law; provided, however, that notwithstanding
the foregoing, the Company Board may take, and disclose to the Company's
stockholders, a position contemplated by Rules 14d-9 and 14e-2 promulgated under
the Exchange Act with respect to any tender offer for shares of capital stock of
the Company. Prior to furnishing any information to any such person making a
Takeover Proposal, the Company is required to obtain a confidentiality agreement
from such person substantially similar to the Confidentiality Agreement, dated
June 27, 1996, between General Re and the Company. The Company will notify
General Re of any such offers, proposals, inquiries or Takeover Proposals
(including, without limitation, the material terms and conditions thereof and
the identity of the person making it), within 24 hours of the receipt thereof,
and will provide General Re with a copy of any written Takeover Proposal or
amendments or supplements thereto, and will thereafter inform General Re on a
reasonable basis of the status of any discussions or negotiations with such a
third party, and any material changes to the terms and conditions of such
Takeover Proposal, and will promptly give General Re a copy of any information
delivered to such person
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which has not previously been reviewed by General Re. The Company will, and will
cause its subsidiaries and affiliates, and their respective officers, directors,
employees, investment bankers, attorneys, accountants and other agents to,
immediately cease and cause to be terminated all discussions and negotiations
that have taken place, if any, prior to the date of the Merger Agreement, with
any parties with respect to any Takeover Proposal relating to the Company, and
any such discussions or negotiations will not be renewed except as discussed
above.
As used in the Merger Agreement, a 'Takeover Proposal' means any tender or
exchange offer involving the capital stock of the Company, any proposal for a
merger, consolidation or other business combination involving the Company, any
proposal or offer to acquire in any manner a substantial equity interest in, or
a substantial portion of the business or assets of, the Company or any
subsidiary of the Company, any proposal or offer with respect to any
recapitalization or restructuring with respect to the Company or any subsidiary
of the Company or any proposal or offer with respect to any other transaction
similar to any of the foregoing with respect to the Company or any subsidiary of
the Company other than pursuant to the transactions to be effected pursuant to
the Merger Agreement.
DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION
In the Merger Agreement, General Re has agreed that at all times after the
Effective Time, it will indemnify each person who is, or has been prior to the
date of the Merger Agreement, a director or officer of the Company or of any of
the Company's subsidiaries, or person otherwise entitled to indemnification
(each, an 'Indemnified Party'), to the same extent and in the same manner as is
now provided in the respective charters or by-laws of the Company and its
subsidiaries or otherwise in effect on the date of the Merger Agreement, with
respect to any claim, liability, loss, damage, cost or expense (whenever
asserted or claimed) (each, an 'Indemnified Liability') based in whole or in
part on, or arising in whole or in part out of, any matter existing or occurring
at or prior to the Effective Time. The Merger Agreement also provides that
General Re will, or will cause Sub to, maintain in effect for not less than six
years after consummation of the Merger the current policies of directors' and
officers' liability insurance maintained by the Company and its subsidiaries on
the date of execution of the Merger Agreement (provided that General Re may
substitute therefor policies having at least the same coverage and containing
terms and conditions which are no less advantageous to the persons currently
covered by such policies and with carriers comparable to the Company's existing
carriers in terms of creditworthiness) with respect to matters existing or
occurring at or prior to the Effective Time.
AGREEMENTS WITH STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENTS
In the Merger Agreement, the Company has agreed to (i) cooperate to
terminate or cause to be terminated, prior to the Effective Time, the Amended
and Restated Management Stockholders Agreement, dated as of February 5, 1992,
among the Company and certain stockholders of the Company, as amended, and the
Stockholders Agreement, dated as of February 5, 1992, by and among Lincoln
National Corporation, Keystone, Acadia and the persons listed on Schedule A
thereto, as amended; (ii) cooperate to cause the Amended and Restated Investor
Stockholders Agreement, dated as of February 5, 1992, among the Company and
certain stockholders of the Company, as amended, to remain in full force and
effect until the Special Meeting and to terminate such Agreement immediately
following the Special Meeting; and (iii) suspend all sales under the Shelf
Registration Statement filed pursuant to the Registration Rights Agreement,
dated as of April 30, 1990, by and among the Company, Keystone, Acadia and
certain other stockholders of the Company named therein (the 'Registration
Rights Agreement') at least one business day prior to the Closing Date and will
cause the Registration Rights Agreement not to have any application to any
securities of General Re or its subsidiaries following the Effective Time.
REPRESENTATIONS AND WARRANTIES
In the Merger Agreement, the Company has made certain representations and
warranties to General Re and Sub with respect to, among other things, its
organization, capitalization, corporate power and authority, corporate actions,
validity of the Merger Agreement, consents and approvals, absence of violations,
filings with the Commission, financial statements, absence of certain changes,
absence of undisclosed liabilities, information in this Proxy
Statement/Prospectus, employee benefit plans, litigation, compliance with laws,
absence of defaults, tax matters, contracts, absence of agreements not to
compete, transactions with affiliates, receipt of an opinion from the Company's
financial advisor, matters relating to a contract with Lincoln National
Corporation and the
47
<PAGE>
absence of brokers who are entitled to fees in connection with the Merger other
than as disclosed therein. In the Merger Agreement, each of General Re and Sub
have made certain representations and warranties to the Company with respect to,
among other things, its organization, capitalization, corporate power and
authority, corporate actions, validity of the Merger Agreement, consents and
approvals, absence of violations, filings with the Commission, financial
statements, absence of certain changes, absence of undisclosed liabilities,
information in this Proxy Statement/Prospectus, litigation, compliance with
laws, absence of defaults, tax matters, availability of sufficient financing to
fund the maximum Cash Consideration that could be paid in the Merger, receipt of
an opinion from General Re's financial advisor, and the absence of brokers who
are entitled to fees in connection with the Merger other than as disclosed
therein.
CONDITIONS TO THE MERGER
The obligations of the Company, on the one hand, and General Re and Sub, on
the other hand, to consummate the Merger are subject to the satisfaction (or, if
permissible, waiver by the party for whose benefit such conditions exist) of the
following conditions: (i) the Merger Agreement shall have been adopted by the
stockholders of the Company in accordance with the DGCL; (ii) no court,
arbitrator or governmental body, agency or official shall have issued any order,
decree or ruling and there shall not be any statute, rule or regulation,
restraining, enjoining or prohibiting the consummation of the Merger; (iii) the
Registration Statement of which this Proxy Statement/Prospectus forms a part
shall have become effective under the Securities Act and no stop order
suspending effectiveness of such Registration Statement shall have been issued
and no proceeding for that purpose shall have been initiated or threatened by
the Commission; (iv) any waiting period applicable to the Merger under the HSR
Act shall have expired or been terminated; and (v) all actions by or in respect
of or filing or any governmental body, agency, official, or authority required
to permit the consummation of the Merger (including insurance regulatory
commission approvals) shall have been obtained and such approvals shall be in
full force and effect.
The obligations of General Re and Sub to consummate the Merger are subject
to the satisfaction (or waiver by General Re) of the following further
conditions: (i) the representations and warranties of the Company shall have
been true and accurate as of the Effective Time as if made at and as of such
time (except for those representations and warranties that address matters only
as of a particular date or only with respect to a specific period of time which
need only be true and accurate as of such date or with respect to such period),
except where the failure of such representations and warranties to be so true
and correct (without giving effect to any limitation as to 'materiality' or
'material adverse effect' set forth therein) would not have, and is not
reasonably likely to have, a material adverse effect on the Company and its
subsidiaries taken as a whole; (ii) the Company shall have performed in all
material respects its obligations under the Merger Agreement required to be
performed by it at or prior to the Effective Time; (iii) since March 31, 1996,
except as disclosed by the Company to General Re prior to the execution of the
Merger Agreement, there shall not have occurred any event, change or effect
having, or which would be reasonably likely to have, in the aggregate, a
material adverse effect on the Company and its subsidiaries, taken as a whole
(other than changes in insurance laws and regulations affecting the reinsurance
industry generally); and (iv) General Re shall have received the General Re Tax
Opinion.
The obligations of the Company to consummate the Merger are subject to the
satisfaction (or waiver by the Company) of the following further conditions: (i)
the representations and warranties of General Re and Sub shall be true and
accurate as of the Effective Time as if made at and as of such time (except for
those representations and warranties that address matters only as of a
particular date or only with respect to a specific period of time which need
only be true and accurate as of such date or with respect to such period),
except where the failure of such representations and warranties to be so true
and correct (without giving effect to any limitation as to 'materiality' or
'material adverse effect' set forth therein), would not have, and is not
reasonably likely to have, individually or in the aggregate, a material adverse
effect on General Re and its subsidiaries; (ii) each of General Re and Sub shall
have performed in all material respects all of the respective obligations under
the Merger Agreement required to be performed by General Re or Sub, as the case
may be, at or prior to the Effective Time; (iii) the General Re Common Stock to
be issued in the Merger shall have been approved for listing on the NYSE,
subject to official notice of issuance; (iv) since March 31, 1996, there shall
not have occurred any event, change or effect having, or which would be
reasonably likely to have, individually or in the aggregate, a material adverse
effect on General Re and its subsidiaries, taken as a whole (other than changes
in
48
<PAGE>
insurance laws and regulations affecting the reinsurance industry generally);
(v) the Company shall have received the Company Tax Opinion; and (vi) the
Average General Re Share Price shall not be less than $125 per share.
TERMINATION
The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time, whether before or after stockholder approval, (i)
by mutual consent of the General Re Board and the Company Board; (ii) by either
the General Re Board or the Company Board (a) if the Merger shall not have
occurred on or prior to December 31, 1996; provided, however, that such right to
terminate the Merger Agreement will not be available to any party whose failure
to fulfill any obligation under the Merger Agreement has been the cause of, or
resulted in, the failure of the Merger to occur on or before such date, or (b)
if any governmental entity issues an order, decree or ruling or taken any other
action (which order, decree, ruling or other action the parties will use their
best efforts to lift), in each case permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by the Merger Agreement and
such order, decree, ruling or other action has become final and non-appealable;
(iii) by the Company Board if it (a) withdraws its approval or recommendation of
the Merger in order to approve and permit the Company to execute a definitive
agreement relating to a Takeover Proposal, (b) determines, after having received
the advice of outside legal counsel and the advice of the Company's financial
advisor, that the failure to take such action is reasonably likely to result in
a breach of its fiduciary duties, (c) provides General Re and Sub with 48 hours'
advance notice of such termination, and (d) causes the fees described below
under '--Termination Fee' to be paid to General Re; (iv) by either the Company
or General Re if the other party breaches any representation or warranty which
breach is likely to have a material adverse effect on the other party or the
other party breached any material covenant, provided, however, that if any such
breach is curable by the breaching party through the exercise of its best
efforts and for so long as the breaching party is using its best efforts to cure
such breach, the non-breaching party may not so terminate the Merger Agreement;
(v) by the Company Board if it fails to obtain the required approval of its
stockholders and it causes the Company to pay General Re the fees described
below; (vi) by the General Re Board if (a) the Company Board withdraws its
approval or recommendation of the Merger in order to approve and permit the
Company to execute a definitive agreement relating to a Takeover Proposal or the
Company shall have entered into a definitive agreement providing for a Takeover
Proposal or (b) a third party becomes known publicly or to General Re, prior to
the certification of the vote at the Special Meeting, to have acquired 40% or
more of the Company's capital stock which acquisition was not so known on the
date the Merger Agreement was executed; and (vii) by the General Re Board if the
Company's stockholders do not approve the Merger at the Special Meeting.
TERMINATION FEE
The Merger Agreement provides for the Company to pay an amount equal to $25
million in cash to General Re in the event that the Merger Agreement is
terminated (i) by the Company Board to permit the Company to execute a
definitive agreement relating to a Takeover Proposal; (ii) by the General Re
Board if (a) the Company Board withdraws its approval or recommendation of the
Merger, (b) the Company Board recommends or approves a Takeover Proposal, (c)
the Company executes an agreement in principle or a definitive agreement
relating to a Takeover Proposal, or (d) a third party becomes known publicly or
to General Re, prior to the certification of the vote at the Special Meeting, to
have acquired 40% or more of the Company's capital stock which acquisition was
not so known on the date the Merger Agreement was executed; (iii) by the General
Re Board or the Company Board if the Company's stockholders do not approve the
Merger at the Special Meeting and, in either case, there shall have been made or
commenced a Takeover Proposal with respect to the Company; or (iv) by the
General Re Board if it terminates the Merger Agreement because the Company has
breached any representation or warranty which breach is likely to have a
material adverse effect on the Company or the Company breaches any material
covenant, and, within a year of such termination, a person acquires a majority
of the Company's outstanding shares or obtains majority representation on the
Company Board or enters into a definitive agreement with the Company with
respect to a Takeover Proposal.
49
<PAGE>
THE STOCKHOLDERS AGREEMENTS
The following summary of the material terms which appear in each of the
Stockholders Agreements (as defined below) is qualified in its entirety by
reference to the complete text of the forms of Stockholders Agreements which are
incorporated by reference herein and copies of which are annexed to this Proxy
Statement/Prospectus as Annex II. Capitalized terms not defined herein shall
have the meanings set forth in the Stockholders Agreements.
In connection with the Merger, on July 1, 1996, General Re and Sub entered
into Stockholders Agreements (each, a 'Stockholders Agreement') with the
following major stockholders of the Company (each, a 'Major Stockholder'): (i)
Messrs. Eager, Cheney, Warren and McCaffrey, all of whom are executive officers
of the Company; and (ii) Acadia and Keystone. The Major Stockholders
beneficially own in the aggregate approximately 22.76% of the issued and
outstanding shares of National Re Common Stock (excluding shares underlying
stock options) as of the Record Date. In addition, pursuant to the Keystone
Stockholders Agreement, the holders of an additional 3.43% of the issued and
outstanding shares of National Re Common Stock (excluding shares underlying
stock options) on the Record Date are obligated to vote their shares in favor of
the approval and adoption of the Merger Agreement.
In the Stockholders Agreements, each of the Major Stockholders has agreed,
among other things, (i) to vote all of such stockholder's shares of National Re
Common Stock (a) in favor of the Merger and the Merger Agreement and the
transactions contemplated by the Merger Agreement, provided that no such
obligation will exist if the Company Board withdraws its recommendation that
stockholders of the Company vote in favor of the approval and adoption of the
Merger Agreement and (b) against (1) approval of any proposal made in opposition
to or in competition with the Merger or any of the other transactions
contemplated by the Merger Agreement, (2) any merger, consolidation, sale of
assets, business combination, share exchange, reorganization or recapitalization
of the Company or any of its subsidiaries, with or involving any party other
than General Re or Sub, (3) any liquidation or winding up of the Company, (4)
any extraordinary dividend by the Company, (5) any change in the capital
structure of the Company (other than pursuant to the Merger Agreement) and (6)
any other action that may reasonably be expected to impede, interfere with,
delay, postpone or attempt to discourage the Merger or the other transactions
contemplated by the Merger Agreement or result in a breach of any of the
covenants, representations, warranties or other obligations or agreements of the
Company under the Merger Agreement which could materially and adversely affect
the Company or its ability to consummate the transactions contemplated by the
Merger Agreement; and (ii) not sell or transfer any of such stockholder's shares
of National Re Common Stock prior to the earlier of the Effective Time or the
termination of the Merger Agreement in accordance with its terms.
From and after July 1, 1996, each of the Major Stockholders has also agreed
(i) not to commit any act that could restrict or otherwise affect such
stockholder's full legal power, authority and right to vote such stockholder's
shares of National Re Common Stock in favor of the approval and adoption of the
Merger Agreement and the transactions contemplated by the Merger Agreement, and
(ii) without limiting the generality of the foregoing, not to enter into any
voting agreement with any person or entity with respect to any of such Major
Stockholder's National Re Common Stock, grant any person or entity any proxy
(revocable or irrevocable) or power of attorney with respect to any of such
stockholder's National Re Common Stock, deposit any of such stockholder's
National Re Common Stock into a voting trust or otherwise enter into any
agreement or arrangement limiting or affecting such Major Stockholder's legal
power, authority or right to vote his National Re Common Stock in favor of the
approval and adoption of the Merger Agreement and the transactions contemplated
thereby.
For a period ending on the later of December 31, 1996 or three months
following the termination of the Merger Agreement (other than as a result of a
breach by General Re or Sub of any Stockholders Agreement or the Merger
Agreement), each of the Major Stockholders has further agreed not to enter into,
execute, or be a party to any agreement or understanding, written or otherwise,
with any person whereby such stockholder (i) grants or otherwise gives to such
person an option or right to purchase or acquire any or all of such
stockholder's shares of National Re Common Stock other than sales made in open
market transactions, (ii) agrees or covenants to vote or to grant a proxy to
vote any or all of the shares of National Re Common Stock held of record or
beneficially owned by such stockholder, at any meeting (whether annual or
special and whether or not an adjourned or postponed meeting) of the holders of
National Re Common Stock, however called, or in connection with any written
consent of the holders of National Re Common Stock, or (iii) agrees or covenants
to tender any or all of the National Re Common Stock held of record or
beneficially owned by such stockholder into any tender offer or exchange offer
relating to the National Re Common Stock; provided that such stockholder is not
prevented from
50
<PAGE>
granting a revocable proxy or executing a revocable written consent or tendering
shares of National Re Common Stock into any tender offer or exchange offer (the
foregoing collectively, the 'Share Restrictions').
Acadia and Keystone have also agreed in their Stockholders Agreements to
execute the continuity of interest letter (the 'Continuity of Interest Letter')
which is attached as an exhibit thereto at or prior to the Effective Time. In
the Continuity of Interest Letter, Acadia and Keystone will each represent that
(i) it has not purchased, sold, exchanged, transferred by gift or otherwise
disposed of shares of National Re Common Stock prior to the date thereof either
in contemplation of or as part of the Merger or otherwise; and (ii) it does not
have any plan or intention to sell, exchange, transfer by gift or otherwise
dispose of (including by transactions which would have the ultimate economic
effect of a disposition including, but not limited to, puts, short-sales and
equity swap arrangements) any General Re Common Stock to be received by such
stockholder pursuant to the Merger.
Acadia and Keystone will further agree that for a period of eighteen months
after the Merger (the 'Post-Merger Continuity Period'), such stockholder will
not sell, exchange, transfer by gift or otherwise dispose of any of the General
Re Common Stock that such stockholder receives in exchange for National Re
Common Stock pursuant to the Merger; provided, however, such stockholder (or the
estate of such stockholder) is expressly permitted to transfer General Re Common
Stock pursuant to a pledge that is not a disposition, upon such stockholder's
death or to a 'grantor' trust created for such stockholder's benefit in which
such stockholder is treated as the owner pursuant to Sections 671 through 678 of
the Code, and, if such stockholder is a partnership for U.S. federal income tax
purposes, such stockholder is expressly permitted to transfer its General Re
Common Stock to its partners pro rata in accordance with their interests in such
stockholder on the condition that, prior to any such transfer of shares of
General Re Common Stock, each partner that would have owned (or would have been
treated as owning) 5% of the outstanding shares of National Re Common Stock at
the time of the Merger (if such stockholder had distributed its National Re
Common Stock pro rata to its partners in accordance with their interests in such
stockholder at such time) executes a continuity of interest agreement (i)
identical to the Continuity of Interest Letter or (ii) substantially similar to
the Continuity of Interest Letter and reasonably acceptable to General Re's tax
counsel.
The Continuity of Interest Letter also provides that, notwithstanding
anything therein to the contrary, each of Acadia and Keystone may, prior to the
end of the Post-Merger Continuity Period, sell, exchange, transfer by gift or
otherwise dispose of the General Re Common Stock that it receives pursuant to
the Merger, if prior to the date of such disposition, such stockholder (i)
obtains the written consent of Skadden, Arps, Slate, Meagher & Flom and Paul,
Weiss, Rifkind, Wharton & Garrison or (ii) obtains a written opinion of Cleary,
Gottlieb, Steen & Hamilton or another nationally recognized tax counsel
experienced in tax-free corporate reorganizations that such disposition will not
prevent such General Re Common Stock from qualifying as stock that satisfies the
'continuity of interest' requirement under Section 368 of the Code.
Additionally, if the Stock Consideration (excluding cash in lieu of fractional
shares) issued in the Merger is issued in exchange for more than 50% of the
shares of National Re Common Stock, each of Acadia and Keystone will be
permitted to dispose of a number of shares of General Re Common Stock that bears
the same relationship to the number of shares of General Re Common Stock issued
in excess of 50% of the shares of National Re Common Stock that (i) the number
of shares of General Re Common Stock held by such stockholder bears to (ii) the
number of shares of General Re Common Stock held by all stockholders who execute
continuity of interest agreements substantially similar to the Continuity of
Interest Letter.
If, in lieu of the Special Meeting, stockholder action in respect of the
Merger Agreement or any of the transactions contemplated thereby is taken by
written consent, each of the Major Stockholders has agreed that the provisions
of the Stockholders Agreements imposing obligations in respect of or in
connection with the Special Meeting will similarly apply to such action by
written consent.
If, after the date of the Stockholders Agreements, a Major Stockholder
acquires the right to vote any additional shares of National Re Common Stock
(any such shares, 'Additional Shares'), including, without limitation, upon
exercise of any option, warrant, or other right to acquire shares of National Re
Common Stock or through any stock dividend or stock split, each of the Major
Stockholders has agreed that the provisions described above will also apply to
such Additional Shares.
The provisions of the Stockholders Agreements will terminate on the
earliest to occur of (i) the consummation of the Merger and (ii) the termination
of the Merger Agreement; provided, however, that the Share Restrictions
discussed above will expire on the later of December 31, 1996 and three months
following the termination of the Merger Agreement (other than as a result of a
breach by General Re or Sub of any Stockholders Agreement or the Merger
Agreement).
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<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited, pro forma consolidated statements of income for
the year ended December 31, 1995 and for the six months ended June 30, 1996
present the results for General Re as if the Merger had occurred on January 1,
1995. The accompanying unaudited pro forma consolidated balance sheet as of June
30, 1996 gives effect to the Merger as of that date (see the notes to the pro
forma consolidated statements of income and balance sheet for more information).
The unaudited, pro forma consolidated statements of income and balance sheet
neither purport to represent what General Re's results of operations actually
would have been had the Merger and related transactions in fact occurred on the
assumed dates, nor to project General Re's results of operations and financial
position for any future period. The pro forma adjustments are based upon
preliminary estimates, information currently available and certain assumptions
that General Re believes are reasonable in the circumstances. The unaudited pro
forma financial statements are based on the historical consolidated financial
statements of General Re and the Company and should be read in conjunction with
such historical financial statements and the notes thereto, which are
incorporated by reference in this Proxy Statement/Prospectus. See 'Incorporation
of Certain Documents by Reference' and 'Available Information.'
The pro forma adjustments and pro forma consolidated information are
provided for informational purposes only. General Re's actual financial
statements will reflect the effects of the Merger on the closing date rather
than the dates indicated above. The pro forma adjustments applied in the pro
forma financial statements record the Merger as a purchase. Under purchase
accounting, the total purchase cost of the assets acquired will be allocated to
the Company's assets and liabilities based on fair values as of the closing date
with the excess over fair value recorded as goodwill. Allocations included in
the pro forma statements are based on analysis which is not yet completed.
Accordingly, the final allocations of purchase price will be different from the
amounts included in the pro forma statements.
Subsequent to the closing of the Merger, General Re anticipates there will
be annual synergies from the integration of General Re's and the Company's
operations. These synergies are expected to result from a reduction in overhead
expenses, increased investment income, reduced investment management fees, and
adjustments to the Company's retrocessional program. Consequently, the
transaction is expected to be non-dilutive to General Re's 1997 results from
operations. There can be no assurance that General Re will achieve these
projected synergies and actual synergies could be materially different than
those currently projected. Anticipated future synergies are not included in the
pro forma financial statements. See 'The Merger--Estimated Synergies.'
52
<PAGE>
GENERAL RE CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
GENERAL RE NATIONAL RE PRO FORMA PRO FORMA
HISTORICAL(1) HISTORICAL(2) ADJUSTMENTS(3) CONSOLIDATED
------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
PREMIUMS AND OTHER REVENUES:
Net Premiums Earned
Property/Casualty................ $ 5,141 $ 314 $5,455
Life/Health...................... 696 696
------------- ------ ------------
Total Net Premiums Earned.......... 5,837 314 6,151
Net Investment Income.............. 1,017 76 $(34)(A) 1,059
Other Revenues..................... 292 292
Net Realized Gains on
Investments...................... 64 1 65
------------- ------ ------ ------------
TOTAL REVENUES................ 7,210 391 (34) 7,567
------------- ------ ------ ------------
EXPENSES:
Claims and Claim Expenses.......... 3,680 201 3,881
Life/Health Benefits............... 505 505
Acquisition Costs.................. 1,345 103 1,448
Other Operating Costs and
Expenses......................... 563 25 6(B) 594
------------- ------ ------ ------------
TOTAL EXPENSES................ 6,093 329 6 6,428
------------- ------ ------ ------------
INCOME BEFORE TAXES AND
MINORITY INTEREST........... 1,117 62 (40) 1,139
Income Tax Expense................. 247 14 (9)(C) 252
------------- ------ ------ ------------
INCOME BEFORE MINORITY
INTEREST.................... 870 48 (31) 887
Minority Interest.................. 45 45
------------- ------ ------ ------------
NET INCOME.................... $ 825 $ 48 ($31) $ 842
------------- ------ ------ ------------
------------- ------ ------ ------------
SHARE DATA:
Net Income per Common Share........ $ 9.92 $ 9.76
------------- ------------
------------- ------------
Average Shares Outstanding......... 82.1 3.1(D) 85.2
------------- ------ ------------
------------- ------ ------------
</TABLE>
See the accompanying notes to the unaudited pro forma consolidated statements of
income.
53
<PAGE>
GENERAL RE CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1996
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
GENERAL RE NATIONAL RE PRO FORMA PRO FORMA
HISTORICAL(1) HISTORICAL(2) ADJUSTMENTS(3) CONSOLIDATED
------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
PREMIUMS AND OTHER REVENUES:
Net Premiums Earned
Property/Casualty................ $ 2,718 $ 190 $2,908
Life/Health...................... 499 499
------------- ------ ------ ------------
Total Net Premiums Earned 3,217 190 3,407
Net Investment Income.............. 573 41 $(17)(A) 597
Other Revenues..................... 146 146
Net Realized Gains on
Investments...................... 80 4 84
------------- ------ ------ ------------
TOTAL REVENUES................ 4,016 235 (17) 4,234
------------- ------ ------ ------------
EXPENSES:
Claims and Claim Expenses.......... 1,912 125 2,037
Life/Health Benefits............... 364 364
Acquisition Costs.................. 744 59 803
Other Operating Costs and
Expenses......................... 329 13 3(B) 345
------------- ------ ------ ------------
TOTAL EXPENSES: 3,349 197 3 3,549
------------- ------ ------ ------------
INCOME BEFORE TAXES AND
MINORITY INTEREST........... 667 38 (20) 685
Income Tax Expense................. 161 10 (5)(C) 166
------------- ------ ------ ------------
INCOME BEFORE MINORITY
INTEREST.................... 506 28 (15) 519
Minority Interest.................. 45 45
------------- ------ ------ ------------
NET INCOME.................... $ 461 $ 28 $(15) $ 474
------------- ------ ------ ------------
------------- ------ ------ ------------
SHARE DATA:
Net Income per Common Share........ $ 5.67 $ 5.61
------------- ------------
------------- ------------
Average Shares Outstanding......... 80.4 3.1(D) 83.5
------------- ------ ------------
------------- ------ ------------
</TABLE>
See the accompanying notes to the unaudited pro forma consolidated statements of
income.
54
<PAGE>
GENERAL RE CORPORATION
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
The pro forma income statements present the results of General Re as if the
Merger had occurred on January 1, 1995. It is not appropriate to assume the
results presented would have been the actual amounts reported by General Re if
the transaction had occurred on January 1, 1995. The pro forma consolidated
income statements assume the consideration to purchase the Company was in the
form of 50% General Re Common Stock and 50% cash.
(1) The first column presents the historical results from operations reported
by General Re in its Annual Report on Form 10-K for the year ended December
31, 1995 and in its Quarterly Report on Form 10-Q for the six months ended
June 30, 1996.
(2) The second column presents the historical results from operations by the
Company in its Annual Report on Form 10-K for the year ended December 31,
1995 and in its Quarterly Report on Form 10-Q for the six months ended June
30, 1996.
(3) The third column includes purchase accounting and pro forma adjustments to
General Re's and the Company's historical results from operations which are
described below.
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN
INCOME
--------------------------
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------ ----------
(IN MILLIONS)
<S> <C> <C> <C>
(A) It was assumed that General Re would have
paid $470 million in cash on January 1, 1995,
for 50% of the total purchase consideration.
These funds were assumed to have earned
annual pretax investment income at 7.13%
based on the historical United States
portfolio yield.............................. $(34) $(17)
----- -----
----- -----
(B) The amortization of the excess of purchase
price over the fair value of net assets
acquired was assumed to occur over 40
years........................................ $(15) $ (8)
The Company's amortization for future value
of treaties, which was included in its
historical results, would have been reversed
under purchase accounting.................... 8 4
The Company's amortization for goodwill
related to prior transactions and deferred
financing costs would also have been reversed
under purchase accounting.................... 1 1
----- -----
$ (6) $ (3)
----- -----
----- -----
(C) An adjustment would have been made to record
the tax effect of items A and B, excluding
goodwill, using a 35% statutory tax rate..... $ 9 $ 5
----- -----
----- -----
(D) It was assumed that General Re would have
issued General Re Common Stock for aggregate
value of $470 million for 50% of the total
purchase consideration. Using the average of
the closing prices on the NYSE for the ten
consecutive trading days prior to June 30,
1996, General Re would have issued 3.1
million shares at $151.63 per share.
</TABLE>
55
<PAGE>
GENERAL RE CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
GENERAL RE NATIONAL RE PRO FORMA PRO FORMA
HISTORICAL (1) HISTORICAL (2) ADJUSTMENTS (3) CONSOLIDATED
-------------- -------------- --------------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Fixed Maturities:
Available-for-Sale............ $ 15,370 $1,111 $(436)(A) $ 16,045
Trading....................... 2,965 2,965
Equity Securities................ 4,035 181 4,216
Short-Term Investments........... 1,523 8 1,531
Other Invested Assets............ 853 853
-------------- ------- ------- ------------
Total Investments............. 24,746 1,300 (436) 25,610
Cash............................... 407 2 409
Accrued Investment Income.......... 386 19 405
Accounts Receivable................ 2,793 231 3,024
Funds Held by Reinsured
Companies........................ 2,141 2,141
Reinsurance Recoverable............ 2,867 84 2,951
Deferred Acquisition Costs......... 439 32 (8)(B) 463
Securities Purchased under
Agreements to Resell............. 157 157
Trading Account Assets............. 2,350 2,350
Other Assets....................... 1,527 99 549(C) 2,175
-------------- ------- ------- ------------
TOTAL ASSETS.................. $ 37,813 $1,767 $ 105 $ 39,685
-------------- ------- ------- ------------
-------------- ------- ------- ------------
LIABILITIES:
Claims and Claim Expenses.......... $ 14,701 $1,043 $ 15,744
Policy Benefits for Life/Health
Contracts........................ 2,378 2,378
Unearned Premiums.................. 1,993 108 2,101
Other Reinsurance Balances......... 3,041 3,041
Notes Payable and Commercial
Paper............................ 379 211 $ 6(D) 596
Income Taxes....................... 593 (39)(F) 554
Securities Sold under Agreements to
Repurchase....................... 2,607 2,607
Securities Sold but not yet
Purchased........................ 568 568
Trading Account Liabilities........ 2,664 2,664
Other Liabilities.................. 1,407 30 43(E) 1,480
Minority Interest.................. 1,184 1,184
-------------- ------- ------- ------------
TOTAL LIABILITIES............. 31,515 1,392 10 32,917
-------------- ------- ------- ------------
Cumulative Convertible Preferred
Stock............................ 147 147
Loan to ESOP....................... (146) (146)
-------------- ------- ------- ------------
1 1
-------------- ------- ------- ------------
COMMON STOCKHOLDERS' EQUITY:
Common Stock....................... 51 51
Paid-in Capital.................... 654 218 82(G) 954
Unrealized Appreciation of
Investments...................... 1,358 6 (6)(H) 1,358
Currency Translation Adjustments... (45) (45)
Retained Earnings.................. 6,361 168 (168)(H) 6,361
Less Common Stock in Treasury...... (2,082) (17) 187(I) (1,912)
-------------- ------- ------- ------------
TOTAL COMMON STOCKHOLDERS'
EQUITY...................... 6,297 375 95 6,767
-------------- ------- ------- ------------
TOTAL LIABILITIES, CUMULATIVE
CONVERTIBLE PREFERRED STOCK
AND COMMON EQUITY........... $ 37,813 $1,767 $ 105 $ 39,685
-------------- ------- ------- ------------
-------------- ------- ------- ------------
</TABLE>
See the accompanying notes to the unaudited pro forma consolidated balance
sheet.
56
<PAGE>
GENERAL RE CORPORATION
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
The pro forma balance sheet presents the results of General Re as if the
Merger had occurred on June 30, 1996. It is not appropriate to assume the
balance sheet data would have been the actual amounts reported by General Re if
the transaction had occurred on June 30, 1996. The pro forma consolidated
balance sheet assumes the consideration to purchase the Company was in the form
of 50% General Re Common Stock and 50% cash.
(1) The first column presents General Re's historical balance sheet as of
June 30, 1996 as reported in its Quarterly Report on Form 10-Q.
(2) The second column presents the Company's historical balance sheet as of
June 30, 1996 as reported in its Quarterly Report on Form 10-Q.
(3) The third column includes purchase accounting adjustments and pro forma
adjustments to General Re's and the Company's historical balance sheets,
respectively.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
IN NET ASSETS
(IN MILLIONS)
-------------------
<S> <C> <C>
(A) It was assumed that General Re would have paid cash on June
30, 1996 for 50% of the purchase consideration. $(470)
It was assumed that all outstanding Company stock options
(1,118,800 shares) would have been exercised prior to the
purchase. 34
------
$(436)
------
------
(B) Deferred acquisition costs would have been reduced for
deferred costs other than commissions to conform to General
Re's accounting. $ (8)
------
------
(C) The excess of purchase price paid over the fair value of net
assets acquired would have been recorded. $ 585
Intangible assets included in the Company's historical
balance sheet would have been reduced for the following
items not carried forward under purchase accounting:
--Future value of treaties (27)
--Goodwill (6)
--Deferred financing costs (3)
------
$ 549
------
------
(D) The carrying value of the Company's senior notes would have
been adjusted to fair value using current market quotations. $ (6)
------
------
(E) The liability for estimated severance and closing costs
would have been accrued. $ (43)
------
------
(F) The tax effect of applicable items in A through E, excluding
goodwill, would have been recorded using a 35% statutory tax
rate. $ 39
------
------
(G) The issuance of General Re Common Stock would have increased
paid-in capital. $ 300
The Company's paid-in capital would have been eliminated. (218)
------
$ 82
------
------
(H) The Company's unrealized appreciation in investments and
retained earnings would have been eliminated. --
(I) The issuance of General Re Common Stock would have increased
treasury stock by $55 per share issued. $ 170
The Company's treasury stock would have been eliminated. 17
------
$ 187
------
------
</TABLE>
57
<PAGE>
OTHER MATTERS
REGULATORY APPROVALS
Set forth below is a summary of the material regulatory approvals required
to consummate the Merger. While the Company and General Re believe that they
will receive the requisite regulatory approvals for the Merger which have not
already been obtained, there can be no assurance as to the timing of such
approvals or the ability of the parties to obtain such approvals on satisfactory
terms or otherwise.
State Regulatory Approvals. State insurance regulatory laws intended
primarily for the protection of policyholders contain provisions that require
advance approval by state agencies of any change in control of insurance
companies that are domiciled in that state. The Company is the holding company
for insurance companies domiciled in Connecticut and Delaware. The approval of
the Insurance Commissioners of the States of Connecticut and Delaware under the
change in control laws in such states must be obtained in order to consummate
the Merger. Although requirements vary by state, in general state insurance
commissioners are required to approve the Merger unless such commissioners find
that it is not in the interest of the public and policyholders after
consideration of, among other factors: (i) requirements for licensure of the
insurance company; (ii) effects on competition; (iii) the financial condition of
the insurance company after the Merger; (iv) plans or proposals for changes in
business, corporate structure and management; (v) competence, experience and
integrity of those persons to be controlling the insurance company's operations;
and (vi) whether the Merger would be hazardous or prejudicial to those buying
insurance.
General Re has filed applications with the insurance commissioners of all
applicable states seeking orders granting such approval. General Re has obtained
approval from the Insurance Commissioner of the State of Delaware. General Re
and the Company expect that approval from the Insurance Commissioner of the
State of Connecticut will be granted during the third or fourth quarter of 1996,
although there can be no assurance that a final order will be issued by such
time. Affected persons, as determined by a commissioner, may generally seek to
participate in insurance commission proceedings regarding the Merger. While
procedures vary by state, orders of insurance commissioners may be appealed by
certain persons and the effectiveness of an order could be stayed by the
commissioner or a court while such an appeal is pending. If approval is stayed,
consummation of the Merger could be delayed pending such proceedings.
Antitrust. The applicable waiting period for the approval of the Merger
under the HSR Act has expired. Notwithstanding the expiration of the HSR waiting
period, any time before or after the Effective Time, the Federal Trade
Commission ('FTC'), the United States Department of Justice ('DOJ') or others
can take action under the antitrust laws, including seeking to enjoin the
consummation of the Merger or seeking the divestiture by General Re of all or
any part of the stock or assets of the Company. There can be no assurance that a
challenge to the Merger on antitrust grounds will not be made, or if such a
challenge is made, that it would not be successful.
Other. Certain aspects of the Merger will require notification to, and
filings with, various securities and other authorities in certain states.
STATE TAKEOVER STATUTES
As a Delaware corporation, the Company is subject to Section 203 ('Section
203') of the DGCL. Section 203 would prevent an 'Interested Stockholder'
(generally defined as a person beneficially owning 15% or more of a
corporation's voting stock) from engaging in a 'Business Combination' (as
defined in Section 203) with a Delaware corporation for three years following
the date such person became an Interested Stockholder unless: (i) before such
person became an Interested Stockholder, the board of directors of the
corporation approved the transaction in which the Interested Stockholder became
an Interested Stockholder or approved the Business Combination, (ii) upon
consummation of the transaction which resulted in the Interested Stockholder
becoming an Interested Stockholder, the Interested Stockholder owned at least
85% of the voting stock of the corporation outstanding at the time that the
transaction commenced (excluding stock held by directors who are also officers
and by employee stock ownership plans that do not allow plan participants to
determine confidentially whether to tender shares) or (iii) following the
transaction in which such person became an Interested Stockholder, the Business
Combination is (x) approved by the board of directors of the corporation and (y)
authorized at a meeting of stockholders by the affirmative vote of the holders
of at least 66 2/3% of the outstanding voting stock of the corporation not owned
by the Interested Stockholder. In accordance with the
58
<PAGE>
provisions of Section 203, the Company Board has approved the transactions
contemplated by the Merger Agreement. Accordingly, the transactions contemplated
by the Merger Agreement are exempt from the provisions of Section 203.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In 1982, in Edgar v. MITE Corp., the Supreme
Court of the United States invalidated on constitutional grounds the Illinois
Business Takeover Statute, which, as a matter of state securities law, made
takeovers of corporations meeting certain requirements more difficult. However,
in 1987, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that
the State of Indiana may, as a matter of corporate law, and, in particular, with
respect to those aspects of corporate law concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of a
target corporation without the prior approval of the remaining stockholders. The
state law before the Supreme Court was by its terms applicable only to
corporations that had a substantial number of stockholders in the state and were
incorporated there.
The Company conducts business, directly or through subsidiaries, in a
number of states throughout the United States, some of which have enacted
takeover laws. General Re does not know whether any of these laws will, by their
terms, apply to the Merger and has not complied with any such laws. Should any
person seek to apply any state takeover law, General Re will take such action as
then appears desirable, which may include challenging the validity or
applicability of any such statute in appropriate court proceedings. In the event
it is asserted that one or more state takeover laws is applicable to the Merger,
and an appropriate court does not determine that it is inapplicable or invalid
as applied to the Merger, General Re and/or Sub might be required to file
certain information with, or receive approvals from, the relevant state
authorities.
DESCRIPTION OF GENERAL RE CAPITAL STOCK
GENERAL
The following summaries of the terms of the capital stock of General Re do
not purport to be complete and are qualified in their entirety by reference to
the General Re Certificate of Incorporation, the General Re Bylaws, the Rights
Agreement between General Re and The Bank of New York, as Rights Agent, the
Certificates of Designation for the General Re Preferred Stock (as defined
below) and the DGCL.
GENERAL RE COMMON STOCK
Under the provisions of the General Re Restated Certificate of
Incorporation, General Re is authorized to issue 250,000,000 shares of General
Re Common Stock, $.50 per share. As of June 30, 1996, 78,740,961 shares of
General Re Common Stock are issued and outstanding. General Re Common Stock is
listed and traded on the NYSE under the symbol 'GRN.' Shares of General Re
Common Stock are fully paid and nonassessable. Subject to preferential rights
that may be applicable to any outstanding General Re Preferred Stock, holders of
General Re Common Stock are entitled to receive dividends if, as and when
declared by the General Re Board out of funds legally available therefor. See
'Market Price Data and Dividends.' In the event of a liquidation, dissolution or
winding-up of General Re, holders of General Re Common Stock are entitled to
share equally and ratably in General Re's assets remaining after the payment of
all of General Re's liabilities and the liquidation preferences of any
outstanding General Re Preferred Stock. Holders of General Re Common Stock have
no preemptive rights, no cumulative voting rights, no rights to convert their
General Re Common Stock to any other securities, and there are no redemption or
sinking fund provisions. Holders of General Re Common Stock are entitled to one
vote for each share held of record at all meetings of General Re stockholders.
For a discussion of the material differences between the rights of holders
of General Re Common Stock and the rights of holders of National Re Common
Stock, see 'Comparison of Rights of Stockholders.'
GENERAL RE PREFERRED STOCK
General. Under the provisions of the General Re Restated Certificate of
Incorporation, the General Re Board is authorized to issue up to 20,000,000
shares of preferred stock, without par value ('General Re Preferred Stock'), in
one or more series and to fix the designations, relative powers, preferences,
rights, qualifications, limitations and restrictions of all shares of each such
series, including, without limitation, dividend rates,
59
<PAGE>
conversion rights, voting rights, redemption and sinking fund provisions,
liquidation preferences and the number of shares constituting each such series,
without any further vote or action by General Re's stockholders. The issuance of
General Re Preferred Stock could decrease the amount of earnings and assets
available for distribution to holders of General Re Common Stock or adversely
affect the rights and powers, including voting rights, of the holders of General
Re Common Stock.
General Re Series A ESOP Convertible Preferred Stock. Pursuant to the
Certificate of Stock Designation, filed with the Secretary of State of the State
of Delaware on July 6, 1989, General Re created a series of preferred stock
without par value, designated as Series A ESOP Convertible Preferred Stock
consisting of 1,754,386 shares (the 'General Re ESOP Preferred'). As of June 30,
1996, 1,719,371 shares of General Re ESOP Convertible Preferred are issued and
outstanding. General Re ESOP Preferred will generally pay an annual dividend of
$6.20 per share subject to increase if the annual dividend on an equivalent
share of General Re Common Stock is in excess of $6.20 (excluding certain
extraordinary dividends or distributions paid in connection with a tender or
exchange offer). General Re ESOP Preferred ranks senior to General Re Common
Stock as to payment of dividends and distribution of assets on liquidation. In
the event that the full cumulative dividends on the General Re ESOP Preferred
have not been declared and paid when due, General Re cannot declare or pay any
dividends with respect to any class of General Re's capital stock ranking junior
to the General Re ESOP Preferred. General Re Preferred Stock ranking senior to
or on a parity with General Re ESOP Preferred may, but has not been, issued.
Holders of General Re ESOP Preferred are entitled to vote on all matters
submitted to holders of General Re Common Stock, voting together with holders of
General Re Common Stock as one class. Each share of General Re ESOP Preferred is
entitled to the number of votes equal to the number of shares of General Re
Common Stock into which the shares of General Re ESOP Preferred could be
converted on the record date for determining the General Re stockholders
entitled to vote, rounded to the nearest one-tenth of a vote. General Re ESOP
Preferred is convertible into General Re Common Stock at any time prior to the
fixing of a date for redemption, initially at a conversion rate of one share of
General Re Common Stock for each share of General Re ESOP Preferred. Appropriate
anti-dilution adjustments will be made to General Re ESOP Preferred in the event
of a reclassification of shares, recapitalization, issuance of rights or
warrants to purchase General Re Common Stock or similar transactions.
General Re ESOP Preferred is redeemable, in whole or in part, at General
Re's option, during the twelve-month periods ending July 6, 1997 and July 6,
1998 at 101.45% and 100.75%, respectively, of the liquidation values per share,
plus, in each case, an amount equal to all accrued and unpaid dividends thereon
to the date fixed for redemption. Thereafter, General Re ESOP Preferred is
redeemable, in whole or in part, at General Re's option, for $85.50 per share
plus, an amount equal to all accrued and unpaid dividends thereon to the date
fixed for redemption. General Re shall make payment of the redemption price in
cash or shares of General Re Common Stock, or a combination of cash and shares.
From and after the date fixed for redemption, dividends on shares of General Re
ESOP Preferred called for redemption will cease to accrue, the shares will no
longer be deemed to be outstanding and all rights with respect to the shares
will cease, except the right to receive the redemption price. If less than all
of the outstanding shares of General Re ESOP Preferred are to be redeemed,
General Re will either redeem a portion of the shares of each holder determined
pro rata based on the number of shares held by each holder or will select the
shares to be redeemed by lot, as may be determined by the General Re Board. If
General Re elects, by a resolution of the General Re Board, to make payment of
all future redemption prices solely in cash or solely in shares of General Re
Common Stock and notifies the holders of General Re ESOP Preferred of such
election, all such payments thereafter will be made in compliance with such
election, which will be irrevocable.
Shares of General Re ESOP Preferred will be redeemed, at the option of the
holder, by General Re at a redemption price equal to the fair market value of
General Re ESOP Preferred plus an amount equal to all accrued and unpaid
dividends thereon to the date fixed for redemption, at any time and from time to
time upon notice to General Re given not less than five (5) business days prior
to the date fixed by the participant in the notice for redemption, when and to
the extent necessary (i) for the holder to provide for distributions required to
be made to participants under, or to satisfy an investment election provided to
participants in accordance with, the General Re Employee Stock Ownership Plan
(the 'General Re ESOP'), or any successor Plan or (ii) for the holder to make
payment of principal, interest or premium due and payable (whether as scheduled
or upon acceleration) on indebtedness of the trust under the General Re ESOP or
indebtedness incurred by the holder for the benefit of the General Re ESOP.
60
<PAGE>
In the event of a consolidation, merger or similar transaction, the General
Re ESOP Preferred will be converted into similar shares of any successor or
resulting company. A holder may also elect to have his shares of General Re ESOP
Preferred redeemed as discussed above.
General Re Preferred Stock Purchase Rights. Pursuant to the Rights
Agreement, dated as of September 11, 1991, by and between General Re and The
Bank of New York, as Rights Agent, the General Re Board adopted a Stockholder
Rights Plan (the 'General Re Preferred Stock Purchase Rights Plan') and declared
a dividend distribution of one right (the 'General Re Preferred Stock Purchase
Rights') for each outstanding share of General Re Common Stock to General Re
stockholders of record at the close of business on October 1, 1991. The General
Re Preferred Stock Purchase Plan also provides that General Re Preferred Stock
Purchase Rights will be issued in respect of all shares of General Re Common
Stock which are issued after October 1, 1991 but prior to the earlier of the
Distribution Date (as defined below) or the close of business on September 11,
2001. Accordingly, each share of General Re Common Stock issued in the Merger
will have one General Re Preferred Stock Purchase Right attached thereto.
Each General Re Preferred Stock Purchase Right entitles the registered
holder to purchase from General Re one unit consisting of one one-hundredth of a
share of General Re Series A Junior Participating Preferred Stock without par
value (the 'General Re Junior Preferred Stock'), at a purchase price of $350 per
unit, subject to adjustment. The General Re Preferred Stock Purchase Rights
attach to shares of General Re Common Stock without the distribution of separate
rights certificates. The General Re Preferred Stock Purchase Rights will
separate from the General Re Common Stock and a distribution will occur on the
date (the 'Distribution Date') which is the earlier of (i) 10 business days
following the public announcement that a group has acquired or obtained the
right to acquire beneficial ownership of 20% or more of the outstanding shares
of General Re Common Stock (the 'Stock Acquisition Date') or (ii) 10 business
days (or such later date as the General Re Board shall determine) following the
commencement of a tender offer or exchange offer that would result in a person
beneficially owning 20% or more of the outstanding shares of General Re Common
Stock. Until the Distribution Date, the General Re Preferred Stock Purchase
Rights will be evidenced by General Re Common Stock certificates and will be
transferred only with shares of General Re Common Stock. The General Re
Preferred Stock Purchase Rights will not be exercisable until the Distribution
Date.
In the event that, following the Distribution Date, an individual, firm,
corporation, or any other entity becomes the beneficial owner of more than 20%
of the then outstanding shares of General Re Common Stock, except pursuant to an
offer for all outstanding shares of General Re Common Stock which General Re's
independent directors determine to be fair and in the best interest of General
Re and its stockholders, each holder of a General Re Preferred Stock Purchase
Right will thereafter have the right to receive, upon exercise, shares of
General Re Common Stock (or in certain circumstances cash, property or other
securities of General Re or securities of the acquiring company) having a value
equal to two times the exercise price of the General Re Preferred Stock Purchase
Right. In such event, all General Re Preferred Stock Purchase Rights that are
owned beneficially by the person acquiring 20% or more of the then outstanding
shares of General Re Common Stock will be null and void.
The purchase price payable and the number of units of General Re Junior
Preferred Stock or other securities or other property issuable upon exercise of
the General Re Preferred Stock Purchase Rights are subject to adjustment from
time to time to prevent dilution in the event of a stock dividend on, or a
subdivision, combination, or reclassification of, the General Re Junior
Preferred Stock.
In the event that, at any time following the Stock Acquisition Date, (i)
General Re is acquired in a merger or other business combination transaction in
which General Re is not the surviving corporation (other than a merger which
General Re's independent directors determine to be fair and in the best interest
of General Re and its stockholders), or (ii) 50% or more of General Re's assets
or earning power is sold or otherwise transferred, each holder of a General Re
Preferred Stock Purchase Right will thereafter have the right to receive, upon
exercise, common stock of the acquiring person having a value equal to two times
the exercise price of the General Re Preferred Stock Purchase Right.
At any time until 10 days following the Stock Acquisition Date, General Re
may redeem the General Re Preferred Stock Purchase Rights in whole but not in
part, at a price of $.01 per right, at which time the General Re Preferred Stock
Purchase Rights will terminate. Unless earlier redeemed as described in the
preceding sentence, the General Re Preferred Stock Purchase Rights will expire
at the close of business on September 11, 2001.
61
<PAGE>
Other than those provisions relating to the principal economic terms of the
General Re Preferred Stock Purchase Rights, any of the provisions of the General
Re Preferred Stock Purchase Plan may be amended by the General Re Board prior to
the Distribution Date. After the Distribution Date, the provisions of the
General Re Preferred Stock Purchase Plan may be amended by the General Re Board
in order to cure any ambiguity, to make changes which do not adversely affect
the interests of holders of the General Re Preferred Stock Purchase Rights
(excluding the interests of any Acquiring Person), or to shorten or lengthen any
time period under the General Re Preferred Stock Purchase Plan, provided,
however, that no amendment to adjust the time period governing redemption may be
made at a time when the General Re Preferred Stock Purchase Rights are no longer
redeemable.
The General Re Preferred Stock Purchase Rights have certain anti-takeover
effects. The General Re Preferred Stock Purchase Rights will cause substantial
dilution to a person or group that attempts to acquire General Re on terms not
approved by the General Re Board. The General Re Preferred Stock Purchase Rights
should not interfere with any merger or business combination approved by the
General Re Board since the General Re Board may, at its option, at any time
prior to the close of business on the earlier of (i) the tenth day following the
Stock Acquisition Date or (ii) September 11, 2001, redeem all but not less than
all the outstanding General Re Preferred Stock Purchase Rights. In addition,
certain provisions of the General Re Restated Certificate of Incorporation and
the General Re By-laws may have anti-takeover effects. See 'Comparison of Rights
of Stockholders.'
The Certificate of Designation of the General Re Junior Preferred Stock
designates 1,100,000 shares for issuance pursuant to the exercise of the General
Re Preferred Stock Purchase Rights. As of the date hereof, General Re has no
General Re Junior Preferred Stock outstanding. When issued, the General Re
Junior Preferred Stock will be nonredeemable and rank junior to all other series
of General Re Preferred Stock. Each whole share of General Re Junior Preferred
Stock will be entitled to receive a quarterly preferential dividend in an amount
equal to the greater of (i) $1.00 or (ii) subject to customary anti-dilution
adjustments, 100 times the aggregate amount to be distributed per share to
holders of General Re Common Stock. In the event of the liquidation, dissolution
or winding-up of General Re, each whole share of General Re Junior Preferred
Stock will be entitled to receive a preferential liquidation payment in an
amount equal to $100, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment. In
the event of any merger, consolidation or other transaction in which General Re
Common Stock is exchanged for or changed into other stock or securities, cash
and/or any other property, then in such case each whole share of General Re
Junior Preferred Stock will be entitled to receive 100 times the amount received
per each share of General Re Common Stock. Each whole share of General Re Junior
Preferred will be entitled to 100 votes, subject to customary anti-dilution
adjustments, on all matters submitted to a vote of the stockholders of General
Re, and the holders of General Re Junior Preferred Stock will generally vote
together as one class with the holders of General Re Common Stock on all matters
submitted to a vote of the stockholders of General Re.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for General Re's capital stock is American
Stock Transfer & Trust Company ('AST'). AST is located at 40 Wall Street, New
York, New York and its telephone number is (800) 937-5449 or, in New York, (718)
921-8200.
COMPARISON OF RIGHTS OF STOCKHOLDERS
The rights of holders of National Re Common Stock are presently governed by
the DGCL, the Company's Restated Certificate of Incorporation (the 'Company
Certificate') and By-laws. As a result of the Merger, holders of National Re
Common Stock who make a Stock Election will become stockholders of General Re,
also a Delaware corporation. Accordingly, such holders' rights will be governed
by the DGCL, the General Re Restated Certificate of Incorporation (the 'General
Re Certificate') and the General Re By-laws. Certain differences in the rights
of stockholders arise from distinctions between the Company Certificate and the
General Re Certificate and between the Company By-laws and the General Re
By-laws. The following is a brief description of the material differences. This
description does not purport to be a complete statement of all differences
between the rights of the stockholders of the Company and the stockholders of
General Re, and the identification of specific differences is not meant to
indicate that other differences do not exist. The following description is
qualified in its entirety by reference to the Company Certificate, the Company
By-laws, the
62
<PAGE>
General Re Certificate and the General Re By-laws. For information on how to
obtain copies of any of these documents, see 'Available Information.'
Each Company stockholder should carefully consider these differences,
including provisions of the General Re Certificate and the General Re By-laws
that may have an anti-takeover effect, in connection with such stockholder's
decision to vote for or against the adoption and approval of the Merger
Agreement.
BOARD OF DIRECTORS
The Company By-laws provide that the number of directors which shall
constitute the Company Board shall be at least one, but no more than twenty, as
determined from time to time by the affirmative vote of the majority of the
directors present at any meeting at which there is a quorum present. The number
of directors constituting the Company Board is presently 14. The General Re
By-laws provide that the number of directors which shall constitute the General
Re Board shall not be less than nine or more than twenty-one and shall be
established from time to time by the affirmative vote of (i) a majority of the
directors in office at the time of such vote or (ii) the holders of 60% in
interest of the outstanding voting shares of General Re's capital stock (the
'General Re Voting Shares'). The number of directors constituting the General Re
Board is presently 11.
The Company By-laws provide that in general all the directors constituting
the Company Board shall be elected at each annual meeting of the Company's
stockholders by a plurality of the votes cast and shall hold office for a term
of one year. The General Re By-laws provide that the directors constituting the
General Re Board shall be classified into three classes, each consisting as
nearly as possible of an equal number of directors, and that at each annual
meeting of General Re's stockholders one class of directors shall be elected by
a majority of the votes cast and shall hold office for a term of three years.
The Company By-laws provide that unless otherwise restricted by a written
agreement to which the Company is bound, any director or the entire Company
Board may be removed, with or without cause, by the holders of a majority of the
shares of National Re Common Stock entitled to vote at an election of directors.
The General Re By-laws provide that any director may be removed from office, but
only for cause, by the affirmative vote of the General Re stockholders holding a
majority of the outstanding General Re Voting Shares, given at a meeting called
for that purpose.
ADVANCE NOTICE OF NOMINATIONS FOR THE ELECTION OF DIRECTORS
The Company By-laws contain no provisions regarding the submission of
director nominations by stockholders. The General Re By-laws provide that a
stockholder who is entitled to vote for the election of directors at a meeting
of stockholders who wishes to nominate a person for election as a director of
General Re must give written notice to General Re's corporate secretary not less
than 60 days nor more than 90 days prior to any meeting of stockholders called
for the purpose of electing directors; provided, however, that if less than 35
days' notice of the meeting is given to stockholders, such nomination shall have
been mailed or delivered to General Re's corporate secretary not later than the
close of business on the 7th day following the day on which the notice of
meeting was mailed. The notice must contain the following information with
respect to each nominee who is not an incumbent director: (i) the name, age,
business address and, if known, residence address of each such nominee; (ii) the
principal occupation or employment of each such nominee; (iii) the number of
shares of each class of stock of General Re which are beneficially owned by such
nominee and by the nominating stockholder; and (iv) any other information
concerning the nominee that must be disclosed of nominees in proxy solicitations
pursuant to Regulation 14A of the Exchange Act. If the presiding officer of the
meeting determines that the nomination was not made in accordance with the
foregoing procedures, the General Re By-laws provide that the defective
nomination will be disregarded.
STOCKHOLDER PROPOSALS
The Company By-laws contain no advance notice requirements relating to
proposals sought to be made by stockholders at the annual meeting of
stockholders. The General Re By-laws generally provide that any stockholder
desiring to make a proposal for new business at the annual meeting of
stockholders must submit a written statement of the proposal which must be
received by General Re's corporate secretary not less than 60 days nor more than
90 days prior to the date of the annual meeting; provided, however, that in the
event that less than 70 days' notice of or prior public disclosure of the date
of the annual meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the
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7th day following the day on which such notice of the date of the annual meeting
was mailed or such public disclosure of the date of the annual meeting was made,
whichever first occurs.
STOCKHOLDER ACTION BY WRITTEN CONSENT
The Company By-laws provide that any action that may be taken at a meeting
of the Company's stockholders may be taken without a meeting of stockholders if
a written consent setting forth the action to be taken is signed by the holders
of not less than the minimum number of votes that would be necessary to take
such action at a meeting of stockholders. The General Re By-laws provide that,
except for any action which may be taken solely upon the vote or consent in
writing of the holders of General Re Preferred Stock, any action required to be
taken or which may be taken by the General Re stockholders must be effected at a
duly called annual or special meeting of the stockholders and may not be taken
by a consent in writing by the General Re stockholders.
SPECIAL MEETINGS
The Company By-laws provide that special meetings of the Company's
stockholders may be called by the Company's president and shall be called by the
Company's president or the Company's corporate secretary at the request in
writing of a majority of the holders of the outstanding capital stock of the
Company issued and outstanding and entitled to vote at the meeting. The General
Re Certificate provides that special meetings of General Re's stockholders, for
any proper purpose or purposes, may be called only by the General Re Board,
pursuant to a resolution adopted by the General Re Board.
BUSINESS COMBINATIONS; TRANSACTIONS WITH INTERESTED STOCKHOLDERS
Neither the Company Certificate nor the Company By-laws contains any
provisions regarding the vote required for the approval of business combinations
or transactions with Interested Stockholders (as defined below). The General Re
Certificate provides that any business combination shall require only the
affirmative vote of a majority of the outstanding General Re Voting Shares if
all of the following conditions are satisfied: (i) the consideration to be
received by the holders of General Re Voting Shares shall be cash or in the same
form as previously had been paid by or on behalf of the Interested Stockholder
in connection with its acquisition of beneficial ownership of any General Re
Voting Shares; (ii) if the consideration paid by or on behalf of the Interested
Stockholder for General Re Voting Shares varied as to form, the form of
consideration to be received by holders of General Re Voting Shares shall be
either cash or the form previously used by the Interested Stockholder to acquire
beneficial ownership of the largest number of General Re Voting Shares; (iii)
the aggregate amount of cash and the fair market value of the consideration
other than cash to be received for each General Re Voting Share by the holders
thereof in any business combination shall be at least equal to the highest per
share price paid by such Interested Stockholder in acquiring any of the General
Re Voting Shares; (iv) after becoming an Interested Stockholder and prior to the
consummation of any business combination, such Interested Stockholder shall not
have acquired any newly-issued shares of capital stock from General Re and such
Interested Stockholder shall not have received the benefit of any financial
assistance from General Re; (v) a proxy statement prepared in accordance with
the Exchange Act shall be mailed to General Re's stockholders for the purpose of
soliciting stockholder approval of such business combination and such proxy
statement shall contain, if deemed advisable by a majority of the Continuing
Directors (as defined below), an opinion of a reputable investment banking firm
as to the fairness (or lack of fairness) of the terms of such business
combination from the point of view of the holders of General Re Voting Shares.
If the foregoing conditions are not satisfied, and except where a business
combination has been approved by two-thirds of the Continuing Directors, any
business combination shall require the affirmative vote of the holders of 60% of
the General Re Voting Shares (other than an Interested Stockholder or an
affiliate thereof). The General Re Certificate provides that 'Interested
Stockholder' shall generally mean any person (other than General Re or any
subsidiary of General Re or any employee benefit plan maintained by General Re
or any subsidiary of General Re) together with its affiliates who or which,
along with its affiliates, as of the record date for the determination of
stockholders entitled to notice of and to vote on a business combination, is the
beneficial owner of more than 5% of the General Re Voting Shares. The General Re
Certificate provides that 'Continuing Director' shall mean a member of the
General Re Board who was in office prior to the time an Interested Stockholder
became an Interested Stockholder, or a director who has been recommended to
directly succeed a Continuing Director or join the General Re Board by a
majority of the remaining Continuing Directors.
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AMENDMENTS TO CHARTER AND BY-LAWS
Neither the Company Certificate nor the Company By-laws contain any
supermajority provisions concerning the amendment of either document. The
General Re Certificate provides that the holders of 60% of the General Re Voting
Shares are required to amend, alter or repeal any provisions of the General Re
Certificate governing (i) certain business combinations; (ii) the authorization
of General Re Preferred Stock; (iii) the election and removal of directors; (iv)
actions by written stockholder consents; (v) the call of special stockholder
meetings; (vi) certain determinations by the Continuing Directors; (vii) share
purchases from Interested Stockholders; and (viii) amendments to the General Re
By-laws. The General Re Certificate also provides that the holders of 60% of the
General Re Voting Shares are required to amend, alter or repeal any provisions
of the General Re By-laws governing (i) the call of special stockholder
meetings; (ii) the number and election of directors; (iii) the filling of
director vacancies; (iv) the nomination of directors; and (v) amendments to the
General Re By-laws. Notwithstanding the foregoing, the General Re Certificate
provides that only the affirmative vote, in person or by proxy, of the holders
of a majority of the outstanding General Re Voting Shares is required to approve
any proposed amendment, alteration or repeal of the General Re Certificate or
the General Re By-laws if at the time of any such proposed amendment, alteration
or repeal (i) there shall exist one or more Interested Stockholders and a
majority of the Continuing Directors approve such proposed amendment, alteration
or repeal; or (ii) no Interested Stockholder exists, and a majority of the
members of the General Re Board approve such proposed amendment, alteration or
repeal.
STOCKHOLDER RIGHTS PLAN
The Company does not have a stockholder rights plan, while General Re has
adopted the General Re Preferred Stock Purchase Rights Plan. The General Re
Preferred Stock Purchase Rights have certain anti-takeover effects. Such rights
will cause substantial dilution to a person or group that attempts to acquire
General Re on terms not approved by the General Re Board, except pursuant to an
offer conditioned on a substantial number of General Re Preferred Stock Purchase
Rights being acquired, redeemed or invalidated. See 'Description of General Re
Capital Stock-- General Re Preferred Stock--General Re Preferred Stock Purchase
Rights.'
LEGAL MATTERS
Certain legal matters with respect to the validity of the securities
offered hereby will be passed upon for General Re by Skadden, Arps, Slate,
Meagher & Flom.
EXPERTS
The consolidated financial statements and the related financial statement
schedules of General Re as of December 31, 1995 and 1994 and for each of the
years in the three-year period ended December 31, 1995 have been incorporated by
reference in reliance on the report of Coopers & Lybrand, L.L.P., independent
accountants, as given on the authority of such firm given upon their authority
as experts in accounting and auditing.
The consolidated financial statements and the related financial statement
schedules of the Company as of December 31, 1995 and 1994 and for each of the
years in the three-year period ended December 31, 1995 have been incorporated by
reference herein or appear in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995 which has been incorporated by reference
herein, in reliance upon the reports of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing. The reports of
KPMG Peat Marwick LLP contain an explanatory paragraph that refers to the
Company's adoption of the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 115, 'Accounting for
Certain Investments in Debt and Equity Securities' in 1993.
STOCKHOLDER PROPOSALS
Any stockholder of the Company wishing to submit a proposal to the Company
for consideration for inclusion in its proxy statement relating to its 1997
Annual Meeting of Stockholders must deliver such proposal to the Company by
December 2, 1996. If the Merger is consummated, no such meeting will be held.
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ANNEX I
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
GENERAL RE CORPORATION,
N ACQUISITION CORPORATION
AND
NATIONAL RE CORPORATION
DATED AS OF
JULY 1, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER............................................. I-4
Section 1.1 The Merger............................................. I-4
Section 1.2 Effective Time......................................... I-4
Section 1.3 Closing................................................ I-4
Section 1.4 Directors and Officers of the Surviving Corporation.... I-5
Section 1.5 Stockholders' Meeting.................................. I-5
ARTICLE II
CONVERSION OF SHARES; ELECTION PROCEDURES.............. I-5
Section 2.1 Conversion of Shares................................... I-5
Section 2.2 Election Procedure..................................... I-6
Section 2.3 Issuance of Parent Common Stock and Payment of Cash
Consideration; Proration............................... I-7
Section 2.4 Issuance of Parent Common Stock........................ I-8
Section 2.5 Payment of Cash Consideration.......................... I-8
Section 2.6 Treatment of Company Stock Options..................... I-8
Section 2.7 Stock Transfer Books................................... I-9
Section 2.8 Shares of Dissenting Stockholders...................... I-9
Section 2.9 Tax Opinion Adjustment................................. I-9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......... I-10
Section 3.1 Organization........................................... I-10
Section 3.2 Capitalization......................................... I-10
Section 3.3 Corporate Authorization; Validity of Agreement; Company
Action................................................. I-11
Section 3.4 Consents and Approvals; No Violations.................. I-11
Section 3.5 SEC Reports and Financial Statements................... I-12
Section 3.6 Absence of Certain Changes............................. I-12
Section 3.7 No Undisclosed Liabilities............................. I-13
Section 3.8 Information in Proxy Statement/Prospectus.............. I-13
Section 3.9 Employee Benefit Plans; ERISA.......................... I-13
Section 3.10 Litigation; Compliance with Law........................ I-14
Section 3.11 No Default............................................. I-14
Section 3.12 Taxes.................................................. I-14
Section 3.13 Contracts.............................................. I-15
Section 3.14 Transactions with Affiliates........................... I-15
Section 3.15 Opinion of Financial Advisor........................... I-15
Section 3.16 Lincoln National Contract.............................. I-15
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB....... I-16
Section 4.1 Organization........................................... I-16
Section 4.2 Capitalization......................................... I-16
Section 4.3 Corporate Authorization; Validity of Agreement;
Necessary Action....................................... I-16
Section 4.4 Consents and Approvals; No Violations.................. I-16
Section 4.5 SEC Reports and Financial Statements................... I-17
Section 4.6 Absence of Certain Changes............................. I-17
Section 4.7 No Undisclosed Liabilities............................. I-17
Section 4.8 Information in Proxy Statement/Prospectus.............. I-17
Section 4.9 Litigation; Compliance with Law........................ I-18
Section 4.10 Taxes.................................................. I-18
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Section 4.11 Financing.............................................. I-18
Section 4.12 Opinion of Financial Advisor........................... I-18
ARTICLE V
COVENANTS.............................................. I-19
Section 5.1 Interim Operations of the Company...................... I-19
Section 5.2 Interim Operations of Parent........................... I-20
Section 5.3 Access to Information.................................. I-21
Section 5.4 Consents and Approvals................................. I-21
Section 5.5 Employee Matters....................................... I-21
Section 5.6 No Solicitation........................................ I-22
Section 5.7 Additional Agreements.................................. I-22
Section 5.8 Publicity.............................................. I-22
Section 5.9 Notification of Certain Matters........................ I-23
Section 5.10 Directors' and Officers' Insurance and
Indemnification........................................ I-23
Section 5.11 Rule 145 Affiliates.................................... I-23
Section 5.12 Proxy Statement/Prospectus............................. I-23
Section 5.13 Tax-Free Reorganization................................ I-24
Section 5.14 Existing Stockholder Agreements and Registration Rights
Agreement.............................................. I-24
Section 5.15 Stock Exchange Listing................................. I-24
ARTICLE VI
CONDITIONS............................................. I-24
Section 6.1 Conditions to the Obligations of Each Party............ I-24
Section 6.2 Conditions to the Obligations of Parent and Sub........ I-25
Section 6.3 Conditions to the Obligations of the Company........... I-25
ARTICLE VII
TERMINATION............................................ I-26
Section 7.1 Termination............................................ I-26
Section 7.2 Effect of Termination.................................. I-27
ARTICLE VIII
MISCELLANEOUS.......................................... I-27
Section 8.1 Fees and Expenses...................................... I-27
Section 8.2 Finders' Fees.......................................... I-27
Section 8.3 Amendment and Modification............................. I-27
Section 8.4 Nonsurvival of Representations and Warranties.......... I-28
Section 8.5 Notices................................................ I-28
Section 8.6 Interpretation......................................... I-28
Section 8.7 Counterparts........................................... I-29
Section 8.8 Entire Agreement; No Third Party Beneficiaries; Rights
of Ownership........................................... I-29
Section 8.9 Severability........................................... I-29
Section 8.10 Specific Performance................................... I-29
Section 8.11 Governing Law.......................................... I-29
Section 8.12 Assignment............................................. I-29
Exhibit A Form of Tax Representation Letter of Company
Exhibit B Form of Tax Representation Letter of Parent
Exhibit C Form of Affiliate Agreement
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I-3
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 1, 1996, by and among
General Re Corporation, a Delaware corporation ('Parent'), N Acquisition
Corporation, a Delaware corporation and wholly-owned subsidiary of Parent
('Sub'), and National Re Corporation, a Delaware corporation (the 'Company').
WHEREAS, the Boards of Directors of Parent, Sub and the Company have
approved, and deem it advisable and in the best interests of their respective
stockholders to consummate, the acquisition of the Company by Parent upon the
terms and subject to the conditions set forth herein;
WHEREAS, as a condition and inducement to Parent's and Sub's entering into
this Agreement and incurring the obligations set forth herein, concurrently with
the execution and delivery of this Agreement, Parent and Sub are entering into
Stockholder Agreements (collectively, the 'Stockholder Agreements') with
Keystone Inc., Acadia Partners, L.P., William D. Warren, Peter A. Cheney, Robert
W. Eager, Jr., and Timothy T. McCaffrey (collectively, the 'Stockholders'),
pursuant to which, among other things, such stockholders have agreed to vote the
shares of common stock, with no par value, of the Company (the 'Company Common
Stock' or 'Shares') then owned by such stockholders in favor of the Merger (as
herein defined) provided for herein;
WHEREAS, the Board of Directors of the Company has approved the
transactions contemplated by this Agreement and the Stockholder Agreements in
accordance with the provisions of Section 203 of the Delaware General
Corporation Law (the 'DGCL') and has resolved to recommend the approval of the
Merger by the holders of shares of Company Common Stock; and
WHEREAS, for United States federal income tax purposes, it is intended that
the Merger provided for herein shall qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
'Code');
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Stockholder Agreements, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. (a) Subject to the terms and conditions of this
Agreement and in accordance with the DGCL, at the Effective Time (as herein
defined), the Company and Sub shall consummate a merger (the 'Merger') pursuant
to which (i) the Company shall be merged with and into Sub and the separate
corporate existence of the Company shall thereupon cease, and (ii) Sub shall be
the surviving corporation (the 'Surviving Corporation') in the Merger and shall
continue to be governed by the laws of the State of Delaware. Pursuant to the
Merger, (x) the Certificate of Incorporation of Sub, as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended as provided by law and such
Certificate of Incorporation, and (y) the By-laws of Sub, as in effect
immediately prior to the Effective Time, shall be the By-laws of the Surviving
Corporation until thereafter amended as provided by law, the Certificate of
Incorporation of the Surviving Corporation and such By-laws. The Merger shall
have the effects set forth in the DGCL.
Section 1.2 Effective Time. Parent, Sub and the Company will cause a
Certificate of Merger (the 'Certificate of Merger') with respect to the Merger
to be executed and filed on the date of the Closing (as defined in Section 1.3)
(or on such other date as Parent and the Company may agree) with the Secretary
of State of the State of Delaware as provided in the DGCL. The Merger shall
become effective on the date on which the Certificate of Merger has been duly
filed with the Secretary of State of the State of Delaware or such time as is
agreed upon by the parties and specified in the Certificate of Merger, and such
time is hereinafter referred to as the 'Effective Time'.
Section 1.3 Closing. The closing of the Merger (the 'Closing') will take
place at 10:00 a.m., New York City time, on a date to be specified by the
parties, which shall be no later than two New York Stock Exchange ('NYSE')
trading days after satisfaction or waiver of all of the conditions set forth in
Article VI hereof (the
I-4
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'Closing Date'), at the offices of Skadden, Arps, Slate, Meagher & Flom, 919
Third Avenue, New York, New York, unless another time, date or place is agreed
to in writing by the parties hereto.
Section 1.4 Directors and Officers of the Surviving Corporation. The
directors and officers of Sub at the Effective Time shall, from and after the
Effective Time, be the initial directors and officers, respectively, of the
Surviving Corporation until their successors shall have been duly elected or
appointed or qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
By-laws.
Section 1.5 Stockholders' Meeting. In order to consummate the Merger, the
Company, acting through its Board of Directors, shall, in accordance with
applicable law duly call, give notice of, convene and hold a special meeting of
its stockholders (the 'Company Special Meeting'), as soon as practicable after
the Registration Statement on Form S-4 (together with all amendments, schedules,
and exhibits thereto) to be filed by Parent in connection with the registration
of the shares of common stock, $.50 par value, of Parent ('Parent Common Stock')
and the associated Preferred Stock Purchase Rights of Parent (the 'Parent
Rights') to be issued by Parent in the Merger (the 'Registration Statement') is
declared effective, for the purpose of considering and taking action upon this
Agreement. (Unless the context otherwise requires, all references in this
Agreement to Parent Common Stock shall include the corresponding Parent Rights.)
The Company shall include in the joint proxy statement/prospectus forming a part
of the Registration Statement (the 'Proxy Statement/Prospectus') the
recommendation of the Board of Directors of the Company that stockholders of the
Company vote in favor of the approval of the Merger and the adoption of this
Agreement; provided that the Company may withdraw, modify or change such
recommendation only to the extent that the Board of Directors of the Company
determines, after having received the advice of outside legal counsel to the
Company and the advice of the Company's financial advisor, that the failure to
withdraw, modify or change such recommendation is reasonably likely to result in
a breach of the Board of Directors' fiduciary duties under applicable law.
ARTICLE II
CONVERSION OF SHARES; ELECTION PROCEDURES
Section 2.1 Conversion of Shares. (a) Each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time (other than
Shares to be cancelled pursuant to Section 2.1(c) hereof and Dissenting Shares
(as herein defined)) shall, at the Effective Time, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
right to receive, at the election of the holder as provided in and subject to
the limitations set forth in this Article II, either (A) a fraction (the
'Conversion Fraction') of a validly issued, fully paid and nonassessable share
of Parent Common Stock, determined by dividing $53 by the average (without
rounding) of the closing prices per share of Parent Common Stock on the NYSE as
reported on the NYSE Composite Tape for the ten (10) consecutive NYSE trading
days ending on the second NYSE trading day immediately preceding the Closing
Date (the 'Average Parent Share Price') and rounding the result to the nearest
one one-hundred thousandth of a share; provided, that Parent shall issue not
more than .39259 nor less than .32121 shares of Parent Common Stock per Share
(the 'Stock Consideration') or (B) $53 in cash, without any interest thereon
(the 'Cash Consideration').
(b) Each share of Common Stock, par value $.01 per share, of Sub issued and
outstanding immediately prior to the Effective Time shall, at the Effective
Time, by virtue of the Merger and without any action on the part of Parent, be
converted into one fully paid and nonassessable share of common stock, par value
$.01 per share, of the Surviving Corporation.
(c) All shares of Company Common Stock that are owned by the Company as
treasury stock and any shares of Company Common Stock owned by Parent, Sub or
any other direct or indirect wholly owned Subsidiary (as defined in Section 3.1
hereof) of Parent shall, at the Effective Time, be cancelled and retired and
shall cease to exist and no Parent Common Stock or cash consideration shall be
delivered in exchange therefor.
(d) On and after the Effective Time, holders of certificates which
immediately prior to the Effective Time represented outstanding Shares (the
'Certificates') shall cease to have any rights as stockholders of the
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<PAGE>
Company, except the right to receive the consideration set forth in this Article
II (the 'Merger Consideration') for each Share held by them.
Section 2.2 Election Procedure. Each holder of Shares (other than holders
of Shares to be cancelled as set forth in Section 2.1(c) and Dissenting Shares)
shall have the right, subject to the limitations set forth in this Article II,
to submit a request specifying the number of Shares that such holder desires to
have converted into the Stock Consideration in the Merger and the number of
Shares that such holder desires to have converted into the Cash Consideration in
the Merger in accordance with the following procedures:
(a) Each holder of Shares may specify in a request made in accordance with
the provisions of this Section 2.2 (herein called an 'Election') (i) the number
of Shares owned by such holder that such holder desires to have converted into
the right to receive the Stock Consideration in the Merger (a 'Stock Election')
and (ii) the number of Shares owned by such holder that such holder desires to
have converted into the right to receive the Cash Consideration in the Merger (a
'Cash Election').
(b) Parent shall prepare a form reasonably acceptable to the Company (the
'Form of Election') which shall be mailed to the Company's stockholders entitled
to vote at the Company Special Meeting so as to permit the Company's
stockholders to exercise their right to make an Election prior to the Election
Deadline (as defined in Section 2.2(d)).
(c) Parent shall use all reasonable efforts to make the Form of Election
initially available to all stockholders of the Company at least twenty business
days prior to the Election Deadline and shall use all reasonable efforts to make
available on a prompt basis a Form of Election to any stockholder of the Company
who requests such Form following the initial mailing of the Forms of Election
and prior to the Election Deadline.
(d) Any Election shall have been made properly only if the person
authorized to receive Elections and to act as exchange agent under this
Agreement, which person shall be designated by Parent and shall be reasonably
satisfactory to the Company (the 'Exchange Agent'), shall have received, by 5:00
p.m. local time in the city in which the principal office of such Exchange Agent
is located, on the date of the Election Deadline, a Form of Election properly
completed and signed and accompanied by certificates for the Shares to which
such Form of Election relates (or by an appropriate guarantee of delivery of
such certificates, as set forth in such Form of Election, from a member of any
registered national securities exchange or of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company in the United
States provided such certificates are in fact delivered to the Exchange Agent by
the time required in such guarantee of delivery). Failure to deliver Shares
covered by such a guarantee of delivery within the time set forth on such
guarantee shall be deemed to invalidate any otherwise properly made Election. As
used herein, 'Election Deadline' means the date mutually agreed to by Parent and
Company, in a news release delivered to the Dow Jones News Service, as the last
day on which Forms of Election will be accepted; provided, that such date shall
be a business day no earlier than twenty business days prior to the Effective
Time and no later than the date on which the Effective Time occurs and shall be
at least ten business days following the date of such news release and, unless
the Company and Parent otherwise agree, shall not precede the date of the
Company Special Meeting; provided, further, that Parent shall have the right to
set a later date of, or to extend, the Election Deadline so long as such later
date is no later than the date on which the Effective Time occurs.
(e) Any Company stockholder may at any time prior to the Election Deadline
change his or her Election by written notice received by the Exchange Agent
prior to the Election Deadline accompanied by a properly completed and signed,
revised Form of Election.
(f) Any Company stockholder may, at any time prior to the Election
Deadline, revoke his or her Election by written notice received by the Exchange
Agent prior to the Election Deadline or by withdrawal prior to the Election
Deadline of his or her certificates for Shares, or of the guarantee of delivery
of such certificates, previously deposited with the Exchange Agent. All
Elections shall be revoked automatically if the Exchange Agent is notified in
writing by Parent or the Company that this Agreement has been terminated. Any
Company stockholder who shall have deposited certificates for Shares with the
Exchange Agent shall have the right to withdraw such certificates by written
notice received by the Exchange Agent and thereby revoke his Election as of the
Election Deadline if the Merger shall not have been consummated prior thereto.
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(g) Parent shall have the right to make rules, not inconsistent with the
terms of this Agreement, governing the validity of the Forms of Election, the
manner and extent to which Elections are to be taken into account in making the
determinations prescribed by Section 2.3, the issuance and delivery of
certificates for Parent Common Stock into which Shares are converted in the
Merger and the payment of cash for Shares converted into the right to receive
the Cash Consideration in the Merger.
Section 2.3 Issuance of Parent Common Stock and Payment of Cash
Consideration; Proration. The manner in which each Share (other than Shares to
be cancelled as set forth in Section 2.1(c) and Dissenting Shares) shall be
converted into the right to receive either the Stock Consideration or the Cash
Consideration on the Effective Date shall be as set forth in this Section 2.3.
All references to 'outstanding' Shares in this Section 2.3 shall mean (i) all
Shares outstanding immediately prior to the Effective Time minus (ii) Shares
owned by Parent or by any direct or indirect wholly-owned subsidiary of Parent.
(a) In the event that, between the date of this Agreement and the Effective
Time, the issued and outstanding shares of Parent Common Stock shall have been
affected or changed into a different number of shares or a different class of
shares as a result of a stock split, reverse stock split, stock dividend,
spin-off, extraordinary dividend, recapitalization, reclassification or other
similar transaction with a record date within such period, the Conversion
Fraction shall be appropriately adjusted.
(b) As is more fully set forth below, the Total Cash Consideration in the
Merger pursuant to this Agreement shall not be more than 50% of the value of all
outstanding Shares. 'Total Cash Consideration' shall mean the sum of (1) the
fair market value of Shares to be converted into the right to receive the Cash
Consideration, (2) cash paid in lieu of fractional Shares, and (3) cash paid for
Dissenting Shares. For these purposes, cash paid for Dissenting Shares shall be
computed as if holders of Dissenting Shares had made the Cash Election.
(c) Each Share for which a Stock Election has been received and each Share
as to which an Election is not in effect at the Election Deadline (a
'Non-Electing Share') shall be converted into the right to receive the Stock
Consideration in the Merger.
(d) If the Total Cash Consideration is 50% or less of the value of the
outstanding Shares, each Share covered by a Cash Election shall be converted in
the Merger into the right to receive the Cash Consideration.
(e) If the Total Cash Consideration is more than 50% of the value of the
outstanding Shares, the Shares for which Cash Elections have been received shall
be converted into the right to receive the Cash Consideration and the Stock
Consideration in the following manner:
(1) The Exchange Agent will distribute with respect to Shares as to
which a Cash Election has been made the Cash Consideration with respect to
a fraction of such Shares, the numerator of which fraction shall be 50% of
the value (based on the closing price of the Shares on the last full
trading day prior to the Effective Time) of the outstanding Shares and the
denominator of which shall be the sum of (A) the value (based on the
closing price of the Shares on the last full trading day prior to the
Effective Time) of the aggregate number of Shares covered by Cash
Elections, (B) cash to be paid in lieu of fractional Shares and (C) cash to
be paid for Dissenting Shares (computed as if holders of Dissenting Shares
had made the Cash Election) and
(2) Shares covered by a Cash Election and not fully converted into the
right to receive the Cash Consideration as set forth in clause (1) above
shall be converted in the Merger into the right to receive the Stock
Consideration.
(f) If Parent and the Company shall determine that any Election is not
properly made with respect to any Shares, such Election shall be deemed to be
not in effect, and the Shares covered by such Election shall, for purposes
hereof, be deemed to be Non-Electing Shares.
(g) No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of Certificates, no
dividend or distribution with respect to shares shall be payable on or with
respect to any fractional share and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a stockholder of
Parent. In lieu of any such fractional share of Parent Common Stock, Parent
shall pay to each former stockholder of the Company who otherwise would be
entitled to receive a fractional share of Parent Common Stock an amount in cash
determined by multiplying (i) the Average Parent
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Share Price but not more than $165.00 nor less than $135.00 by (ii) the
fractional interest in a share of Parent Common Stock to which such holder would
otherwise be entitled.
Section 2.4 Issuance of Parent Common Stock. Immediately following the
Effective Time, Parent shall deliver, in trust, to the Exchange Agent, for the
benefit of the holders of Shares, certificates representing an aggregate number
of shares of Parent Common Stock as nearly as practicable equal to the product
of the Conversion Fraction and the number of Shares to be converted into Parent
Common Stock as determined in Section 2.3. As soon as practicable after the
Effective Time, each holder of Shares converted into Parent Common Stock in the
Merger, upon surrender to the Exchange Agent (to the extent not previously
surrendered with a Form of Election) of one or more certificates for such Shares
for cancellation, shall be entitled to receive certificates representing the
number of shares of Parent Common Stock into which such Shares shall have been
converted in the Merger. No dividends or distributions that have been declared
will be paid to persons entitled to receive certificates for shares of Parent
Common Stock until such persons surrender their certificates for Shares, at
which time all such dividends shall be paid. In no event shall the persons
entitled to receive such dividends be entitled to receive interest on such
dividends. If any certificate for such Parent Common Stock is to be issued in a
name other than that in which the certificate for Shares surrendered in exchange
therefor is registered, it shall be a condition of such exchange that the person
requesting such exchange shall pay to the Exchange Agent any transfer or other
Taxes (as herein defined) required by reason of issuance of certificates for
such Parent Common Stock in a name other than the registered holder of the
certificate surrendered, or shall establish to the reasonable satisfaction of
the Exchange Agent that such Tax has been paid or is not applicable.
Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto
shall be liable to a holder of Shares for any Parent Common Stock or dividends
thereon delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
Section 2.5 Payment of Cash Consideration. At the Closing, Parent shall
deposit in trust with the Exchange Agent, for the benefit of the holders of
Shares, an amount in cash equal to the Cash Consideration multiplied by the
number of Shares to be converted into the right to receive the Cash
Consideration as determined in Section 2.3. As soon as practicable after the
Effective Time, the Exchange Agent shall distribute to holders of Shares
converted into the right to receive the Cash Consideration, upon surrender to
the Exchange Agent (to the extent not previously surrendered with a Form of
Election) of one or more certificates for such Shares for cancellation, a bank
check for an amount equal to the Cash Consideration times the number of Shares
so converted. In no event shall the holder of any such surrendered certificates
be entitled to receive interest on any of the Cash Consideration to be received
in the Merger. If such check is to be issued in the name of a person other than
the person in whose name the certificates for the Shares surrendered for
exchange therefor are registered, it shall be a condition of the exchange that
the person requesting such exchange shall pay to the Exchange Agent any transfer
or other Taxes required by reason of issuance of such check to a person other
than the registered holder of the certificates surrendered, or shall establish
to the reasonable satisfaction of the Exchange Agent that such Tax has been paid
or is not applicable. Notwithstanding the foregoing, neither the Exchange Agent
nor any party hereto shall be liable to a holder of Shares for any amount paid
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
Section 2.6 Treatment of Company Stock Options. (a) Each option granted
to a Company employee to acquire shares of Company Common Stock ('Company Stock
Option') that is outstanding on the Effective Time, whether or not then vested
or exercisable, shall, effective as of the Effective Time, become and represent
an option for the number of shares of Parent Common Stock (a 'Substitute
Option'), rounded up to the nearest whole share, determined by multiplying (i)
the number of shares of Company Common Stock subject to such Company Stock
Option immediately prior to the Effective Time by (ii) the Conversion Fraction
at an exercise price per share of Parent Common Stock (decreased to the nearest
whole cent) equal to the exercise price per share of such Company Stock Option
divided by the Conversion Fraction; provided, however, that in the case of any
Company Stock Option to which Section 421 of the Code applies by reason of its
qualification as an incentive stock option under Section 422 of the Code, the
conversion formula shall be adjusted if necessary to comply with Section 424(a)
of the Code. After the Effective Time, except as provided above in this Section
2.6, each Substitute Option shall be exercisable upon the same terms and
conditions as were applicable to the related Company Stock Option immediately
prior to the Effective Time. Notwithstanding the foregoing provisions of this
Section 2.6(a) or any other provision of this Agreement, the Company and the
holder of any Company Stock
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Option may amend such Company Stock Option so that the holder of such Company
Stock Option (if it is outstanding at the Effective Time) may elect to receive,
in settlement thereof, an amount in cash equal to the excess of $53 over the
exercise price of such Company Stock Option multiplied by the number of Shares
subject to such Company Stock Option.
(b) Prior to the Effective Time, the Company shall use all reasonable
efforts to (i) obtain any consents from holders of Company Stock Options and
(ii) amend the terms of its equity incentive plans or arrangements, in each case
as is necessary to give effect to the provisions of paragraph (a) of this
Section 2.6.
(c) Prior to the Effective Time, Parent shall (i) file with the Securities
and Exchange Commission ('SEC') a registration statement on Form S-8 or another
appropriate form for the registration of shares of Parent Common Stock issuable
pursuant to all Substitute Options and (ii) amend the terms of its equity
incentive plans or arrangements, in each case as is necessary to give effect to
the provisions of paragraph (a) of this Section 2.6.
Section 2.7 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of Shares on the records of the Company. If, after the
Effective Time, certificates representing Shares are presented to the Surviving
Corporation, they shall be cancelled and exchanged for cash and/or certificates
representing Parent Common Stock pursuant to this Article II.
Section 2.8 Shares of Dissenting Stockholders. Notwithstanding anything
in this Agreement to the contrary, any shares of Company Common Stock that are
issued and outstanding as of the Effective Time and that are held by a
stockholder who has properly exercised his appraisal rights (the 'Dissenting
Shares') under the DGCL shall not be converted into the right to receive the
Merger Consideration unless and until the holder shall have failed to perfect,
or shall have effectively withdrawn or lost, his right to dissent from the
Merger under the DGCL and to receive such consideration as may be determined to
be due with respect to such Dissenting Shares pursuant to and subject to the
requirements of the DGCL. If any such holder shall have so failed to perfect or
have effectively withdrawn or lost such right, each share of such holder's
Company Common Stock shall thereupon be deemed to have been converted into and
to have become, as of the Effective Time, the right to receive, without any
interest thereon, the Stock Consideration or the Cash Consideration or a
combination thereof as determined by Parent in its sole discretion. The Company
shall give Parent (i) prompt notice of any notice or demands for appraisal or
payment for shares of Company Common Stock received by the Company and (ii) the
opportunity to participate in and direct all negotiations and proceedings with
respect to any such demands or notices. The Company shall not, without the prior
written consent of Parent, make any payment with respect to, or settle, offer to
settle or otherwise negotiate, any such demands.
Section 2.9 Tax Opinion Adjustment. Subject to the limitation of, and the
proviso of Section 2.1(a), if either (i) the tax opinion referred to in Section
6.3(e) cannot be rendered (as reasonably determined by nationally recognized tax
counsel to the Company) or (ii) the tax opinion of nationally recognized tax
counsel to Parent referred to Section 6.2(d) cannot be rendered (as reasonably
determined by nationally recognized tax counsel to Parent), in either case as a
result of the Merger potentially failing to satisfy continuity of interest
requirements under applicable federal income tax principles relating to
reorganizations under Section 368(a) of the Code, then Parent shall reduce the
Cash Consideration to the minimum extent necessary to enable the relevant tax
opinion or opinions, as the case may be, to be rendered, and correspondingly
increase the Stock Consideration.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 3.1 Organization. Each of the Company and its Subsidiaries is a
corporation, partnership or other entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization, and has all requisite corporate or other power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as now being conducted, except where the failure to
be so organized, existing and in good standing or to have such power, authority
and governmental approvals would not have a material adverse effect (as defined
below) on the Company and its Subsidiaries taken as a whole. Each of the Company
and its Subsidiaries is duly qualified or licensed to do business and in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing would not, in the aggregate, have a material
adverse effect on the Company and its Subsidiaries taken as a whole. As used in
this Agreement, the word 'Subsidiary' means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which (i) such party or any other Subsidiary of such party is a general partner
(excluding such partnerships where such party or any Subsidiary of such party do
not have a majority of the voting interest in such partnership) or (ii) at least
a majority of the securities or other interests having by their terms ordinary
voting power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such party or by any one or more
of its Subsidiaries, or by such party and one or more of its Subsidiaries. As
used in this Agreement, any reference to any event, change or effect having a
material adverse effect on or with respect to any entity (or group of entities
taken as a whole) means such event, change or effect, in the aggregate with such
other events, changes, or effects, which is materially adverse to the financial
condition, business or results of operations of such entity. Section 3.1 of the
Disclosure Schedule delivered by the Company to Parent on or prior to the date
hereof (the 'Disclosure Schedule') sets forth a complete list of the Company's
Subsidiaries.
Section 3.2 Capitalization. (a) The authorized capital stock of the
Company consists of 41,000,000 shares consisting of 40,000,000 shares of Company
Common Stock and 1,000,000 shares of Preferred Stock, $.01 par value (the
'Preferred Stock'). (i) As of June 28, 1996, 16,616,894 shares of Company Common
Stock are issued and outstanding and 599,400 shares of Company Common Stock are
held in the treasury of the Company, (ii) as of the date hereof, no Shares of
Preferred Stock are issued and outstanding, and (iii) as of the date hereof,
options to acquire an aggregate of 1,143,000 shares of Company Common Stock have
been issued pursuant to Company Stock Options. All the outstanding shares of the
Company's capital stock are duly authorized, validly issued, fully paid and
non-assessable. There are no bonds, debentures, notes or other indebtedness
having voting rights (or convertible into securities having such rights)
('Voting Debt') of the Company or any of its Subsidiaries issued and
outstanding. Except as set forth above, as set forth on Section 3.2 of the
Disclosure Schedule, and for the transactions contemplated by this Agreement,
(i) there are no shares of capital stock of the Company authorized, issued or
outstanding and (ii) there are no existing options, warrants, calls, pre-emptive
rights, subscriptions or other rights, convertible securities, agreements,
arrangements or commitments of any character, relating to the issued or unissued
capital stock of the Company or any of its Subsidiaries, obligating the Company
or any of its Subsidiaries to issue, transfer or sell or cause to be issued,
transferred or sold any shares of capital stock or Voting Debt of, or other
equity interest in, the Company or any of its Subsidiaries or securities
convertible into or exchangeable for such shares or equity interests or
obligations of the Company or any of its Subsidiaries to grant, extend or enter
into any such option, warrant, call, subscription or other right, convertible
security, agreement, arrangement or commitment. Except as set forth in Section
3.2 of the Disclosure Schedule, there are no outstanding contractual obligations
of the Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any Shares or the capital stock of the Company or any Subsidiary or
affiliate of the Company or to provide funds to make any investment (in the form
of a loan, capital contribution or otherwise) in any Subsidiary or any other
entity. Except as set forth in Section 3.2 of the Disclosure Schedule, and as
permitted by this Agreement, following the Merger, neither the Company nor any
of its Subsidiaries will have any obligation to issue, transfer or sell any
shares of its capital stock other than pursuant to employee benefit plans.
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(b) All of the outstanding shares of capital stock of each of the
Subsidiaries are beneficially owned by the Company, directly or indirectly, and
all such shares have been validly issued and are fully paid and nonassessable
and are owned by either the Company or one of its Subsidiaries free and clear of
all liens, charges, security interests, options, claims or encumbrances of any
nature whatsoever.
(c) Except as set forth in Section 3.2(c) of the Disclosure Schedule, there
are no voting trusts or other agreements or understandings to which the Company
or any of its Subsidiaries is a party with respect to the voting of the capital
stock of the Company or any of the Subsidiaries. None of the Company or its
Subsidiaries is required to redeem, repurchase or otherwise acquire shares of
capital stock of the Company, or any of its Subsidiaries, respectively, as a
result of the transactions contemplated by this Agreement.
(d) At the Effective Time, the number of shares of Company Common Stock
outstanding shall not exceed 17,859,894.
Section 3.3 Corporate Authorization; Validity of Agreement; Company
Action. (a) The Company has full corporate power and authority to execute and
deliver this Agreement and, subject to obtaining any necessary approval of its
stockholders as contemplated by Section 1.5 hereof with respect to the Merger,
to consummate the transactions contemplated hereby. The execution, delivery and
performance by the Company of this Agreement, and the consummation by it of the
transactions contemplated hereby, have been duly and validly authorized by its
Board of Directors and, except for obtaining the approval of its stockholders as
contemplated by Section 1.5 hereof with respect to the Merger, no other
corporate action or proceedings on the part of the Company is necessary to
authorize the execution and delivery by the Company of this Agreement, and the
consummation by it of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by the Company and, assuming this Agreement
constitutes a valid and binding obligation of Parent and Sub, constitutes a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(b) The Board of Directors of the Company has duly and validly approved and
taken all corporate action required to be taken by the Board of Directors for
the consummation of the transactions contemplated by this Agreement and the
Stockholder Agreements, including, but not limited to, all actions necessary to
render the provisions of Section 203 of the DGCL inapplicable to this Agreement
and the Stockholder Agreements. The affirmative vote of the holders of a
majority of the Shares is the only vote of the holders of any class or series of
Company capital stock necessary to approve the Merger.
Section 3.4 Consents and Approvals; No Violations. Except as set forth in
Section 3.4 of the Disclosure Schedule and for all filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Exchange Act (as defined herein), the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the 'HSR
Act'), the state securities or 'blue sky' laws, state takeover laws, state and
foreign insurance regulatory laws and commissions, and for the approval of this
Agreement by the Company's stockholders and the filing and recordation of the
Certificate of Merger as required by the DGCL, neither the execution, delivery
or performance of this Agreement nor the consummation by the Company of the
transactions contemplated hereby nor compliance by the Company with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of the Certificate of Incorporation or by-laws or similar
organizational documents of the Company or of any of its Subsidiaries, (ii)
require any filing with, or permit, authorization, consent or approval of, any
court, arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority, commission or agency (a
'Governmental Entity'), except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings would not have a
material adverse effect on the Company and its Subsidiaries taken as a whole and
would not, or would not be reasonably likely to, materially impair the ability
of the Company to consummate the Merger or the other transactions contemplated
hereby, (iii) result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, guarantee,
other evidence of indebtedness (collectively, the 'Debt Instruments'), lease,
license, contract, agreement or other instrument or
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obligation to which the Company or any of its Subsidiaries is a party or by
which any of them or any of their properties or assets may be bound (a 'Company
Agreement') or (iv) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to the Company, any of its Subsidiaries or any of their
properties or assets, except in the case of clauses (iii) and (iv) for
violations, breaches or defaults which would not have a material adverse effect
on the Company and its Subsidiaries taken as a whole.
Section 3.5 SEC Reports and Financial Statements. (a) The Company has
filed with the SEC and has heretofore made available to Parent true and complete
copies of, all forms, reports, schedules, statements and other documents
required to be filed by it and its Subsidiaries since January 1, 1994 under the
Securities Exchange Act of 1934, as amended (the 'Exchange Act') and the
Securities Act of 1933, as amended (the 'Securities Act') (as such documents
have been amended since the time of their filing, collectively, the 'Company SEC
Documents'). As of their respective dates or, if amended, as of the date of the
last such amendment, the Company SEC Documents, including, without limitation,
any financial statements or schedules included therein (a) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading and (b) complied
in all material respects with the applicable requirements of the Exchange Act
and the Securities Act, as the case may be, and the applicable rules and
regulations of the SEC thereunder. Each of the consolidated financial statements
included in the Company SEC Documents have been prepared from, and are in
accordance with, the books and records of the Company and/or its consolidated
Subsidiaries, comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with United States generally
accepted accounting principles ('GAAP') applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position and the
consolidated results of operations and cash flows (and changes in financial
position, if any) of the Company and its consolidated Subsidiaries as at the
dates thereof or for the periods presented therein (subject, in the case of
unaudited interim financial statements, to normal year end adjustments).
(b) The Annual Statements and Quarterly Statement of National Reinsurance
Corporation, a wholly owned subsidiary of the Company ('National Re'), as filed
with the departments of insurance for all applicable domiciliary states for the
years ended December 31, 1995 and December 31, 1994 (the 'Annual Statutory
Statements') and the quarter ended March 31, 1996 (the 'Quarterly Statutory
Statement'), respectively, together with all exhibits and schedules thereto (all
Annual Statutory Statements and the Quarterly Statutory Statement, together with
all exhibits and schedules thereto, referred to as the 'Statutory Financial
Statements'), have been prepared in accordance with the accounting practices
prescribed or permitted by the departments of insurance for all applicable
domiciliary states for purposes of financial reporting to the state's insurance
regulators ('State Statutory Accounting Principles'), and such accounting
practices have been applied on a basis consistent with State Statutory
Accounting Principles throughout the periods involved, except as expressly set
forth in the notes, exhibits or schedules thereto, and the Statutory Financial
Statements of National Re present fairly in all material respects the financial
position and the results of operations for National Re and its Subsidiaries as
of the dates and for the periods therein in accordance with State Statutory
Accounting Principles. The Company has heretofore made available to Parent true
and complete copies of the Statutory Financial Statements.
Section 3.6 Absence of Certain Changes. Except as disclosed in the Company
SEC Documents or as set forth in Section 3.6 of the Disclosure Schedule, since
January 1, 1996, the Company and its Subsidiaries have conducted their
respective businesses and operations in the ordinary course of business
consistent with past practice. Since March 31, 1996, there has not occurred (i)
any events, changes, or effects (including the incurrence of any liabilities of
any nature, whether or not accrued, contingent or otherwise) having or, which
would be reasonably likely to have, in the aggregate, a material adverse effect
on the Company and its Subsidiaries taken as a whole (other than changes in
insurance laws and regulations affecting the reinsurance industry generally);
(ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to the equity
interests of the Company or of any of its Subsidiaries, other than regular
quarterly cash dividends or dividends paid by wholly owned Subsidiaries; or
(iii) any change by the Company or any of its Subsidiaries in accounting
principles or methods, except insofar as may be required by a change in GAAP.
Since January 1, 1996, except as set forth on Section 3.6 of the Disclosure
Schedule, the
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Company and its Subsidiaries have conducted their respective businesses in the
ordinary course consistent with past practice.
Section 3.7 No Undisclosed Liabilities. Except (a) as disclosed in Section
3.6 of the Disclosure Schedule, (b) to the extent disclosed in the Company SEC
Documents filed prior to the date of this Agreement and (c) for liabilities and
obligations incurred in the ordinary course of business consistent with past
practice, since March 31, 1996, neither the Company nor any of its Subsidiaries
has incurred any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, that have, or would be reasonably likely to
have, a material adverse effect on the Company and its Subsidiaries. Section 3.7
of the Disclosure Schedule sets forth each instrument evidencing indebtedness of
the Company and its Subsidiaries (other than insurance treaties entered into in
the ordinary course of the Company's business) which will accelerate or become
due or payable, or result in a right of redemption or repurchase on the part of
the holder of such indebtedness, or with respect to which any other payment or
amount will become due or payable, in any such case with or without due notice
or lapse of time, as a result of this Agreement, the Merger or the other
transactions contemplated hereby.
Section 3.8 Information in Proxy Statement/Prospectus. The Proxy
Statement/Prospectus (or any amendment thereof or supplement thereto), at the
date mailed to the Company's stockholders and at the time of the Company Special
Meeting, will 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, provided, however, that no representation is made by the
Company with respect to statements made therein based on information supplied by
Parent or Sub for inclusion in the Proxy Statement/Prospectus. None of the
information supplied by the Company for inclusion or incorporation by reference
in the Registration Statement will, at the date it becomes effective and at the
time of the Company Special Meeting contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. Subject to the proviso set forth in
the second preceding sentence, the Proxy Statement/Prospectus will comply in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
Section 3.9 Employee Benefit Plans; ERISA. As of the date of this
Agreement: (a) there are no material employee or director benefit plans,
arrangements, practices, contracts or agreements (including, without limitation,
employment agreements, change of control employment agreements and severance
agreements, incentive compensation, bonus, stock option, stock appreciation
rights and stock purchase plans) of any type (including but not limited to plans
described in section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ('ERISA')), maintained by the Company, any of its Subsidiaries
or any trade or business, whether or not incorporated (an 'ERISA Affiliate'),
that together with the Company would be deemed a 'controlled group' within the
meaning of section 4001(a)(14) of ERISA, or with respect to which the Company or
any of its Subsidiaries has or may have a liability, other than those listed on
Section 3.9(a) of the Disclosure Schedule (the 'Benefit Plans'). Except as
disclosed in Section 3.9(a) or 5.5(c) of the Disclosure Schedule (or as
otherwise permitted by this Agreement) neither the Company nor any ERISA
Affiliate has any formal plan or commitment, whether legally binding or not, to
create any additional Benefit Plan or modify or change any existing Benefit Plan
that would affect any employee or terminated employee of the Company or any
ERISA Affiliate.
(b) Except as disclosed in Section 3.9(b) of the Disclosure Schedule, with
respect to any Benefit Plan, there are no material amounts accrued but unpaid as
of the most recent balance sheet date that are not reflected on that balance
sheet prepared in accordance with GAAP.
(c) With respect to each Benefit Plan except as disclosed on Schedule
3.9(c) of the Disclosure Schedule: (i) if intended to qualify under section
401(a), 401(k) or 403(a) of the Code, such plan has received, or an application
is pending for, a determination letter from the Service that the Plan so
qualifies, and its trust is exempt from taxation under section 501(a) of the
Code and the Company knows of no event that would prevent such qualification;
(ii) such plan has been administered in all material respects in accordance with
its terms and applicable law; (iii) no breaches of fiduciary duty have occurred;
(iv) no material disputes are pending, or, to the knowledge of the Company,
threatened; (v) no prohibited transaction (within the meaning of section 406 of
ERISA) has occurred; (vi) all contributions and premiums due (including any
extensions for such contributions
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and premiums) have been made in full; (vii) no such Plan has incurred or will
incur any 'accumulated funding deficiency,' as such term is defined in Section
412 of the Code, whether or not waived; (viii) no such Plan provides medical or
death benefits with respect to current or former employees of the Company or any
of its Subsidiaries beyond their termination of employment, other than on an
employee-pay-all basis; and (ix) no Plan is a 'multiemployer plan,' as such term
is defined in section 3(37) of ERISA, or is covered by section 4063 or 4064 of
ERISA.
(d) Except as disclosed on Schedule 3.9(d) of the Disclosure Schedule: (i)
neither the Company nor any ERISA Affiliate has incurred any material liability
under Title IV of ERISA since the effective date of ERISA that has not been
satisfied in full (including sections 4063-4064 and 4069 of ERISA) and, to the
knowledge of the Company, no basis for any such liability exists; (ii) neither
the Company nor any ERISA Affiliate maintains (or contributes to), or has
maintained (or has contributed to) within the last six years, any employee
benefit plan that is subject to Title IV of ERISA (other than a Benefit Plan).
(e) Except as set forth in Section 3.9(e) of the Disclosure Schedule,
Section 5.5(c) of the Disclosure Schedule or to the extent disclosed in the
Company SEC Documents, the consummation of the transactions contemplated by this
Agreement will not entitle any individual to severance pay or accelerate the
time of payment or vesting, or increase the amount, of compensation or benefits
due to any individual with respect to any Benefit Plan. As a result of the
transactions described herein, either alone or together with another event such
as termination of employment, except as set forth in Section 3.9(e) of the
Disclosure Schedule, no party will be required to make a 'parachute payment' to
a 'disqualified individual' within the meaning of Section 280G of the Code.
(f) The Company has delivered or made available to Parent accurate and
complete copies of all plan texts, summary plan descriptions, trust agreements
and other related agreements including all amendments to the foregoing; the two
most recent annual reports; the most recent annual and periodic accounting of
plan assets; the most recent determination letter received from the United
States Internal Revenue Service (the 'Service'); and the two most recent
actuarial reports, to the extent any of the foregoing may be applicable to a
particular Benefit Plan.
Section 3.10 Litigation; Compliance with Law. (a) Except to the extent
disclosed in the Company SEC Documents filed prior to the date of this
Agreement, there is no suit, claim, action, proceeding, review or investigation
pending or, to the knowledge of the Company, threatened against or affecting,
the Company or any of its Subsidiaries which, individually or in the aggregate,
is reasonably likely to have a material adverse effect on the Company and its
Subsidiaries taken as a whole, or would, or would be reasonably likely to,
materially impair the ability of the Company to consummate the Merger or the
other transactions contemplated hereby.
(b) The Company and its Subsidiaries have complied in all material respects
with all laws, statutes, regulations, rules, ordinances, and judgments, decrees,
orders, writs and injunctions, of any court or Governmental Entity relating to
any of the property owned, leased or used by them, or applicable to their
business, including, but not limited to, equal employment opportunity,
discrimination, occupational safety and health, environmental, insurance
regulatory, antitrust laws, ERISA and laws relating to Taxes (as defined in
Section 3.12).
Section 3.11 No Default. Except as disclosed in the Company SEC Documents,
the business of the Company and each of its Subsidiaries is not being conducted
in default or violation of any term, condition or provision of (a) its
respective certificate of incorporation or by-laws or similar organizational
documents, or (b) any Company Agreement, excluding from the foregoing clause
(b), defaults or violations that would not have a material adverse effect on the
Company and its Subsidiaries taken as a whole or would not, or would not be
reasonably likely to, materially impair the ability of the Company to consummate
the Merger or the other transactions contemplated hereby.
Section 3.12 Taxes. Except as set forth in Section 3.12 of the Disclosure
Schedule:
(a) the Company and its Subsidiaries have (I) duly filed (or there have
been filed on their behalf) with the appropriate governmental authorities all
material Tax Returns (as hereinafter defined) required to be filed by them and
such Tax Returns are true, correct and complete, and (II) duly paid in full or
made provision in
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accordance with GAAP (or there has been paid or provision has been made on their
behalf) for the payment of all Taxes (as hereinafter defined) that are due and
payable for all periods ending through the date hereof;
(b) no material federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of the Company or its Subsidiaries;
(c) no governmental authority has asserted in writing against the Company
or any of its Subsidiaries any deficiency or claim for a material amount of
Taxes;
(d) there are no material liens for Taxes upon any property or assets of
the Company or any Subsidiary thereof, except for liens for Taxes not yet due
and payable and liens for Taxes that are being contested in good faith;
(e) the United States federal income Tax Returns of the Company and its
Subsidiaries have been examined by the Service (or the applicable statutes of
limitation for the assessment of federal income Taxes for such periods have
expired) for all periods through and including 1990; and
(f) the Company is not aware of any reason that would preclude it from
executing an opinion representation letter, substantially similar to the form
letter attached hereto as Exhibit A, as of the Effective Time.
'Taxes' shall mean any and all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income, gross
receipts, excise, stamp, real or personal property, ad valorem, sales,
withholding, estimated, social security, unemployment, occupation, use, service,
service use, license, net worth, payroll, franchise, severance, transfer,
recording or other taxes, assessments or charges, imposed by any governmental
authority and any interest, penalties, or additions to tax attributable thereto.
'Tax Return' shall mean any report, return, document, declaration, information,
return, or filing (including any related or supporting information).
Section 3.13 Contracts. Each material Company Agreement is valid, binding
and enforceable and in full force and effect, except where failure to be valid,
binding and enforceable and in full force and effect would not have a material
adverse effect on the Company and its Subsidiaries taken as a whole, and there
are no defaults thereunder, except those defaults that would not have a material
adverse effect on the Company and its Subsidiaries taken as a whole. Neither the
Company nor any Subsidiary is a party to any agreement that expressly and
materially limits the ability of the Company or any Subsidiary to compete in or
conduct any line of business or compete with any person or in any geographic
area or during any period of time.
Section 3.14 Transactions with Affiliates. Except to the extent disclosed
in the Company SEC Documents filed prior to the date of this Agreement, since
January 1, 1993 there have been no material transactions, agreements,
arrangements or understandings between the Company or its Subsidiaries, on the
one hand, and the Company's affiliates (other than wholly-owned Subsidiaries of
the Company) or other Persons, on the other hand, that would be required to be
disclosed under Item 404 of Regulation S-K under the Securities Act.
Section 3.15 Opinion of Financial Advisor. The Company has received an
opinion from Goldman, Sachs & Co. ('Goldman Sachs') to the effect that the
consideration to be received by the stockholders of the Company pursuant to the
Merger, is fair to such stockholders.
Section 3.16 Lincoln National Contract. The Aggregate Excess of Loss
Reinsurance Contract between National Re and Lincoln National Health and
Casualty Insurance Company dated April 30, 1990, a true and complete copy of
which has been delivered to Parent, is in full force and effect and will
continue in effect following the Effective Time, subject to the terms and
conditions of such agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
Section 4.1 Organization. Each of Parent and its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware, and has all requisite corporate or other power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as now being conducted, except where the failure to
be so organized, existing and in good standing or to have such power, authority
and governmental approvals would not have a material adverse effect on Parent
and its Subsidiaries. Parent and each of its Subsidiaries is duly qualified or
licensed to do business and in good standing in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except where the failure
to be so duly qualified or licensed and in good standing would not have a
material adverse effect on Parent and its Subsidiaries taken as a whole. Sub has
not heretofore conducted any business other than in connection with this
Agreement and the transactions contemplated hereby.
Section 4.2 Capitalization. The authorized capital stock of Parent
consists of 270,000,000 shares of capital stock, consisting of 250,000,000
shares of Parent Common Stock and 20,000,000 shares of preferred stock, without
par value (the 'Parent Preferred Stock'). As of June 30, 1996, (i) 78,740,961
shares of Parent Common Stock are issued and outstanding, (ii) approximately
1,724,386 shares of Parent ESOP Convertible Preferred Stock are issued and
outstanding, (iii) 24,086,383 shares of Parent Common Stock are issued and held
in the treasury of Parent, and (iv) not more than 8,000,000 shares of Parent
Common Stock are reserved for option and employee benefit plans of Parent. All
of the outstanding shares of Parent's capital stock are duly authorized, validly
issued, fully paid and non-assessable. There are no bonds, debentures, notes or
other indebtedness having voting rights (or convertible into securities having
such rights) ('Parent Voting Debt') of Parent or any of its Subsidiaries issued
and outstanding.
Section 4.3 Corporate Authorization; Validity of Agreement; Necessary
Action. Each of Parent and Sub has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Parent and Sub
of this Agreement and the consummation by Parent and Sub of the transactions
contemplated hereby have been duly and validly authorized by their respective
Boards of Directors and no other corporate action or proceedings on the part of
Parent and Sub are necessary to authorize the execution and delivery by Parent
and Sub of this Agreement, and the consummation by Parent and Sub of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Parent and Sub, and, assuming this Agreement constitutes a valid
and binding obligation of the Company, constitutes a valid and binding
obligation of each of Parent and Sub, enforceable against each of them in
accordance with their terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. The shares of Parent Common Stock to be
issued pursuant to the Merger will be duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights. No vote of the
stockholders of Parent is necessary for Sub to consummate the Merger.
Section 4.4 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the Securities Act, the
DGCL, the HSR Act, state blue sky laws and any applicable state takeover laws
and insurance regulatory laws and commissions, neither the execution, delivery
or performance of this Agreement by Parent and Sub nor the consummation by
Parent and Sub of the transactions contemplated hereby nor compliance by Parent
and Sub with any of the provisions hereof will (i) conflict with or result in
any breach of any provision of the Certificate of Incorporation or by-laws of
Parent and any of its Subsidiaries, (ii) require any filing with, or permit,
authorization, consent or approval of, any Governmental Entity (except where the
failure to obtain such permits, authorizations, consents or approvals or to make
such filings would not have a material adverse effect on Parent and its
Subsidiaries taken as a whole or would not, or would not be reasonably likely
to, materially impair the
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ability of Parent and Sub to consummate the Merger or the other transactions
contemplated hereby), (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration) under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
guarantee, other evidence of indebtedness, lease, license, contract, agreement
or other instrument or obligation to which Parent or any of its Subsidiaries is
a party or by which any of them or any of their properties or assets may be
bound or (iv) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Parent, any of its Subsidiaries or any of their
properties or assets, except in the case of clauses (iii) and (iv) for
violations, breaches or defaults which would not have a material adverse effect
on Parent and its Subsidiaries taken as a whole or would not, or would not be
reasonably likely to, materially impair the ability of Parent or Sub to
consummate the Merger or the other transactions contemplated hereby.
Section 4.5 SEC Reports and Financial Statements. Parent has filed with
the SEC, and has heretofore made available to the Company true and complete
copies of, all forms, reports, schedules, statements and other documents
required to be filed by it and its Subsidiaries since January 1, 1994 under the
Exchange Act or the Securities Act (as such documents have been amended since
the time of their filing, collectively, the 'Parent SEC Documents'). As of their
respective dates or, if amended, as of the date of the last such amendment, the
Parent SEC Documents, including, without limitation, any financial statements or
schedules included therein (a) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading and (b) complied in all material
respects with the applicable requirements of the Exchange Act and the Securities
Act, as the case may be, and the applicable rules and regulations of the SEC
thereunder. Each of the consolidated financial statements included in the Parent
SEC Documents have been prepared from, and are in accordance with, the books and
records of Parent and/or its consolidated Subsidiaries, comply in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present in all
material respects the consolidated financial position and the consolidated
results of operations and cash flows (and changes in financial position, if any)
of Parent and its consolidated Subsidiaries as at the dates thereof or for the
periods presented therein (subject, in the case of unaudited interim financial
statements, to normal year end adjustments).
Section 4.6 Absence of Certain Changes. Since January 1, 1996, Parent and
its Subsidiaries have conducted their respective businesses in the ordinary
course of business consistent with past practice. Since March 31, 1996, there
has not occurred (i) any events, changes, or effects (including the incurrence
of any liabilities of any nature, whether or not accrued, contingent or
otherwise) having or, which would be reasonably likely to have, individually or
in the aggregate, a material adverse effect on Parent and its Subsidiaries taken
as a whole; (ii) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to the
equity interests of Parent or of any of its Subsidiaries other than regular
quarterly cash dividends or dividends paid by wholly owned Subsidiaries; or
(iii) any change by Parent or any of its Subsidiaries in accounting principles
or methods, except insofar as may be required by a change in GAAP.
Section 4.7 No Undisclosed Liabilities. Except (a) to the extent disclosed
in the Parent SEC Documents filed prior to the date of this Agreement and (b)
for liabilities and obligations incurred in the ordinary course of business
consistent with past practice, since March 31, 1996, neither Parent nor any of
its Subsidiaries has incurred any liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise, that have, or would be
reasonably likely to have, a material adverse effect on Parent and its
Subsidiaries.
Section 4.8 Information in Proxy Statement/Prospectus. The Registration
Statement (or any amendment thereof or supplement thereto), at the date it
becomes effective and at the time of the Company Special Meeting, will 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, provided, however, that no representation is made by Parent or Sub
with respect to statements made therein based on information supplied by the
Company for inclusion in the Proxy Statement/Prospectus or the Registration
Statement. None of the information supplied by Parent or Sub for inclusion or
incorporation by reference in the Proxy Statement/Prospectus will, at the date
mailed to stockholders of the Company and at the time of the Company Special
Meeting, contain any untrue statement of a material fact
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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. Subject to the proviso set forth in the second
preceding sentence, the Registration Statement will comply in all material
respects with the provisions of the Securities Act and the rules and regulations
thereunder.
Section 4.9 Litigation; Compliance with Law.
(a) Except to the extent disclosed in the Parent SEC Documents filed prior
to the date of this Agreement, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of Parent, threatened against or
affecting, Parent or any of its Subsidiaries, which, individually or in the
aggregate, is reasonably likely to have a material adverse effect on Parent and
its Subsidiaries or would, or would be reasonably likely to, materially impair
the ability of Parent to consummate the Merger or the other transactions
contemplated hereby.
(b) Parent and its Subsidiaries have complied in all material respects with
all laws, statutes, regulations, rules, ordinances, and judgments, decrees,
orders, writs and injunctions, of any court or Governmental Entity relating to
any of the property owned, leased or used by them, or applicable to their
business, including, but not limited to, equal employment opportunity,
discrimination, occupational safety and health, environmental, insurance
regulatory, and antitrust laws.
Section 4.10 Taxes.
(a) Parent and its Subsidiaries have (i) duly filed (or there have been
filed on their behalf) with the appropriate governmental authorities all
material Tax Returns required to be filed by them and such Tax Returns are true,
correct and complete, and (ii) duly paid in full or made provision in accordance
with GAAP (or there has been paid or provision has been made on their behalf)
for the payment of all material Taxes due and payable for all periods ending
through the date hereof.
(b) Parent is not aware of any reason that would preclude it from executing
an opinion representation letter on behalf of Parent and Sub, substantially
similar to the form letter attached hereto as Exhibit B, as of the Effective
Time.
Section 4.11 Financing. Either Parent or Sub has, or will have prior to
the consummation of the Merger, sufficient funds available to purchase the
maximum amount of Shares which may be converted into the right to receive the
Cash Consideration in the Merger.
Section 4.12 Opinion of Financial Advisor. Parent has received an opinion
from Morgan Stanley & Co. Incorporated ('Morgan Stanley') dated the date of this
Agreement to the effect that, as of such date, the consideration to be paid by
Parent in the Merger is fair to Parent from a financial point of view, a copy of
which opinion has been delivered to the Company.
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ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The Company covenants and
agrees that, except (i) as expressly provided in this Agreement, (ii) with the
prior written consent of Parent or (iii) as set forth on Section 5.1 of the
Disclosure Schedule, after the date hereof and prior to the Effective Time:
(a) the business of the Company and its Subsidiaries, including,
without limitation, investment practices and policies, shall be conducted
only in the ordinary course of business consistent with past practice and,
each of the Company and its Subsidiaries shall use all reasonable efforts
to preserve its business organization intact and maintain its existing
relations with material customers, retrocessionaires, employees, creditors
and business partners;
(b) the Company will not, directly or indirectly, split, combine or
reclassify the outstanding Company Common Stock, or any outstanding capital
stock of any of the Subsidiaries of the Company;
(c) neither the Company nor any of its Subsidiaries shall: (i) amend
its certificate of incorporation or by-laws or similar organizational
documents; (ii) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its capital
stock other than dividends paid by the Company's wholly-owned Subsidiaries
to the Company or its wholly-owned Subsidiaries and other than ordinary
quarterly cash dividends by the Company not to exceed $.05 per quarter;
(iii) issue, sell, transfer, pledge, dispose of or encumber any additional
shares of, or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares
of capital stock of any class of the Company or its Subsidiaries, other
than issuances pursuant to exercise of stock-based awards outstanding on
the date hereof as disclosed in Section 3.2 hereof or with respect to any
shares issued under the Company's Employee Stock Purchase Plan prior to its
termination in accordance with Section 5.5(e); (iv) transfer, lease,
license, sell, mortgage, pledge, dispose of, or encumber any assets that
are material to the Company and its Subsidiaries taken as a whole other
than sales of investment assets in the ordinary course of business
consistent with past practice; or (v) redeem, purchase or otherwise acquire
directly or indirectly any of its capital stock;
(d) neither the Company nor any of its Subsidiaries shall: (i) grant
any increase in the compensation payable or to become payable by the
Company or any of its Subsidiaries to any officer or employee other than
scheduled annual increases in the ordinary course of business consistent
with past practice in an amount not to exceed 10% for any individual; (ii)
adopt any new, or amend or otherwise increase, or accelerate the payment or
vesting of the amounts payable or to become payable under any existing,
bonus, incentive compensation, deferred compensation, severance, profit
sharing, stock option, stock purchase, insurance, pension, retirement or
other employee benefit plan agreement or arrangement; (iii) enter into any,
or amend any existing, employment, consulting or severance agreement with
or, except in accordance with the existing written policies of the Company,
grant any severance or termination pay to any officer, director or employee
of the Company or any of its Subsidiaries; (iv) make any additional
contributions to any grantor trust created by the Company to provide
funding for non-tax-qualified employee benefits or compensation; or (v)
provide any severance program to any Subsidiary which does not have a
severance program as of the date of this Agreement;
(e) neither the Company nor any of its Subsidiaries shall modify,
amend or terminate any of the material Company Agreements or waive, release
or assign any material rights or claims, except in the ordinary course of
business consistent with past practice;
(f) neither the Company nor any of its Subsidiaries shall permit any
material insurance policy naming it as a beneficiary or a loss payable
payee to be cancelled or terminated, except in the ordinary course of
business consistent with past practice;
(g) neither the Company nor any of its Subsidiaries shall: (i) incur
or assume any debt except for (A) borrowings under existing credit
facilities in an amount not to exceed $10 million; (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person, except
in the ordinary course of business consistent with past
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practice; (iii) make any loans, advances or capital contributions to, or
investments in, any other person (other than to wholly owned Subsidiaries
of the Company or customary loans or advances to employees in accordance
with past practice and other than as to such matters related to the
Company's or any of its Subsidiaries' investment portfolios in the ordinary
course of business consistent with past practice); or (iv) enter into any
material commitment (including, but not limited to, any capital expenditure
or purchase of assets) other than in the ordinary course of business
consistent with past practice;
(h) neither the Company nor any of its Subsidiaries shall change any
of the accounting principles used by it unless required by Statutory
Accounting Principles or GAAP;
(i) neither the Company nor any of its Subsidiaries shall pay,
discharge or satisfy any material claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction of any such claims, liabilities
or obligations, (x) reflected or reserved against in, or contemplated by,
the consolidated financial statements (or the notes thereto) of the Company
and its consolidated Subsidiaries, (y) incurred in the ordinary course of
business consistent with past practice or (z) which are legally required to
be paid, discharged or satisfied;
(j) neither the Company nor any of its Subsidiaries will adopt a plan
of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other material reorganization of the
Company or any of its Subsidiaries or any agreement relating to a Takeover
Proposal (as defined in Section 5.6) (other than the Merger) other than
confidentiality agreements as provided in Section 5.6(a);
(k) neither the Company nor any of its Subsidiaries will engage in any
transaction with, or enter into any agreement, arrangement, or
understanding with, directly or indirectly, any of the Company's
affiliates, including, without limitation, any transactions, agreements,
arrangements or understandings with any affiliate or other Person covered
under Item 404 of Regulation S-K under the Securities Act that would be
required to be disclosed under such Item 404 other than such transactions
of the same general nature, scope and magnitude as are disclosed in the
Company SEC Documents;
(l) except upon the prior written consent of Parent, the Company shall
not make any Tax election that would have a material adverse effect on the
Company or any of its Subsidiaries, except in the ordinary course of
business consistent with past practice; and
(m) neither the Company nor any of its Subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing,
or to authorize, recommend, propose or announce an intention to do any of
the foregoing.
Section 5.2 Interim Operations of Parent. Parent covenants and agrees
that, except (i) as expressly provided in this Agreement, or (ii) with the prior
written consent of the Company, after the date hereof and prior to the Effective
Time:
(a) the business of Parent and its Subsidiaries, including, without
limitation, investment practices and policies, shall be conducted in the
ordinary course of business consistent with past practice;
(b) Parent will not, directly or indirectly, split, combine or
reclassify the outstanding Parent Common Stock;
(c) Parent will not: (i) amend its certificate of incorporation or
by-laws; or (ii) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its capital
stock except for quarterly cash dividends consistent in amount and timing
with past practice, provided that Parent may increase its dividend rate
consistent with prior practice;
(d) neither Parent nor any of its Subsidiaries shall change any of the
accounting principles used by it unless required by GAAP or Statutory
Accounting Principles; and
(e) neither Parent nor any of its Subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing,
or to authorize, recommend, propose or announce an intention to do any of
the foregoing.
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Section 5.3 Access to Information. (a) The Company shall (and shall cause
each of its Subsidiaries to) afford to the officers, employees, accountants,
counsel, financing sources and other representatives of Parent, reasonable
access, during normal business hours, during the period prior to the Effective
Time, to all of its and its Subsidiaries' properties, books, contracts,
commitments and records (including any Tax Returns or other Tax related
information pertaining to the Company and its Subsidiaries) and, during such
period, the Company shall (and shall cause each of its Subsidiaries to) furnish
promptly to Parent (a) a copy of each report, schedule, registration statement
and other document filed or received by it during such period pursuant to the
requirements of the federal securities laws or any insurance regulatory laws and
(b) all other information concerning its business, properties and personnel as
Parent may reasonably request (including any Tax Returns or other Tax related
information pertaining to the Company and its Subsidiaries). Parent will hold
any such information which is nonpublic in confidence in accordance with the
provisions of the existing confidentiality agreement between the Company and
Parent, dated June 27, 1996 (the 'Confidentiality Agreement').
Section 5.4 Consents and Approvals. (a) Each of the Company, Parent and
Sub will take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on it with respect to this Agreement and the
transactions contemplated hereby which actions shall include, without
limitation, furnishing all information in connection with approvals of or
filings with any Governmental Entity, including, without limitation, any
schedule, or reports required to be filed with the SEC, and will promptly
cooperate with and furnish information to each other in connection with any such
requirements imposed upon any of them or any of their Subsidiaries in connection
with this Agreement and the transactions contemplated hereby. Each of the
Company, Parent and Sub will, and will cause its Subsidiaries to, take all
reasonable actions necessary to obtain any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity or other public or
private third party, required to be obtained or made by Parent, Sub, the Company
or any of their Subsidiaries in connection with the Merger or the taking of any
action contemplated thereby or by this Agreement.
Section 5.5 Employee Matters.
(a) Benefit Plans. After the Effective Time, Parent shall either continue
the existing Benefit Plans of the Company or shall provide, or cause Sub to
provide, benefits to employees of the Company and its Subsidiaries that are no
less favorable in the aggregate to such employees than those provided under the
'Parent Benefit Plans' (as defined below) (as they may be amended from time to
time) to similarly situated employees of Parent and its Subsidiaries. 'Parent
Benefit Plan' means any material employee or director benefit plan, arrangement,
practice, contract or agreement of any type (including but not limited to a plan
described in Section 3(3) of ERISA), maintained by Parent or General Reinsurance
Corporation, Parent's wholly owned Subsidiary.
(b) Service Credit. With respect to any Parent Benefit Plan which is an
'employee benefit plan' as defined in Section 3(3) of ERISA, for purposes of
determining eligibility to participate, vesting, and entitlement to benefits,
including for severance benefits, vacation entitlement and service awards (but
not for accrual of pension benefits), service with the Company or any Subsidiary
shall be treated as service with Parent or its Subsidiaries; provided, however,
that such service shall not be recognized to the extent that such recognition
would result in a duplication of benefits. Such service also shall apply for
purposes of satisfying any waiting periods, evidence of insurability
requirements, or the application of any preexisting condition limitations.
Company employees shall be given credit for amounts paid under a corresponding
benefit plan during the same period for purposes of applying deductibles,
copayments and out-of-pocket maximums as though such amounts had been paid in
accordance with the terms and conditions of the Parent Plan.
(c) Severance and Stay Protection Plan. At or before the Effective Time,
the Company shall adopt a severance and stay protection plan, the substantive
terms of which are set forth on Section 5.5(c) in the Disclosure Schedule. From
and after the Effective Time, Parent shall cause Sub to honor such plan in
accordance the terms thereof.
(d) Third Party Beneficiary. For one year following the Effective Time,
the provisions of this Section 5.5 are intended for the benefit of, and shall be
enforceable by, the continuing employees of the Company and its subsidiaries.
(e) Promptly following the date hereof but in no event later than August 1,
1996, Parent and the Company shall cooperate to cause the termination as soon as
practicable, of the Company's Employee Stock Purchase Plan.
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Section 5.6 No Solicitation. (a) The Company (and its Subsidiaries and
affiliates) will not, and the Company (and its Subsidiaries and affiliates) will
use their reasonable best efforts to ensure that their respective officers,
directors, employees, investment bankers, attorneys, accountants and other
agents do not, directly or indirectly: (i) initiate, solicit or encourage, or
(except to the extent permitted by clause (ii) below) take any action to
facilitate the making of, any offer or proposal which constitutes or is
reasonably likely to lead to any Takeover Proposal (as defined below) of the
Company or any Subsidiary or an inquiry with respect thereto, or, (ii) in the
event of an unsolicited bona fide Takeover Proposal for the Company or any
Subsidiary of the Company, engage in negotiations or discussions with, or
provide any information or data to, any corporation, partnership, person or
other entity or group (other than Parent, Sub or any of their affiliates or
representatives) ('Person') relating to any Takeover Proposal, except in the
case of clause (ii) above, to the extent that the Company's Board of Directors
determines, after having received the advice of outside legal counsel to the
Company and the advice of the Company's financial advisor, that the failure to
engage in such negotiations or discussions or provide such information is
reasonably likely to result in a breach of the Board of Directors' fiduciary
duties under applicable law; provided, however, that notwithstanding the
foregoing, the Company's Board of Directors may take, and disclose to the
Company's stockholders a position contemplated by Rules for 14d-9 and 14e-2
promulgated under the Exchange Act with respect to any tender offer for shares
of capital stock of the Company. Prior to furnishing any information to any such
Person making a Takeover Proposal, the Company shall have obtained a
confidentiality agreement from such Person substantially similar to the
Confidentiality Agreement. The Company shall notify Parent of any such offers,
proposals, inquiries or Takeover Proposals (including, without limitation, the
material terms and conditions thereof and the identity of the Person making it),
within 24 hours of the receipt thereof, and shall provide Parent with a copy of
any written Takeover Proposal or amendments or supplements thereto, and shall
thereafter inform Parent on a reasonable basis of the status of any discussions
or negotiations with such a third party, and any material changes to the terms
and conditions of such Takeover Proposal, and shall promptly give Parent a copy
of any information delivered to such Person which has not previously been
reviewed by Parent. The Company shall, and shall cause its Subsidiaries and
affiliates, and their respective officers, directors, employees, investment
bankers, attorneys, accountants and other agents to, immediately cease and cause
to be terminated all discussions and negotiations that have taken place prior to
the date hereof, if any, with any parties conducted heretofore with respect to
any Takeover Proposal relating to the Company and shall not renew any such
discussions or negotiations unless permitted by the first sentence of clause
(a)(ii) of this Section 5.6.
(b) As used in this Agreement, 'Takeover Proposal' shall mean any tender or
exchange offer involving the capital stock of the Company, any proposal for a
merger, consolidation or other business combination involving the Company, any
proposal or offer to acquire in any manner a substantial equity interest in, or
a substantial portion of the business or assets of, the Company or any
Subsidiary of the Company, any proposal or offer with respect to any
recapitalization or restructuring with respect to the Company or any Subsidiary
of the Company or any proposal or offer with respect to any other transaction
similar to any of the foregoing with respect to the Company or any Subsidiary of
the Company other than pursuant to the transactions to be effected pursuant to
this Agreement.
Section 5.7 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its best efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable, whether under applicable laws and
regulations or otherwise, or to remove any injunctions or other impediments or
delays, legal or otherwise, to consummate and make effective the Merger and the
other transactions contemplated by this Agreement. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of the Company,
Parent and Sub shall use their best efforts to take, or cause to be taken, all
such necessary actions.
Section 5.8 Publicity. So long as this Agreement is in effect, neither the
Company nor Parent nor their affiliates shall issue or cause the publication of
any press release or other public statement or announcement with respect to this
Agreement or the transactions contemplated hereby without prior consultation
with the other party, except as may be required by law or by obligations
pursuant to any listing agreement with a national securities exchange, and in
such case shall use all reasonable efforts to consult with the other party prior
to such release or announcement being issued.
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Section 5.9 Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(a) the occurrence, or non-occurrence of any event the occurrence or
non-occurrence of which would cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at or prior to
the Effective Time and (b) any material failure of the Company or Parent, as the
case may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.9 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
Section 5.10 Directors' and Officers' Insurance and
Indemnification. Parent agrees that at all times after the Effective Time, it
shall indemnify each person who is now, or has been at any time prior to the
date hereof, a director or officer of the Company or of any of the Company's
Subsidiaries or person entitled to indemnification (individually an 'Indemnified
Party' and collectively the 'Indemnified Parties'), to the same extent and in
the same manner as is now provided in the respective charters or by-laws of the
Company and such Subsidiaries or otherwise in effect on the date hereof, with
respect to any claim, liability, loss, damage, cost or expense (whenever
asserted or claimed) ('Indemnified Liability') based in whole or in part on, or
arising in whole or in part out of, any matter existing or occurring at or prior
to the Effective Time. The Indemnified Parties shall be entitled to advancement
of expenses provided such Indemnified Party provides Parent with an undertaking
to reimburse Parent in a form comparable to the undertaking provided for by the
DGCL. Parent shall, or shall cause the Surviving Corporation to, maintain in
effect for not less than six (6) years after consummation of the Merger the
current policies of directors' and officers' liability insurance maintained by
the Company and its Subsidiaries on the date hereof (provided that Parent may
substitute therefor policies having at least the same coverage and containing
terms and conditions which are no less advantageous to the persons currently
covered by such policies and with carriers comparable to the Company's existing
carriers in terms of creditworthiness) with respect to matters existing or
occurring at or prior to the Effective Time. Promptly after receipt by an
Indemnified Party of notice of the assertion (an 'Assertion') of any claim or
the commencement of any action against him or her in respect to which indemnity
or reimbursement may be sought against Parent, the Company, the Surviving
Corporation or a Subsidiary of the Company or the Surviving Corporation
('Indemnitors') hereunder, such Indemnified Party shall notify any Indemnitor in
writing of the Assertion, but the failure to so notify any Indemnitor shall not
relieve any Indemnitor of any liability it may have to such Indemnified Party
hereunder except where such failure shall have materially prejudiced Indemnitor
in defending against such Assertion. No Indemnified Party shall settle any
Assertion without the prior written consent of Parent provided, however, that if
Parent withholds such consent, then Parent shall provide the Indemnified Party
reasonable assurances that it shall honor the indemnification provisions of this
Section 5.10. The provisions of this Section 5.10 are intended for the benefit
of, and shall be enforceable by, the respective Indemnified Parties.
Section 5.11 Rule 145 Affiliates. At least 30 days prior to the Closing
Date, the Company shall deliver to Parent a letter identifying, to the best of
the Company's knowledge, all persons who are, at the time of the Company Special
Meeting, deemed to be 'affiliates' of the Company for purposes of Rule 145 under
the Securities Act ('Company Affiliates'). The Company shall use all reasonable
efforts to cause each Person who is identified as a Company Affiliate to deliver
to Parent prior to the Closing Date an agreement substantially in the form of
Exhibit C to this Agreement.
Section 5.12 Proxy Statement/Prospectus. As soon as practicable following
the date of this Agreement, Parent and the Company shall prepare and file with
the SEC the Proxy Statement/Prospectus and each shall use all reasonable efforts
to have the Proxy Statement/Prospectus cleared by the SEC as promptly as
practicable. As soon as practicable following such clearance, Parent shall
prepare and file with the SEC the Registration Statement, of which the Proxy
Statement/Prospectus will form a part, and shall use its best efforts to have
the Registration Statement declared effective by the SEC as promptly as
practicable thereafter. Parent and the Company shall cooperate with each other
in the preparation of the Proxy Statement/Prospectus, and each will provide to
the other promptly copies of all correspondence between it or any of its
representatives and the SEC. Each of the Company and Parent shall furnish all
information concerning it required to be included in the Registration Statement
and the Proxy Statement/Prospectus, and as promptly as practicable after the
effectiveness of the Registration Statement, the Proxy Statement/Prospectus will
be mailed to the stockholders of the Company. No amendment or supplement to the
Registration Statement or the Proxy Statement/Prospectus will be made without
the approval of each of the Company and Parent, which approval will not be
unreasonably
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withheld or delayed. Each of the Company and Parent will advise the other
promptly after it receives notice thereof, of the time when the Registration
Statement has become effective or any amendment thereto or any supplement or
amendment to the Proxy Statement/Prospectus has been filed, or the issuance of
any stop order, or the suspension of the qualification of the Parent Common
Stock to be issued in the Merger for offering or sale in any jurisdiction, or of
any request by the SEC or the NYSE for amendment of the Registration Statement
or the Proxy Statement/Prospectus.
Section 5.13 Tax-Free Reorganization. The parties intend the transaction
to qualify as a reorganization under Section 368(a) of the Code; each party and
its affiliates shall use all reasonable efforts to cause the Merger so to
qualify; and neither party nor any affiliate shall take any action, including
any transfer or other disposition of assets or any interest in the Company after
the Closing, that would cause the Merger not to qualify as a reorganization
under Section 368(a) of the Code. Parent shall report the Merger for income tax
purposes as a reorganization within the meaning of section 368(a) of the Code
and any comparable state or local tax statute.
Section 5.14 Existing Stockholder Agreements and Registration Rights
Agreement. The Company will cooperate to terminate or cause to be terminated,
prior to the Effective Time, the Amended and Restated Management Stockholder
Agreement, dated as of February 5, 1992, and the Stockholders Agreement dated as
of February 5, 1992, by and among Lincoln National Corporation, Keystone, Inc.,
Acadia Partners, L.P. and the persons listed on Schedule A thereto. The Company
will cooperate to cause the Amended and Restated Investor Stockholders
Agreement, dated as of February 5, 1992, to remain in full force and effect
until the Company Stockholder Meeting and to terminate such Agreement
immediately following such Meeting. The Company will suspend all sales under the
shelf Registration Statement filed pursuant to the Registration Rights Agreement
('Registration Rights Agreement') by and among the Company Keystone, Inc.,
Acadia Partners, L.P. and the other stockholders of the Company named therein at
least one business day prior to the Closing Date and will cause the Registration
Rights Agreement not to have any application to any securities of Parent or its
Subsidiaries following the Effective Time.
Section 5.15 Stock Exchange Listing. Parent shall use all reasonable
efforts to cause the shares of Parent Common Stock issued in the Merger and the
shares of Parent Common Stock to be reserved for issuance upon exercise of the
Parent Stock Options to be approved for listing on the NYSE prior to the Closing
Date.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to the Obligations of Each Party. The obligations
of the Company, on the one hand, and Parent, and Sub, on the other hand, to
consummate the Merger are subject to the satisfaction (or, if permissible,
waiver by the party for whose benefit such conditions exist) of the following
conditions:
(a) this Agreement shall have been adopted by the stockholders of the
Company in accordance with the DGCL;
(b) no court, arbitrator or governmental body, agency or official
shall have issued any order, decree or ruling and there shall not be any
statute, rule or regulation, restraining, enjoining or prohibiting the
consummation of the Merger;
(c) the Registration Statement shall have become effective under the
Securities Act and no stop order suspending effectiveness of the
Registration Statement shall have been issued and no proceeding for that
purpose shall have been initiated or threatened by the SEC;
(d) any waiting period applicable to the Merger under the HSR Act
shall have expired or been terminated; and
(e) all actions by or in respect of or filing or any governmental
body, agency, official, or authority required to permit the consummation of
the Merger (including insurance regulatory commission approvals) shall have
been obtained and such approval shall be in full force and effect.
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Section 6.2 Conditions to the Obligations of Parent and Sub. The
obligations of Parent and Sub to consummate the Merger are subject to the
satisfaction (or waiver by Parent) of the following further conditions:
(a) the representations and warranties of the Company shall have been
true and accurate as of the Effective Time as if made at and as of such
time (except for those representations and warranties that address matters
only as of a particular date or only with respect to a specific period of
time which need only be true and accurate as of such date or with respect
to such period), except where the failure of such representations and
warranties to be so true and correct (without giving effect to any
limitation as to 'materiality' or 'material adverse effect' set forth
therein), would not have, and is not reasonably likely to have,
individually or in the aggregate, a material adverse effect on the Company
and its Subsidiaries taken as a whole;
(b) the Company shall have performed in all material respects its
obligations hereunder required to be performed by it at or prior to the
Effective Time;
(c) since March 31, 1996, except as set forth in Section 3.6 of the
Disclosure Schedule, there shall not have occurred any event, change or
effect having, or which would be reasonably likely to have, in the
aggregate, a material adverse effect on the Company and its Subsidiaries,
taken as a whole (other than changes in insurance laws and regulations
affecting the reinsurance industry generally); and
(d) Parent shall have received an opinion of nationally recognized tax
counsel to Parent, to the effect that the Merger will qualify as a
reorganization within the meaning of Section 368 of the Code and in
rendering such opinion tax counsel may rely upon representations provided
by the parties hereto as well as certain stockholders of the Company.
Section 6.3 Conditions to the Obligations of the Company. The obligations
of the Company to consummate the Merger are subject to the satisfaction (or
waiver by the Company) of the following further conditions:
(a) the representations and warranties of Parent and Sub shall be true
and accurate as of the Effective Time as if made at and as of such time
(except for those representations and warranties that address matters only
as of a particular date or only with respect to a specific period of time
which need only be true and accurate as of such date or with respect to
such period), except where the failure of such representations and
warranties to be so true and correct (without giving effect to any
limitation as to 'materiality' or 'material adverse effect' set forth
therein), would not have, and is not reasonably likely to have,
individually or in the aggregate, a material adverse effect on Parent and
its Subsidiaries;
(b) each of Parent and Sub shall have performed in all material
respects all of the respective obligations hereunder required to be
performed by Parent or Sub, as the case may be, at or prior to the
Effective Time;
(c) the Parent Common Stock to be issued in the Merger shall have been
approved for listing on the New York Stock Exchange, subject to official
notice of issuance;
(d) since March 31, 1996, there shall not have occurred any event,
change or effect having, or which would be reasonably likely to have,
individually or in the aggregate, a material adverse effect on Parent and
its Subsidiaries, taken as a whole (other than changes in insurance laws
and regulations affecting the reinsurance industry generally);
(e) the Company shall have received an opinion of nationally
recognized tax counsel to the Company, to the effect that the Merger will
qualify as a reorganization within the meaning of Section 368(a) of the
Code and in rendering such opinion tax counsel may rely upon
representations provided by the parties hereto as well as certain
stockholders of the Company; and
(f) the Average Parent Share Price shall not be less than $125 per
share.
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ARTICLE VII
TERMINATION
Section 7.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the Merger contemplated
herein may be abandoned at any time prior to the Effective Time, whether before
or after stockholder approval thereof:
(a) By the mutual consent of the Board of Directors of Parent and the Board
of Directors of the Company;
(b) By either of the Board of Directors of the Company or the Board of
Directors of Parent:
(i) if the Merger shall not have occurred on or prior to December 31,
1996; provided, however, that the right to terminate this Agreement under
this Section 7.1(b)(i) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Merger to occur on or prior to such date;
or
(ii) if any Governmental Entity shall have issued an order, decree or
ruling or taken any other action (which order, decree, ruling or other
action the parties hereto shall use their best efforts to lift), in each
case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling
or other action shall have become final and non-appealable;
(c) By the Board of Directors of the Company:
(i) if the Board of Directors of the Company shall have (A) withdrawn,
or modified or changed in a manner adverse to Parent or Sub its approval or
recommendation of this Agreement or the Merger in order to approve and
permit the Company to execute a definitive agreement relating to a Takeover
Proposal, and (B) determined, after having received the advice of outside
legal counsel to the Company and the advice of the Company's financial
advisor, that the failure to take such action as set forth in the preceding
clause (A) is reasonably likely to result in a breach of the Board of
Directors' fiduciary duties under applicable law; provided, however, that
the Company shall have given Parent and Sub forty-eight (48) hours advance
notice of any termination pursuant to this Section 7.1(c)(i) and that the
Company shall have paid Parent the fees and expenses required by Section
8.1(b) hereof;
(ii) if Parent or Sub (x) breaches or fails in any material respect to
perform or comply with any of its material covenants and agreements
contained herein or (y) breaches its representations and warranties in any
material respect and such breach would have or would be reasonably likely
to have a material adverse effect on Parent and its Subsidiaries, in each
case such that the conditions set forth in Section 6.1 or Section 6.3 would
not be satisfied; provided, however, that if any such breach is curable by
the breaching party through the exercise of the breaching party's best
efforts and for so long as the breaching party shall be so using its best
efforts to cure such breach, the Company may not terminate this Agreement
pursuant to this Section 7.1(c)(ii); or
(iii) if the Company fails to obtain the required approval of its
stockholders at the Company Special Meeting and the Company shall have paid
Parent any fees and expenses required by Section 8.1(b) hereof.
(d) By the Board of Directors of Parent:
(i) if the Company (x) breaches or fails in any material respect to
perform or comply with any of its material covenants and agreements
contained herein or (y) breaches its representations and warranties in any
material respect and such breach would have or would be reasonably likely
to have a material adverse effect on the Company and its Subsidiaries, in
each case such that the conditions set forth in Section 6.1 or Section 6.2
would not be satisfied; provided, however, that if any such breach is
curable by the Company through the exercise of the Company's best efforts
and for so long as the Company shall be so using its best efforts to cure
such breach, Parent may not terminate this Agreement pursuant to this
Section 7.1(d)(i);
(ii) if (A) the Board of Directors of the Company shall have
withdrawn, or modified or changed in a manner adverse to Parent or Sub its
approval or recommendation of this Agreement or the Merger or shall have
recommended a Takeover Proposal or other business combination, or the
Company shall have entered into an agreement in principle (or similar
agreement) or definitive agreement providing for a Takeover
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Proposal or other business combination with a person or entity other than
Parent, Sub or their Subsidiaries (or the Board of Directors of the Company
resolves to do any of the foregoing), or (B) prior to the certification of
the vote of the Company's stockholders to approve the Merger at the Company
Special Meeting, it shall have been publicly disclosed or Parent or Sub
shall have learned that any person, entity or 'group' (as that term is
defined in Section 13(d)(3) of the Exchange Act) (an 'Acquiring Person'),
other than Parent or its Subsidiaries or the Stockholders, shall have
acquired beneficial ownership (determined pursuant to Rule 13d-3
promulgated under the Exchange Act) of more than 40% of any class or series
of capital stock of the Company (including the Shares), through the
acquisition of stock, the formation of a group or otherwise, or shall have
been granted any option, right or warrant, conditional or otherwise, to
acquire beneficial ownership of more than 40% of any class or series of
capital stock of the Company (including the Shares) other than as disclosed
in a Schedule 13D on file with the SEC on the date hereof; or
(iii) if the stockholders of the Company do not approve the Merger at
the Company Special Meeting.
Section 7.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 7.1, written notice thereof shall forthwith be
given to the other party or parties specifying the provision hereof pursuant to
which such termination is made, and this Agreement shall forthwith become null
and void, and there shall be no liability on the part of Parent, Sub or the
Company except (A) for fraud or for willful breach of this Agreement and (B) as
set forth in Sections 8.1 and 8.2 hereof and in the last sentence of Section
5.3.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses. (a) Except as set forth in Section 8.1(b)
and except for expenses incurred in connection with printing the Proxy
Statement/Prospectus and the Registration Statement, as well as the filing fees
relating thereto, which costs shall be shared equally by Parent and the Company,
all costs and expenses incurred in connection with this Agreement and the
consummation of the transactions contemplated hereby shall be paid by the party
incurring such expenses.
(b) If (w) the Board of Directors of the Company shall terminate this
Agreement pursuant to Section 7.1(c)(i) hereof, (x) the Board of Directors of
Parent shall terminate this Agreement pursuant to Section 7.1(d)(ii), (y) the
Board of Directors of Parent shall terminate this Agreement pursuant to Section
7.1(d)(iii) hereof or the Board of Directors of the Company shall have
terminated this Agreement pursuant to Section 7.1(c)(iii) and in either case
there shall have been made or commenced a Takeover Proposal (other than the
Merger) with respect to the Company, or (z) the Board of Directors of Parent
shall terminate this Agreement pursuant to Section 7.1(d)(i) and within one year
of such termination, a Person shall acquire or beneficially own a majority of
the then outstanding Shares or shall have obtained majority representation on
the Company's Board of Directors or shall enter into a definitive agreement with
the Company with respect to a Takeover Proposal or similar business combination
(each such case of termination being referred to as a 'Trigger Event'), then the
Company shall pay to Parent (not later than the date of termination of this
Agreement in the case of clauses (w), (x) and (y) above) $25 million in cash.
Section 8.2 Finders' Fees. (a) Except for Morgan Stanley, whose fees will
be paid by Parent, there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of
Parent or any of its Subsidiaries who might be entitled to any fee or commission
from Parent or any of its Subsidiaries upon consummation of the transactions
contemplated by this Agreement.
(b) Except for Goldman Sachs, a copy of whose engagement agreement has been
provided to Parent and whose fees will be paid by the Company, 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 of its Subsidiaries
who might be entitled to any fee or commission from the Company or any of its
Subsidiaries upon consummation of the transactions contemplated by this
Agreement.
Section 8.3 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented in any and all respects,
whether before or after any vote of the stockholders of the Company contemplated
hereby, by written agreement of the parties hereto, pursuant to action taken by
their
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respective Boards of Directors, at any time prior to the Closing Date with
respect to any of the terms contained herein; provided, however, that after the
approval of this Agreement by the stockholders of the Company, no such
amendment, modification or supplement shall reduce or change the consideration
to be received by the Company's stockholders in the Merger.
Section 8.4 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any schedule, instrument
or other document delivered pursuant to this Agreement shall survive the
Effective Time.
Section 8.5 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or sent by an overnight courier service, such as FedEx, to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent or Sub, to:
General Re Corporation
695 East Main Street
Stamford, CT 06904
Attention: Charles F. Barr, Esq.
General Counsel
Telephone No.: (203) 328-5506
Telecopy No.: (203) 328-5877
with a copy to:
James C. Freund, Esq.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone No.: (212) 735-3000
Telecopy No.: (212) 735-2001
and
(b) if to the Company, to:
National Re Corporation
777 Long Ridge Road
Stamford, CT 06904
Attention: Mary Ellen Burns, Esq.
General Counsel
Telephone No.: (203) 329-5391
Telecopy No.: (203) 329-5220
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Matthew Nimetz, Esq.
Telephone No.: (212) 373-3000
Telecopy No.: (212) 757-3990
Section 8.6 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words 'include', 'includes' or
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<PAGE>
'including' are used in this Agreement they shall be deemed to be followed by
the words 'without limitation'. The phrase 'made available' in this Agreement
shall mean that the information referred to has been made available if requested
by the party to whom such information is to be made available. The phrases 'the
date of this Agreement', 'the date hereof', and terms of similar import, unless
the context otherwise requires, shall be deemed to refer to July 1, 1996. As
used in this Agreement, the term 'affiliate(s)' shall have the meaning set forth
in Rule l2b-2 of the Exchange Act.
Section 8.7 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 8.8 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement and the Confidentiality Agreement (including the
exhibits hereto and the documents and the instruments referred to herein and
therein): (a) constitute the entire agreement and supersede all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Sections 5.5 (as provided
therein) and 5.10 with respect to the obligations of Parent thereunder, are not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
Section 8.9 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against its regulatory policy,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
Section 8.10 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to the remedy of specific performance of the terms hereof, in addition
to any other remedy at law or equity.
Section 8.11 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without giving effect to
the principles of conflicts of law thereof.
Section 8.12 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned Subsidiary of Parent; provided,
however, that no such assignment shall relieve Parent from any of its
obligations hereunder. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
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<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized as of the
date first written above.
GENERAL RE CORPORATION
By: /S/ JAMES E. GUSTAFSON
Name: James E. Gustafson
Title: President and Chief
Operating Officer
N ACQUISITION CORPORATION
By: /s/ JOSEPH P. BRANDON
Name: Joseph P. Brandon
Title: Vice President
NATIONAL RE CORPORATION
By: /s/ WILLIAM D. WARREN
Name: William D. Warren
Title: President, Chief Executive
Officer and Chairman of the Board
I-30
<PAGE>
EXHIBIT A
TO MERGER
AGREEMENT
FORM OF COMPANY TAX OPINION REPRESENTATION LETTER
, 1996
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Dear Sirs:
On behalf of the Company, the undersigned, in connection with the opinions
to be delivered by you pursuant to Section 6.2(e) and 6.3(e) of the Agreement
and Plan of Merger dated as of July , 1996, among Parent, Sub and the
Company,* hereby certifies that, to the extent the facts relate to the Company,
to his knowledge and after due diligence, and to the extent otherwise (including
with respect to matters involving Sub) without knowledge to the contrary, the
descriptions of the facts contained in the Proxy Statement/Prospectus and
Registration Statement, dated , 1996, relating to the proposed Merger
of the Company into Sub completely and accurately describe the Merger and the
transactions leading up thereto and further that:
1. The Merger will be consummated in compliance with the terms of the
Agreement and Plan of Merger, and none of the material terms and conditions
therein have been or, except as scheduled, will have been, waived or
modified.
2. The fair market value of the Parent Common Stock and Cash
Consideration received by each Company shareholder will be approximately
equal to the fair market value of the Company Common Stock surrendered in
the exchange and was arrived at through arm's length negotiation.
3. There is no intercorporate indebtedness existing between Parent and
the Company or between Sub and the Company that was issued, acquired, or
will be settled at a discount.
4. The Company is not an investment Company as defined in section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.
5. At the Effective Time, Sub will acquire at least 90 percent of the
fair market value of the net assets and at least 70 percent of the fair
market value of the gross assets held by the Company immediately prior to
the Merger. For purposes of this representation, amounts used by the
Company to pay its reorganization expenses and dissenters and to make all
redemptions and distributions (except for regular, normal dividends) made
by the Company immediately preceding the transfer will be included as
assets of the Company held immediately prior to the Merger.
6. Following the Merger, Sub will continue the historic business of
the Company or use a significant portion of the Company's business assets
in a business.
7. The payment of cash in lieu of fractional shares of Parent Common
Stock does not represent separately bargained-for consideration.
- ------------------
* For purposes of this certificate, capitalized terms used and not otherwise
defined herein shall have the meaning ascribed thereto in the Agreement and
Plan of Merger.
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<PAGE>
8. None of the compensation received (or to be received) by any
shareholder-employee of the Company will be separate consideration for, or
allocable to, any of his shares of Company Common Stock. None of the Parent
Common Stock received by any shareholder-employee of the Company pursuant
to the Merger will be separate consideration for, or allocable to, any
employment agreement or arrangement. The compensation paid to any
shareholder-employee of the Company will be commensurate with amounts that
would be paid to a third party bargaining at arm's length for similar
services.
9. The Company, the Parent, Sub and the shareholders of the Company
will each pay their respective expenses, if any, incurred in connection
with the Merger and the transactions related thereto.
10. On the date hereof, there is no plan or intention on the part of
the shareholders of the Company who own 5 percent or more of the Common
Stock of the Company and, to the best knowledge of the management of the
Company, there is no plan or intention on the part of the remaining
shareholders of the Company, to sell, exchange or dispose otherwise of a
number of shares of Parent Common Stock received in the Merger that would
reduce such Company shareholders' ownership of Parent Common Stock to a
number of shares having a value, as of the date of the Merger, of less than
50 percent of the value of all of the formerly outstanding Company Common
Stock as of the same date. For purposes of this representation, shares of
Company Common Stock exchanged for cash or other property in the Merger,
surrendered by dissenters or exchanged for cash in lieu of fractional
shares of Parent Common Stock will be treated as outstanding Company Common
Stock on the date of the Merger. In addition, and not in limitation of the
foregoing, the Company has considered, in making this representation, any
shares of Company Common Stock that have been sold, redeemed or otherwise
disposed of by shareholders who own 5 percent or more of the Company Common
Stock, or by shareholders who are officers or directors of the Company,
after the announcement of the Merger and prior to the Effective Time, to
the extent the management of the Company has knowledge on the date hereof
of any such sales, redemptions or dispositions. Except as set forth on
Annex I to this letter, to the knowledge of the management of the Company,
there are not shareholders who own 5 percent or more of the Company Common
Stock on the date hereof.
11. The liabilities of the Company assumed by Sub and the liabilities
to which the transferred assets of the Company are subject were incurred by
the Company in the ordinary course of its business.
12. The fair market value of the assets of the Company transferred to
Sub will equal or exceed the sum of the liabilities assumed by Sub, plus
the amount of liabilities, if any, to which the transferred assets are
subject.
13. The Company is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of section 368(a)(3)(A) of the Internal
Revenue Code.
I understand that Paul, Weiss, Rifkind, Wharton & Garrison, as counsel for
the Company, and Skadden, Arps, Slate, Meagher & Flom, as counsel for Parent and
Sub, will rely on this certificate in rendering their respective opinions
concerning certain of the federal income tax consequences of the Merger and
hereby commit to inform them if, for any reason, any of the foregoing
representations ceases to be true prior to the Effective Time.
NATIONAL RE CORPORATION
By:___________________________________
Name:
Title:
I-32
<PAGE>
EXHIBIT B
TO MERGER
AGREEMENT
FORM OF PARENT TAX OPINION REPRESENTATION LETTER
,1996
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Dear Sirs:
On behalf of Parent and Sub, the undersigned, in connection with the
opinions to be delivered by your firms pursuant to Section 6.2(e) and 6.3(e) of
the Agreement and Plan of Merger dated as of July , 1996, among Parent, Sub
and the Company,* hereby certifies that, to the extent the facts relate to
Parent and Sub, to his knowledge and after due diligence, and to the extent
otherwise without knowledge to the contrary, the descriptions of the facts
contained in the Registration Statement and the Proxy Statement completely and
accurately describe the Merger and the transactions leading up thereto and
further that:
1. The Merger will be consummated in compliance with the terms of the
Agreement and Plan of Merger, and none of the material terms and conditions
therein have been or, except as scheduled, will have been, waived or
modified.
2. Prior to the Merger, Parent will be in control of Sub within the
meaning of section 368(c) of the Internal Revenue Code.
3. The fair market value of the Parent Common Stock and other
consideration received by each Company shareholder will be approximately
equal to the fair market value of the Company Common Stock surrendered in
the exchange and was arrived at through arm's length negotiation.
4. There is no intercorporate indebtedness existing between Parent and
the Company or between Sub and the Company that was issued, acquired, or
will be settled at a discount.
5. Neither Parent nor Sub is an investment company as defined in
section 368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.
6. At the Effective Time, Sub will acquire at least 90 percent of the
fair market value of the net assets and at least 70 percent of the fair
market value of the gross assets held by the Company immediately prior to
the Merger. For purposes of this representation, amounts used by the
Company to pay its reorganization expenses and dissenters and to make all
redemptions and distributions (except for regular, normal dividends) made
by the Company immediately preceding the transfer will be included as
assets of the Company held immediately prior to the Merger.
7. Parent has no plan or intention to redeem or acquire after the date
of the Merger any of the Parent Common Stock to be issued in the Merger.
Parent publicly announced on that its Board of Directors
authorized the repurchase of up to $500,000,000 of its Common Stock through
open market
- ------------------
* For purposes of this certificate, capitalized terms used and not otherwise
defined herein shall have the meaning ascribed thereto in the Agreement and
Plan of Merger.
I-33
<PAGE>
purchases (the 'Buy Back'). Pursuant to the Buy Back, (a) any redemptions
will be undertaken for a corporate business purpose, (b) the Parent Common
Stock to be purchased will be widely held, (c) the purchases of Parent
Common Stock will be made in the open market, and to the best of Parent's
knowledge, will not be made from (i) directors or officers of Parent or
Sub, or (ii) any shareholder owning one percent or more of the outstanding
Parent common Stock, and (d) there is no plan or intention that the
aggregate amount of Parent Common Stock purchased in the Buy Back will
equal or exceed 20 percent of the outstanding Parent Common Stock.
8. Parent has no plan or intention to liquidate Sub, merge Sub with
and into another corporation, sell or dispose otherwise of any of the stock
of Sub, or cause Sub to sell or otherwise dispose of any of the assets of
the Company acquired in the Merger, except for dispositions made in the
ordinary course of business, or transfers described in section 368(a)(2)(C)
of the Internal Revenue Code.
9. Following the Merger, Sub will continue the historic business of
the Company or use a significant portion of the Company's business assets
in a business.
10. Following the Merger, Sub will not issue additional shares of its
stock that would result in Parent losing control of Sub within the meaning
of section 368(c) of the Internal Revenue Code.
11. No stock of Sub will be issued in the Merger.
12. The payment of cash in lieu of fractional shares of Parent Common
Stock is solely for the purpose of avoiding the expense and inconvenience
to Parent of issuing fractional shares of Parent Common Stock and does not
represent separately bargained-for consideration.
13. None of the compensation received (or to be received) by any
shareholder-employee of the Company will be separate consideration for, or
allocable to, any of his shares of Company Common Stock. None of the Parent
Common Stock received by any shareholder-employee of the Company pursuant
to the Merger will be separate consideration for, or allocable to, any
employment agreement or arrangement. The compensation paid to any
shareholder-employee of the Company will be commensurate with amounts that
would be paid to a third party bargaining at arm's length for similar
services.
14. The Company, the Parent, Sub and the shareholders of the Company
will each pay their respective expenses, if any, incurred in connection
with the Merger and the transactions related thereto.
I understand that Paul, Weiss, Rifkind, Wharton & Garrison as counsel for
the Company, and Skadden, Arps, Slate, Meagher & Flom, as counsel for Parent,
will rely on this certificate in rendering this opinion concerning certain of
the federal income tax consequences of the Merger and hereby commit to inform
them if, for any reason, any of the foregoing representations ceases to be true
prior to the Effective Time.
GENERAL RE CORPORATION
BY:___________________________________
Name:
Title:
I-34
<PAGE>
EXHIBIT C
TO MERGER
AGREEMENT
FORM OF AFFILIATE AGREEMENT
, 1996
General Re Corporation
695 East Main Street
Stamford, CT 06904
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an 'affiliate' of National Re Corporation, a Delaware corporation (the
'Company'), as the term 'affiliate' is defined for purposes of paragraphs (c)
and (d) of Rule 145 of the rules and regulations (the 'Rules and Regulations')
of the Securities and Exchange Commission (the 'Commission') under the
Securities Act of 1933, as amended (the 'Act'). Pursuant to the terms of the
Agreement and Plan of Merger, dated as of July 1, 1996 (the 'Agreement'), by and
among the Company, General Re Corporation, a Delaware corporation ('Parent'),
and N Acquisition Corporation, a Delaware corporation and a wholly-owned
subsidiary of Parent ('Sub'), the Company will be merged with and into Sub (the
'Merger').
As a result of the Merger, I will receive shares of common stock, par value
$.50 per share, of Parent (the 'Parent Stock') in exchange for shares owned by
me of common stock, no par value, of the Company.
I represent, warrant, and covenant to Parent that in the event I receive
any Parent Stock as a result of the Merger:
A. I shall not make any sale, transfer, or other disposition of the
Parent Stock in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed
the requirements of such documents and other applicable limitations upon my
ability to sell, transfer, or otherwise dispose of the Parent Stock to the
extent I felt necessary, with my counsel or counsel for the Company.
C. I have been advised that the issuance of the Parent Stock to me
pursuant to the Merger has been registered with the Commission under the
Act on a Registration Statement on Form S-4. However, I have also been
advised that, since at the time the Merger was submitted for a vote of the
stockholders of the Company, I may be deemed to have been an affiliate of
the Company and the distribution by me of the Parent Stock has not been
registered under the Act, I may not sell, transfer or otherwise dispose of
the Parent Stock issued to me in the Merger unless (i) such sale, transfer,
or other disposition has been registered under the Act, (ii) such sale,
transfer, or other disposition is made in conformity with Rule 145
promulgated by the Commission under the Act, or (iii) in the opinion of
counsel reasonably acceptable to Parent, or a 'no action' letter obtained
by the undersigned from the staff of the Commission, such sale, transfer,
or other disposition is otherwise exempt from registration under the Act.
D. I understand that Parent is under no obligation to register the
sale, transfer, or other disposition of the Parent Stock by me or on my
behalf under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.
I-35
<PAGE>
E. I also understand that stop transfer instructions will be given to
Parent's transfer agent with respect to the Parent Stock and that there
will be placed on the certificates for the Parent Stock issued to me, or
any substitutions therefor, a legend stating in substance:
'THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE
TERMS OF AN AGREEMENT DATED BETWEEN THE
REGISTERED HOLDER HEREOF AND , A COPY OF
WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF GENERAL
RE CORPORATION.'
F. I also understand that unless the transfer by me of my Parent Stock
has been registered under the Act or is a sale made in conformity with the
provisions of Rule 145, Parent reserves the right to put the following
legend on the certificates issued to my transferee:
'THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH
A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION
THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933.'
It is understood and agreed that the legends set forth in paragraphs E and
F above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act or the Agreement,
including sales under Rule 145(d). It is also understood and agreed that such
legends and the stop orders referred to above will be removed if (i) two years
shall have elapsed from the date the undersigned acquired the Parent Stock
received in the Merger and the provisions of Rule 145(d)(2) are then available
to the undersigned, (ii) three years shall have elapsed from the date the
undersigned acquired the Parent Stock received in the Merger and the provisions
of Rule 145(d)(3) are then applicable to the undersigned, or (iii) Parent has
received either an opinion of counsel, which opinion and counsel shall be
reasonably satisfactory to Parent, or a 'no action' letter obtained by the
undersigned from the staff of the Commission, to the effect that the
restrictions imposed by Rule 145 under the Act no longer apply to the
undersigned.
Execution of this letter should not be considered an admission on my part
that I am an 'affiliate' of the Company as described in the first paragraph of
this letter or as a waiver of any rights I may have to object to any claim that
I am such an affiliate on or after the date of this letter.
Very truly yours,
Accepted this day of
, 1996 by
By:_________________________________
Name:
Title:
I-36
<PAGE>
ANNEX II
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORMS OF STOCKHOLDERS AGREEMENTS
BY AND AMONG
GENERAL RE CORPORATION,
N ACQUISITION CORPORATION
AND
CERTAIN STOCKHOLDERS
OF
NATIONAL RE CORPORATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
II-1
<PAGE>
FORM OF STOCKHOLDERS AGREEMENT
FOR ACADIA PARTNERS, L.P. AND KEYSTONE, INC.
Agreement, dated as of July 1, 1996, by and among (the
'Stockholder'), General Re Corporation, a Delaware corporation ('Parent'), and N
Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of
Parent ('Sub'). Capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Merger Agreement (as defined below).
In consideration of the execution by National Re Corporation, a Delaware
corporation (the 'Company'), of the Agreement and Plan of Merger, dated as of
July 1, 1996 (the 'Merger Agreement'), by and among the Company, Parent and Sub
and other good and valuable consideration, receipt of which is hereby
acknowledged, the Stockholder, Parent and Sub hereby agree as follows:
1. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to Parent and Sub as follows:
(a) Title. As of the date hereof, the Stockholder beneficially owns
(exclusive of options) approximately shares* (the 'Shares') of Common
Stock, no par value (the 'Company Common Stock'), of the Company.
(b) Right to Vote. The Stockholder has full legal power, authority and
right to vote all Shares in favor of approval and adoption of the Merger
Agreement and the transactions contemplated by the Merger Agreement without the
consent or approval of, or any other action on the part of, any other person or
entity. Without limiting the generality of the foregoing, except for this
Agreement, the Amended and Restated Management Stockholder Agreement dated as of
February 5, 1992, the Amended and Restated Investor Stockholders Agreement dated
as of February 5, 1992 and the Stockholders Agreement dated as of February 5,
1992, by and among Lincoln National Corporation, Keystone, Inc., Acadia
Partners, L.P. and the persons listed on Schedule A thereto, the Stockholder is
not a party to any voting agreement with any person or entity with respect to
any of the Shares, granted any person or entity any proxy (revocable or
irrevocable) or power of attorney with respect to any of the Shares, deposited
any of the Shares in a voting trust or entered into any arrangement or agreement
with any person or entity limiting or affecting the Stockholder's legal power,
authority or right to vote the Shares in favor of the approval and adoption of
the Merger Agreement or any of the transactions contemplated by the Merger
Agreement. From and after the date hereof, the Stockholder will not commit any
act that could restrict or otherwise affect such legal power, authority and
right to vote all Shares in favor of the approval and adoption of the Merger
Agreement and the transactions contemplated by the Merger Agreement. Without
limiting the generality of the foregoing, from and after the date hereof the
Stockholder will not enter into any voting agreement with any person or entity
with respect to any of the Shares, grant any person or entity any proxy
(revocable or irrevocable) or power of attorney with respect to any of the
Shares, deposit any of the Shares into a voting trust or otherwise enter into
any agreement or arrangement limiting or affecting the Stockholder's legal
power, authority or right to vote the Shares in favor of the approval and
adoption of the Merger Agreement and the transactions contemplated by the Merger
Agreement (other than this Agreement).
(c) Authority. The Stockholder has full legal power, authority and right
to execute and deliver, and to perform the obligations under, this Agreement.
This Agreement has been duly executed and delivered by the Stockholder and
constitutes a valid and binding agreement of the Stockholder enforceable against
the Stockholder in accordance with its terms, subject to (i) bankruptcy,
insolvency, moratorium and other similar laws now or hereinafter in effect
relating to or affecting creditors' rights generally and (ii) general principles
of equity (regardless of whether considered in a proceeding at law or in
equity).
(d) Conflicting Instruments; No Transfer. Neither the execution and
delivery of this Agreement nor the performance by the Stockholder of the
agreements and obligations hereunder will result in any breach, violation of,
conflict with, or default under any term of any agreement, judgment, injunction,
order, decree, law, regulation or arrangement to which the Stockholder is a
party or by which the Stockholder (or any assets of the Stockholder) is bound,
except for any such breach, violation, conflict or default which, individually
or in the aggregate, would
- ------------------
* Acadia Partners, L.P. beneficially owns 1,460,013 Shares and Keystone, Inc.
beneficially owns 1,825,335 Shares.
II-2
<PAGE>
not impair or affect the Stockholder's ability to cast all votes represented by
the Shares in favor of the approval and adoption of the Merger Agreement and the
transactions contemplated by the Merger Agreement.
2. Representations and Warranties of Parent and Sub. Parent and Sub
hereby represent and warrant to the Stockholder that this Agreement has been
duly authorized by all necessary corporate action on the part of Parent and Sub,
has been duly executed and delivered by Parent and Sub and is a valid and
binding agreement of Parent and Sub enforceable against each of them in
accordance with its terms, subject to (i) bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally and the
rights of creditors of insurance companies generally and (ii) general principles
of equity (regardless of whether considered in a proceeding at law or in
equity).
3. Restriction on Transfer. The Stockholder agrees that (other than
pursuant to the Merger Agreement) the Stockholder will not, and will not agree
to, sell, assign, tender, dispose of, encumber, mortgage, hypothecate or
otherwise transfer (collectively, 'Transfer') any Shares or any options,
warrants or other rights to acquire shares of Company Common Stock to any person
or entity prior to the termination of this Agreement as provided in Section
10(b) hereof.
4. Agreement to Vote of the Stockholder. The Stockholder hereby
irrevocably and unconditionally agrees to vote or to cause to be voted all
Shares at the Company Special Meeting and at any other annual or special meeting
of stockholders of the Company where the following matters arise: (a) in favor
of the approval and adoption of the Merger Agreement and the transactions
contemplated by the Merger Agreement, provided that the Stockholder shall have
no obligation to so vote if the Board of Directors of the Company has withdrawn
its recommendation that stockholders of the Company vote in favor of the
approval and adoption of the Merger Agreement, and (b) against (i) approval of
any proposal made in opposition to or in competition with the Merger or any of
the other transactions contemplated by the Merger Agreement, (ii) any merger,
consolidation, sale of assets, business combination, share exchange,
reorganization or recapitalization of the Company or any of its Subsidiaries,
with or involving any party other than Parent or Sub, (iii) any liquidation or
winding up of the Company, (iv) any extraordinary dividend by the Company, (v)
any change in the capital structure of the Company (other than pursuant to the
Merger Agreement) and (vi) any other action that may reasonably be expected to
impede, interfere with, delay, postpone or attempt to discourage the Merger or
the other transactions contemplated by the Merger Agreement or result in a
breach of any of the covenants, representations, warranties or other obligations
or agreements of the Company under the Merger Agreement which would materially
and adversely affect the Company or its ability to consummate the transactions
contemplated by the Merger Agreement.
5. Stockholder Covenant. Except as contemplated by this Agreement, the
Stockholder shall not for a period ending on the later of December 31, 1996 and
three months following the termination of the Merger Agreement (other than as a
result of a breach by Parent or Sub of this Agreement or the Merger Agreement)
enter into, execute, or be a party to any agreement or understanding, written or
otherwise, with any Person whereby the Stockholder (i) grants or otherwise gives
to such Person an option or right to purchase or acquire any or all of the
Shares other than sales made in open market transactions; (ii) agrees or
covenants to vote or to grant a proxy to vote any or all of the Shares held of
record or Beneficially Owned by the Stockholder, at any meeting (whether annual
or special and whether or not an adjourned or postponed meeting) of the holders
of Company Common Stock, however called, or in connection with any written
consent of the holders of Company Common Stock; or (iii) agrees or covenants to
tender any or all of the Shares held of record or Beneficially Owned by the
Stockholder into any tender offer or exchange offer relating to the Company
Common Stock; provided that nothing herein shall prevent the granting of a
revocable proxy or execution of a revocable written consent or the tender of
Shares into any tender offer or exchange offer by the Stockholder.
6. Tax Matters. The Stockholder agrees to execute the continuity of
interest letter set forth as Exhibit A hereto at or prior to the Effective Time.
7. Invalid Provisions. If any provision of this Agreement shall be invalid
or unenforceable under applicable law, such provision shall be ineffective to
the extent of such invalidity or unenforceability only, without it affecting the
remaining provisions of this Agreement.
II-3
<PAGE>
8. Executed in Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original with the same effect as if the
signatures hereto and thereto were upon the same instrument.
9. Specific Performance. The parties hereto agree that if for any reason
the Stockholder fails to perform any of its agreements or obligations under this
Agreement irreparable harm or injury to Parent and Sub would be caused for which
money damages would not be an adequate remedy. Accordingly, the Stockholder
agrees that in seeking to enforce this Agreement against the Stockholder, Parent
and Sub shall be entitled to specific performance and injunctive and other
equitable relief; provided that, with respect to the Stockholder's agreements
and obligations under this Agreement, the provisions of this Section 9 are
without prejudice to any other rights or remedies, whether at law or in equity,
that Parent and Sub may have against the Stockholder for any failure to perform
any of its agreements or obligations under this Agreement.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to the
principles of conflicts of laws thereof.
11. Amendments; Termination. (a) This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto.
(b) The provisions of this Agreement shall terminate upon the earliest to
occur of (i) the consummation of the Merger or (ii) the termination of the
Merger Agreement, except for Section 5 hereof which shall survive for the period
specified therein.
(c) For purposes of this Agreement, the term 'Merger Agreement' includes
the Merger Agreement, as the same may be modified or amended from time to time;
provided that no such amendment or modification amends or modifies the Merger
Agreement in a manner such that the Merger Agreement, as so amended or modified,
is less favorable to the Stockholder in any material respect than is the Merger
Agreement in effect on the date hereof.
12. Additional Shares. If, after the date hereof, the Stockholder acquires
the right to vote any additional shares of Company Common Stock (any such shares
are called 'Additional Shares'), including, without limitation, upon exercise of
any option, warrant or right to acquire shares of Company Common Stock or
through any stock dividend or stock split, the provisions of this Agreement
(other than those set forth in Section 1) applicable to the Shares shall be
applicable to such Additional Shares as if such Additional Shares had been
Shares as of the date hereof. The provisions of the immediately preceding
sentence shall be effective with respect to Additional Shares without action by
any person or entity immediately upon the acquisition by the Stockholder of
beneficial ownership of such Additional Shares.
13. Action by Written Consent. If, in lieu of the Company Special Meeting,
shareholder action in respect of the Merger Agreement or any of the transactions
contemplated by the Merger Agreement is taken by written consent, the provisions
of this Agreement imposing obligations in respect of or in connection with the
Company Special meeting shall apply mutatis mutandis to such action by written
consent.
14. Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
legal successors (including, in the case of any individual, any executors,
administrators, estates, legal representatives and heirs of such individual) and
permitted 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 party hereto. Without limiting the scope or effect of the
restrictions on Transfer set forth in Section 3 hereof, the Stockholder agrees
that this Agreement and the obligations hereunder shall attach to the Shares and
shall be binding upon any person or entity to which legal or beneficial
ownership of such Shares shall pass, whether by operation of law or otherwise.
II-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
this 1st day of July, 1996.
[STOCKHOLDER]
By: __________________________________________
Name:
Title:
GENERAL RE CORPORATION
By: __________________________________________
Name: James E. Gustafson
Title: President and Chief Operating
Officer
N ACQUISITION CORPORATION
By: __________________________________________
Name: Joseph P. Brandon
Title: Vice President
II-5
<PAGE>
EXHIBIT A TO FORM OF
STOCKHOLDERS AGREEMENT
FOR ACADIA PARTNERS, L.P.
AND KEYSTONE, INC.
CONTINUITY OF INTEREST AGREEMENT
General Re Corporation, a Delaware corporation ('Parent'), N Acquisition
Corporation, a Delaware corporation ('Sub') and a direct wholly-owned subsidiary
of Parent and the undersigned shareholder (the 'Shareholder') of National Re
Corporation, a Delaware corporation ('Company'), hereby enter into this
Agreement on July 1, 1996 for the purposes hereinafter set forth (Parent, Sub
and the Shareholder are collectively referred to as the 'Parties').
WHEREAS, Parent, Sub and Company entered into an Agreement and Plan of
Merger dated as of July 1, 1996 (the 'Merger Agreement');
WHEREAS, pursuant to the Merger Agreement, Company will merge (the
'Merger') with and into Sub and pursuant to such Merger, each Shareholder will
surrender all of its shares of common stock of Company ('Company Common Stock')
in exchange for cash and shares of common stock of Parent ('Parent Common
Shares');
WHEREAS, the Parties wish to take certain steps to quality the Merger as a
tax-free reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986 (the 'Code');
NOW, THEREFORE, the parties agree as follows:
1. The Shareholder represents that the Shareholder has not purchased, sold,
exchanged, transferred by gift or otherwise disposed of shares of Company Common
Stock prior to the date hereof either in contemplation of or as part of the
Merger or otherwise.
2. The Shareholder represents that the Shareholder does not have any plan
or intention to sell, exchange, transfer by gift or otherwise dispose (including
by transactions which would have the ultimate economic effect of a disposition
including, but not limited to, puts, short sales and equity swap type of
arrangement) (collectively, 'dispose' or 'disposition') any Parent Common Shares
to be received by such Shareholder pursuant to the Merger.
3. The Shareholder further agrees that for a period of eighteen months
after the Merger (the 'Post-Merger Continuity Period'), the Shareholder will not
sell, exchange, transfer by gift or otherwise dispose of any of the Parent
Common Shares that the Shareholder receives in exchange for Company Common Stock
pursuant to the Merger; provided, however, the Shareholder (or the estate of the
Shareholder) is expressly permitted to transfer the Parent Common Shares
pursuant to a pledge that is not a disposition, upon the Shareholder's death or
to a 'grantor' trust created for the Shareholder's benefit in which the
Shareholder is treated as the owner pursuant to Sections 671 through 678 of the
Code and, if the Shareholder is a partnership for U.S. Federal income tax
purposes, the Shareholder is expressly permitted to transfer its Parent Common
Shares to its Partners pro rata in accordance with their interests in the
Shareholder on the condition that, prior to any such transfer of Parent Common
Shares, each Partner that would have owned (or would have been treated as
owning) 5% of Company Common Stock at the time of the Merger (if the Shareholder
had distributed its Company Common Stock pro rata to its Partners in accordance
with their interests in the Shareholder at such time) executes a continuity of
interest agreement (i) identical to this Agreement or (ii) substantially similar
to this agreement and reasonably acceptable to Skadden Arps or Other Tax
Counsel. Notwithstanding this paragraph 3, the Shareholder may, prior to the end
of the Post-Merger Continuity Period, sell, exchange, transfer by gift or
otherwise dispose of Parent Common Shares that the Shareholder receives pursuant
to the Merger, if, prior to the date of such disposition, the Shareholder (i)
obtains the written consent of Skadden, Arps, Slate, Meagher & Flom ('Skadden
Arps') and Paul, Weiss, Rifkind, Wharton and Garrison or (ii) obtains a written
opinion of Cleary, Gottlieb, Steen & Hamilton or another nationally recognized
tax counsel experienced in tax-free corporate reorganizations ('Other Tax
Counsel') (which opinion will specifically set forth the facts and analysis
forming the basis of such opinion), that such disposition will not prevent such
Parent Common Shares from qualifying as stock that
II-6
<PAGE>
satisfies the 'continuity of interest' requirement under Section 368 of the
Code. Notwithstanding the foregoing, to the extent that the Stock Consideration
(excluding cash in lieu of fractional shares) issued in the Merger is issued in
exchange for more than 50% of the shares of Company Common Stock, the
Shareholder may dispose of a number of shares of Parent Common Stock that bears
the same relationship to the number of shares of Parent Common Stock issued in
excess of 50% of the shares of Company Common Stock that (i) the number of
shares of Parent Common Stock held by the Shareholder bears to (ii) the number
of shares of Parent Common Stock held by all shareholders who execute continuity
of interest agreements substantially similar to this Agreement.
4. The Shareholder agrees that, during the PostMerger Continuity Period,
the Shareholder will give notice to Parent at least 30 days prior to any
proposed disposition of Parent Common Shares received pursuant to the Merger,
which notice shall describe (i) the number of Parent Common Shares that will be
subject to the proposed disposition, and (ii) the manner of such disposition.
5. This Agreement shall be binding upon and shall be enforceable against
the successors and assigns of the Parties hereto.
6. This Agreement shall not be modified, amended, altered or supplemented
except by a written agreement executed by all of the Parties hereto.
7. All notices to Parent should be sent to:
General Re Corporation
695 East Main Street
Stamford, CT 06904
8. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same document. This Agreement constitutes the entire
agreement among the Parties with respect to the subject matter hereof.
9. Capitalized terms used but not defined herein have the same meaning as
in the Merger Agreement.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed on the date first set forth above.
GENERAL RE CORPORATION
By: __________________________________
Name:
Title:
N ACQUISITION CORPORATION
By: __________________________________
Name:
Title:
[STOCKHOLDER]
By: __________________________________
Name:
Title:
II-7
<PAGE>
FORM OF STOCKHOLDERS AGREEMENT
FOR MESSRS. WARREN, CHENEY, EAGER AND MCCAFFREY
Agreement, dated as of July 1, 1996, by and among (the
'Stockholder'), General Re Corporation, a Delaware corporation ('Parent'), and N
Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of
Parent ('Sub'). Capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Merger Agreement (as defined below).
In consideration of the execution by National Re Corporation, a Delaware
corporation (the 'Company'), of the Agreement and Plan of Merger, dated as of
July 1, 1996 (the 'Merger Agreement'), by and among the Company, Parent and Sub
and other good and valuable consideration, receipt of which is hereby
acknowledged, the Stockholder, Parent and Sub hereby agree as follows:
1. Representations and warranties of the Stockholder. The Stockholder
hereby represents and warrants to Parent and Sub as follows:
(a) Title. As of the date hereof, the Stockholder beneficially owns
(exclusive of options) approximately shares* (the 'Shares') of
Common Stock, no par value (the 'Company Common Stock'), of the Company.
(b) Right to Vote. The Stockholder has full legal power, authority
and right to vote all Shares in favor of approval and adoption of the
Merger Agreement and the transactions contemplated by the Merger Agreement
without the consent or approval of, or any other action on the part of, any
other person or entity. Without limiting the generality of the foregoing,
except for this Agreement, the Amended and Restated Management Stockholder
Agreement dated as of February 5, 1992, the Amended and Restated Investor
Stockholders Agreement dated as of February 5, 1992 and the Stockholders
Agreement dated as of February 5, 1992, by and among Lincoln National
Corporation, Keystone, Inc., Acadia Partners, L.P. and the persons listed
on Schedule A thereto, the Stockholder is not a party to any voting
agreement with any person or entity with respect to any of the Shares,
granted any person or entity any proxy (revocable or irrevocable) or power
of attorney with respect to any of the Shares, deposited any of the Shares
in a voting trust or entered into any arrangement or agreement with any
person or entity limiting or affecting the Stockholder's legal power,
authority or right to vote the Shares in favor of the approval and adoption
of the Merger Agreement or any of the transactions contemplated by the
Merger Agreement. From and after the date hereof, the Stockholder will not
commit any act that could restrict or otherwise affect such legal power,
authority and right to vote all Shares in favor of the approval and
adoption of the Merger Agreement and the transactions contemplated by the
Merger Agreement. Without limiting the generality of the foregoing, from
and after the date hereof the Stockholder will not enter into any voting
agreement with any person or entity with respect to any of the Shares,
grant any person or entity any proxy (revocable or irrevocable) or power of
attorney with respect to any of the Shares, deposit any of the Shares into
a voting trust or otherwise enter into any agreement or arrangement
limiting or affecting the Stockholder's legal power, authority or right to
vote the Shares in favor of the approval and adoption of the Merger
Agreement and the transactions contemplated by the Merger Agreement (other
than this Agreement).
(c) Authority. The Stockholder has full legal power, authority and
right to execute and deliver, and to perform the obligations under, this
Agreement. This Agreement has been duly executed and delivered by the
Stockholder and constitutes a valid and binding agreement of the
Stockholder enforceable against the Stockholder in accordance with its
terms, subject to (i) bankruptcy, insolvency, moratorium and other similar
laws now or hereinafter in effect relating to or affecting creditors,
rights generally and (ii) general principles of equity (regardless of
whether considered in a proceeding at law or in equity).
(d) Conflicting Instruments; No Transfer. Neither the execution and
delivery of this Agreement nor the performance by the Stockholder of the
agreements and obligations hereunder will result in any breach, violation
of, conflict with, or default under any term of any agreement, judgment,
injunction, order, decree, law, regulation or arrangement to which the
Stockholder is a party or by which the Stockholder (or any
- ------------------
* Messrs. Warren, Cheney, Eager and McCaffrey beneficially own 214,882, 85,069,
112,114 and 84,069 Shares, respectively.
II-8
<PAGE>
assets of the Stockholder) is bound, except for any such breach, violation,
conflict or default which, individually or in the aggregate, would not
impair or affect the Stockholder's ability to cast all votes represented by
the Shares in favor of the approval and adoption of the Merger Agreement
and the transactions contemplated by the Merger Agreement.
2. Representations and Warranties of Parent and Sub. Parent and Sub hereby
represent and warrant to the Stockholder that this Agreement has been duly
authorized by all necessary corporate action on the part of Parent and Sub, has
been duly executed and delivered by Parent and Sub and is a valid and binding
agreement of Parent and Sub enforceable against each of them in accordance with
its terms, subject to (i) bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium and other similar laws now or hereafter in effect relating
to or affecting creditors' rights generally and the rights of creditors of
insurance companies generally and (ii) general principles of equity (regardless
of whether considered in a proceeding at law or in equity).
3. Restriction on Transfer. The Stockholder agrees that (other than
pursuant to the Merger Agreement) the Stockholder will not, and will not agree
to, sell, assign, tender, dispose of, encumber, mortgage, hypothecate or
otherwise transfer (collectively, 'Transfer') any Shares or any options,
warrants or other rights to acquire shares of Company Common Stock to any person
or entity prior to the termination of this Agreement as provided in Section
10(b) hereof.
4. Agreement to Vote of the Stockholder. The Stockholder hereby
irrevocably and unconditionally agrees to vote or to cause to be voted all
Shares at the Company Special Meeting and at any other annual or special meeting
of stockholders of the Company where the following matters arise: (a) in favor
of the approval and adoption of the Merger Agreement and the transactions
contemplated by the Merger Agreement, provided that the Stockholder shall have
no obligation to so vote if the Board of Directors of the Company has withdrawn
its recommendation that stockholders of the Company vote in favor of the
approval and adoption of the Merger Agreement, and (b) against (i) approval of
any proposal made in opposition to or in competition with the Merger or any of
the other transactions contemplated by the Merger Agreement, (ii) any merger,
consolidation, sale of assets, business combination, share exchange,
reorganization or recapitalization of the Company or any of its Subsidiaries,
with or involving any party other than Parent or Sub, (iii) any liquidation or
winding up of the Company, (iv) any extraordinary dividend by the Company, (v)
any change in the capital structure of the Company (other than pursuant to the
Merger Agreement) and (vi) any other action that may reasonably be expected to
impede, interfere with, delay, postpone or attempt to discourage the Merger or
the other transactions contemplated by the Merger Agreement or result in a
breach of any of the covenants, representations, warranties or other obligations
or agreements of the Company under the Merger Agreement which would materially
and adversely affect the Company or its ability to consummate the transactions
contemplated by the Merger Agreement.
5. Stockholder Covenant. Except as contemplated by this Agreement, the
Stockholder shall not for a period ending on the later of December 31, 1996 and
three months following the termination of the Merger Agreement (other than as a
result of a breach by Parent or Sub of this Agreement or the Merger Agreement)
enter into, execute, or be a party to any agreement or understanding, written or
otherwise, with any Person whereby the Stockholder (i) grants or otherwise gives
to such Person an option or right to purchase or acquire any or all of the
Shares other than sales made in open market transactions; (ii) agrees or
covenants to vote or to grant a proxy to vote any or all of the Shares held of
record or Beneficially Owned by the Stockholder, at any meeting (whether annual
or special and whether or not an adjourned or postponed meeting) of the holders
of Company Common Stock, however called, or in connection with any written
consent of the holders of Company Common Stock; or (iii) agrees or covenants to
tender any or all of the Shares held of record or Beneficially Owned by the
Stockholder into any tender offer or exchange offer relating to the Company
Common Stock; provided that nothing herein shall prevent the granting of a
revocable proxy or execution of a revocable written consent or the tender of
Shares into any tender offer or exchange offer by the Stockholder.
6. Invalid Provisions. If any provision of this Agreement shall be invalid
or unenforceable under applicable law, such provision shall be ineffective to
the extent of such invalidity or unenforceability only, without it affecting the
remaining provisions of this Agreement.
7. Executed in Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original with the same effect as if the
signatures hereto and thereto were upon the same instrument.
II-9
<PAGE>
8. Specific Performance. The parties hereto agree that if for any reason
the Stockholder fails to perform any of its agreements or obligations under this
Agreement irreparable harm or injury to Parent and Sub would be caused for which
money damages would not be an adequate remedy. Accordingly, the Stockholder
agrees that in seeking to enforce this Agreement against the Stockholder, Parent
and Sub shall be entitled to specific performance and injunctive and other
equitable relief; provided that, with respect to the Stockholder's agreements
and obligations under this Agreement, the provisions of this Section 8 are
without prejudice to any other rights or remedies, whether at law or in equity,
that Parent and Sub may have against the Stockholder for any failure to perform
any of its agreements or obligations under this Agreement.
9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to the
principles of conflicts of laws thereof.
10. Amendments; Termination. (a) This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto.
(b) The provisions of this Agreement shall terminate upon the earliest to
occur of (i) the consummation of the Merger or (ii) the termination of the
Merger Agreement, except for Section 5 hereof which shall survive for the period
specified therein.
(c) For purposes of this Agreement, the term 'Merger Agreement' includes
the Merger Agreement, as the same may be modified or amended from time to time;
provided that no such amendment or modification amends or modifies the Merger
Agreement in a manner such that the Merger Agreement, as so amended or modified,
is less favorable to the Stockholder in any material respect than is the Merger
Agreement in effect on the date hereof.
11. Additional Shares. If, after the date hereof, the Stockholder acquires
the right to vote any additional shares of Company Common Stock (any such shares
are called 'Additional Shares'), including, without limitation, upon exercise of
any option, warrant or right to acquire shares of Company Common Stock or
through any stock dividend or stock split, the provisions of this Agreement
(other than those set forth in Section 1) applicable to the Shares shall be
applicable to such Additional Shares as if such Additional Shares had been
Shares as of the date hereof. The provisions of the immediately preceding
sentence shall be effective with respect to Additional Shares without action by
any person or entity immediately upon the acquisition by the Stockholder of
beneficial ownership of such Additional Shares.
12. Action by Written Consent. If, in lieu of the Company Special Meeting,
shareholder action in respect of the Merger Agreement or any of the transactions
contemplated by the Merger Agreement is taken by written consent, the provisions
of this Agreement imposing obligations in respect of or in connection with the
Company Special Meeting shall apply mutatis mutandis to such action by written
consent.
13. Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
legal successors (including, in the case of any individual, any executors,
administrators, estates, legal representatives and heirs of such individual) and
permitted 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 party hereto. Without limiting the scope or effect of the
restrictions on Transfer set forth in Section 3 hereof, the Stockholder agrees
that this Agreement and the obligations hereunder shall attach to the Shares and
shall be binding upon any person or entity to which legal or beneficial
ownership of such Shares shall pass, whether by operation of law or otherwise.
II-10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
this 1st day of July, 1996.
______________________________________
[Stockholder]
GENERAL RE CORPORATION
By: __________________________________
Name: James E. Gustafson
Title: President and Chief
Operating Officer
N ACQUISITION CORPORATION
By: __________________________________
Name: Joseph P. Brandon
Title: Vice President
II-11
<PAGE>
ANNEX III
[GOLDMAN, SACHS & CO. LETTERHEAD]
DRAFT August , 1996
Board of Directors
National Re Corporation
777 Long Ridge Road
Stamford, CT 06904
Gentlemen:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, with no par value (the 'Shares'), of
National Re Corporation (the 'Company') of the Cash Consideration and the Stock
Consideration (each as defined below), taken as a whole, to be received for the
Shares pursuant to the Agreement and Plan of Merger, dated as of July 1, 1996,
by and among General Re Corporation ('General Re'), N Acquisition Corporation, a
wholly-owned subsidiary of General Re ('Sub'), and the Company (the
'Agreement').
Pursuant to the Agreement, the Company will be merged with and into Sub
(the 'Merger'), and each outstanding Share will be converted into the right to
receive, at the election of the holder, but subject to certain procedures and
limitations set forth in the Agreement (as to which procedures and limitations
we are expressing no opinion), either (A) a fraction of a share of Common Stock,
par value $0.50 per share, of General Re ('General Re Share'), determined by
dividing $53.00 by the average of the closing prices per General Re Share on the
New York Stock Exchange ('NYSE') as reported on the NYSE Composite Tape for the
ten (10) consecutive NYSE trading days ending on the second NYSE trading day
immediately preceding the Closing Date (as defined in the Agreement); provided,
however, that General Re shall not issue more than 0.39259 nor less than 0.32121
of a General Re Share per Share (the 'Stock Consideration'), or (B) $53.00 in
cash, without any interest thereon (the 'Cash Consideration').
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having acted as its financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Agreement. From time to time, Goldman Sachs has been engaged by General Re to
provide it with certain investment banking services, and may be so engaged by
General Re in the future.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Registration Statement on Form S-4, including the Proxy Statement
relating to the Special Meeting of Stockholders of the Company to be held in
connection with the Agreement; the Loss and Loss Adjustment Expense Reserve
Analysis as of December 31, 1995 of National Reinsurance Corporation and its
wholly owned subsidiary, Fairfield Insurance Company, prepared by KPMG Peat
Marwick LLP (the 'Reserve Analysis'); Annual Reports to Stockholders and Annual
Reports on Form 10-K of the Company and of General Re for the five years ended
December 31, 1995; certain interim reports to stockholders and Quarterly Reports
on Form 10-Q of the Company and of General Re; certain other communications from
the Company and General Re to their respective stockholders; and certain
internal financial analyses and forecasts for the Company prepared by its
management. We also have held discussions with members of the senior management
of the Company and of General Re regarding the past and current business
operations, financial condition and future prospects of their respective
companies. In addition, we have reviewed the reported price and trading activity
for the Shares and for the General Re Shares, compared certain financial and
stock market information for the Company and General Re with similar information
for certain other companies the securities of which are publicly traded,
reviewed the financial terms of certain recent business combinations in the
reinsurance industry specifically and in other industries generally and
performed such other studies and analyses as we considered appropriate.
III-1
<PAGE>
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities (including the loss and
loss adjustment expense reserves) of the Company or General Re or any of their
respective subsidiaries, and, expect for the Reserve Analysis referred to in the
fourth paragraph of this opinion, we have not been furnished with any such
evaluation or appraisal. Our advisory services and the opinion expressed herein
are provided for the information and assistance of the Board of Directors of the
Company in connection with its consideration of the transaction contemplated by
the Agreement.
Based upon the foregoing and such other matters as we consider relevant, it
is our opinion that as of the date hereof the Cash Consideration and the Stock
Consideration, taken as a whole, to be received by the holders of the Shares
pursuant to the Agreement is fair to such holders.
Very truly yours,
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<PAGE>
ANNEX IV
[Morgan Stanley Letterhead]
July 1, 1996
Board of Directors
General Re Corporation
Financial Centre
695 East Main Street
Stamford, CT 06901-2351
Members of the Board:
We understand that National Re Corporation ('National' or the 'Company'),
General Re Corporation ('General Re') and N Acquisition Corporation, a wholly
owned subsidiary of General Re ('Acquisition Sub') have entered into an
Agreement and Plan of Merger, dated as of July 1, 1996 (the 'Merger Agreement'),
which provides, among other things, for the merger ('Merger') of the Company
with and into Acquisition Sub. Pursuant to the Merger, Acquisition Sub shall be
the surviving corporation and each outstanding share of common stock, with no
par value (the 'Company Common Stock') of National, other than shares held in
treasury or held by General Re or any affiliate of General Re, will be converted
into the right to receive either (i) a certain number of shares of common stock,
par value $0.50 per share of General Re ('General Re Common Stock') determined
pursuant to a certain formula set forth in the Merger Agreement, or (ii) $53.00
per share in cash, without any interest thereon. The terms and conditions of the
Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the consideration to be paid
to the holders of shares of Company Common stock pursuant to the Merger
Agreement is fair from a financial point of view to General Re.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company and General Re, respectively;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning the Company prepared by the
management of the Company;
(iii) reviewed certain financial projections prepared by the
management of the Company;
(iv) discussed the past and current operations and financial condition
and the prospects of the Company with senior executives of the Company;
(v) reviewed certain internal financial statements and other financial
operating data concerning General Re prepared by the management of General
Re;
(vi) reviewed certain financial projections prepared by the management
of General Re;
(vii) discussed the past and current operations and financial
condition and the prospects of General Re with certain senior executives of
General Re, and analyzed the pro forma impact of the Merger on General Re's
earnings per share, consolidated capitalization and financial ratios;
(viii) reviewed the reported prices and trading activity for the
Company Common Stock and the General Re Common Stock;
(ix) compared the financial performance of the Company and the prices
and trading activity of the Company Common Stock and the General Re Common
Stock with that of certain other comparable publicy-traded companies and
their securities;
(x) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(xi) reviewed and discussed with the senior managements of General Re
and the Company their views of the synergies expected to be derived from
the Merger;
IV-1
<PAGE>
(xii) reviewed and discussed with the senior management of General Re
the strategic rationale for the merger;
(xiii) participated in discussions and negotiations among
representatives of the Company and General Re and their financial and legal
advisors;
(xiv) reviewed the Merger Agreement and certain related documents;
(xv) reviewed a certain report prepared by KPMG Peat Marwick LLP dated
April 29, 1996 regarding certain reserves of the Company;
(xvi) performed such other analyses and considered such other factors
as we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, including estimates of
the synergies expected to be derived from the Merger, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of the Company and
General Re, respectively. We have not made any independent valuation or
appraisal of the assets or liabilities of the Company; however, we have reviewed
the report of KPMG Peat Marwick LLP referred to in subparagraph (xv) above and
have relied without independent verification upon such report for purposes of
this opinion. Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof.
We have acted as financial advisor to the Board of Directors of General Re
in connection with this transaction and will receive a fee for our services. In
the past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for General Re and have received fees
for the rendering of these services. We have also in the past provided financial
advisory and financing services for certain shareholders of National and have
received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of General Re and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its entirety
in any filing made by General Re with the Securities and Exchange Commission
with respect to the transactions contemplated by the Merger. In addition, we
express no recommendation or opinion as to how the holders of Company Common
stock should vote at the shareholders' meeting held in connection with the
Merger.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the consideration to be paid to the holders of shares of Company
Common Stock pursuant to the Merger Agreement is fair from a financial point of
view to General Re.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Gary W. Parr
Gary W. Parr
Managing Director
IV-2
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ANNEX V
DELAWARE GENERAL CORPORATION LAW--SECTION 262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
'stockholder' means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words 'stock' and 'share' mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
'depository receipt' mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipt in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsections (f) or (g) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to sec.
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
(a) Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
(b) Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock or depository
receipts at the effective date of the merger or consolidation will be
either listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by
the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
(c) Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs (a) and (b) of this
paragraph; or
(d) Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs (a), (b), and (c) of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation, or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision,
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the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228
or 253 of this title, the surviving or resulting corporation, either before
the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal
rights on the effective date of the merger or consolidation and that
appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the stockholder at his address as it
appears on the records of the corporation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation which
shall, within 20 days after such service, file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware, or
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<PAGE>
such publication as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs thereof shall
be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest if any, to be paid upon the
amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payments shall be so made to each such stockholder, in the case of
holders of uncertified stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of expenses
incurred by any stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorney's fees and the fees and
expenses of experts, to be charged pro rata against the value of all the shares
entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation. (Last amended by Ch.
279, L. '95, eff. 7-1-95.)
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subsection (a) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he
acted in any of the capacities set forth above, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted under similar
standards, except that no indemnification may be made in respect to any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the corporation unless and only to the extent that the Court of Chancery or the
court in which action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnification for
such expenses which the Court of Chancery or such other court shall deem proper.
Section 145 of the DGCL further provides that to the extent that a director
or officer of a corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in subsections (a) and (b)
of Section 145, or in the defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith; that indemnification
provided by, or granted pursuant to, Section 145 shall not be deemed exclusive
of any other rights to which those seeking indemnification may be entitled; and
empowers the corporation to purchase and maintain insurance on behalf of any
person who is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liabilities under Section 145 of the DGCL.
Article V of the General Re By-laws provides, in detail, for the
indemnification of directors, officers and emloyees of General Re to the fullest
extent permitted under Section 145 of the DGCL.
As permitted by the DGCL, the General Re Certificate contains a provision
limiting the liability of directors for breach of fiduciary duty to General Re
or its stockholders except for liability (i) for breach of the director's duty
of loyalty to General Re or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or knowing violation of law,
(iii) under Section 174 of the DGCL or (iv) for any transaction from which the
director derived an improper personal benefit.
General Re carries policies of insurance which cover the individual
directors and officers of General Re and its domestic subsidiaries for legal
liability, as provided in the By-laws, and which would pay on behalf of General
Re for expenses of indemnification of directors and officers in accordance with
the By-laws.
The General Re Board has approved, and General Re has entered into, certain
indemnification agreements (the 'Indemnification Agreements') with its directors
and certain of its officers (the 'Indemnitee'). In addition, the General Re
Board has authorized General Re to enter into similar agreements with future
directors and officers and has declared it the policy of General Re to enter
into such agreements.
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Each Indemnification Agreement provides, in effect, that General Re shall
indemnify the Indemnitee whenever General Re is legally permitted to do so. The
Indemnitee must be found to have met the relevant standards of conduct to be
entitled to indemnification. Each Indemnification Agreement sets forth the
specific procedure to be followed in making such determination and provides that
General Re is obligated to advance expenses incurred by the Indemnitee in
connection with any action as they are incurred and prior to the final
adjudication of the action, provided that the Indemnitee undertakes to repay
such amounts if it is ultimately determined that he is not entitled to be
indemnified for such expenses. The Indemnitee is not entitled to indemnification
or advancement of expenses under the Indemnification Agreement with respect to
any claim or proceeding brought or made by the Indemnitee against General Re
except for claims to enforce the Indemnification Agreement.
If, pursuant to the Indemnification Agreements or otherwise, General Re is
required to make payments in respect of its indemnification obligations in
excess of, or not covered by, General Re's officers' and directors' liability
insurance, such payments, depending on the amount, could adversely affect
General Re.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of General Re
pursuant to the foregoing provisions or otherwise, General Re has been advised
that, in the opinion of the Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by General Re of expenses incurred or paid by directors, officers
and controlling persons of General Re in the successful defense of any action,
suit or proceeding) is asserted by such directors, officers and controlling
persons in connection with the securities being registered, General Re will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of competent jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) A list of exhibits included as part of this Registration Statement is
set forth in the Exhibit Index which immediately precedes such exhibits and is
hereby incorporated by reference herein.
(b) Financial Statement Schedules have been omitted in accordance with Item
601 of Regulation S-K (incorporated by reference to General Re's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995).
ITEM 22. UNDERTAKINGS.
General Re hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of General Re's annual report
pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) that is incorporated by reference in this
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
General Re hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (i) To
include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement; (iii) To include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
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(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, prior to the public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), General Re undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(5) That, every prospectus: (i) that is filed pursuant to the
paragraph immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the Registration Statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(6) That, insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of General Re pursuant to the foregoing provisions, or otherwise,
General Re has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by General
Re of expenses incurred or paid by a director, officer or controlling
person of General Re in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, General Re will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such
issue.
(7) That: (1) for purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by General Re pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective; and (2) for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(8) To respond to requests for information that is incorporated by
reference into this Proxy Statement/Prospectus pursuant to Item 4, 10(b),
11 or 13 of this Form, within one business day of receipt of such request,
and to send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of this Registration Statement through the
date of responding to the request.
(9) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in this Registration Statement
when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
General Re has duly caused this Registration Statement, or an amendment thereto,
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Stamford, State of Connecticut, on the 23rd day of August 1996.
GENERAL RE CORPORATION
(Registrant)
By: /s/ Charles F. Barr
---------------------------------
Name: Charles F. Barr
Title: Vice President, General
Counsel and Secretary
We, the undersigned officers and directors of General Re Corporation,
hereby severally constitute Joseph P. Brandon and Charles F. Barr and each of
them singly, our true and lawful attorneys with full power to them, and each of
them singly, to sign for us and in our names, in the capacities indicated below,
any and all amendments, including post-effective amendments, to this
Registration Statement, and any additional registration statements pursuant to
Rule 462 under the Securities Act of 1933, as amended, and generally do all such
things in our name and on our behalf in such capacities to enable General Re
Corporation to comply with the applicable provisions of the Securities Act of
1933, as amended, and all requirements of the Securities and Exchange
Commission, and we hereby ratify and confirm our signatures as they may be
signed by our said attorneys, or either of them, to any and all such amendments.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement, or an amendment thereto, has been signed below by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------- ------------------------------ ----------------
<S> <C> <C>
/s/ RONALD E. FERGUSON Chairman, Chief Executive August 23, 1996
Ronald E. Ferguson Officer and Director
(Principal Executive Officer)
/s/ JOSEPH P. BRANDON Vice President and Chief August 23, 1996
Joseph P. Brandon Financial Officer
(Principal Financial Officer)
/s/ ELIZABETH A. MONRAD Vice President and Treasurer August 23, 1996
Elizabeth A. Monrad (Principal Accounting Officer)
/s/ ANDREW W. MATHIESON Director August 23, 1996
Andrew W. Mathieson
</TABLE>
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<TABLE>
<S> <C> <C>
/s/ DAVID E. MCKINNEY Director August 23, 1996
David E. McKinney
/s/ STEPHEN A. ROSS Director August 23, 1996
Stephen A. Ross
/s/ DONALD J. KIRK Director August 23, 1996
Donald J. Kirk
Director
Edward H. Malone
Director
Walter M. Cabot
/s/ LUCY WILSON BENSON Director August 23, 1996
Lucy Wilson Benson
Director
William C. Ferguson
Director
Kay Koplovitz
/s/ WALTER F. WILLIAMS Director August 23, 1996
Walter F. Williams
</TABLE>
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<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- -------- ----------------------------------------------------------------- ----
<S> <C> <C>
2.1 Agreement and Plan of Merger, dated as of July 1, 1996, by and
among General Re Corporation, N Acquisition Corporation and
National Re Corporation (incorporated by reference to Exhibit 1
of the Schedule 13D filed by the Registrant with the Commission
on July 11, 1996).
3.1 Restated Certificate of Incorporation of the Registrant, as
amended (incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for its fiscal year ended
December 31, 1987).
3.2 By-laws of the Registrant, as amended and restated (incorporated
by reference to Exhibit 3(b) to the Registrant's Current Report
on Form 8-K filed with the Commission on February 24, 1995).
4.1 Rights Agreement, dated as of September 11, 1991, between the
Registrant and The Bank of New York, as Rights Agent
(incorporated by reference to Exhibit 4.1 to the Registrant's
Annual Report on Form 10-K for its fiscal year ended December 31,
1994).
*5.1 Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom with
respect to the legality of the securities to be issued in the
Merger.
10.1 Stockholders Agreement, dated as of July 1, 1996, by and among
the Registrant, N Acquisition Corporation and Acadia Partners,
L.P. (incorporated by reference to Exhibit 2 to the Schedule 13D
filed by the Registrant with the Commission on July 11, 1996).
10.2 Stockholders Agreement, dated as of July 1, 1996, by and among
the Registrant, N Acquisition Corporation and Keystone, Inc.
(incorporated by reference to Exhibit 3 to the Schedule 13D filed
by the Registrant with the Commission on July 11, 1996).
10.3 Stockholders Agreement, dated as of July 1, 1996, by and among
the Registrant, N Acquisition Corporation and Robert W. Eager,
Jr. (incorporated by reference to Exhibit 4 to the Schedule 13D
filed by the Registrant with the Commission on July 11, 1996).
10.4 Stockholders Agreement, dated as of July 1, 1996, by and among
the Registrant, N Acquisition Corporation and Peter A. Cheney
(incorporated by reference to Exhibit 5 to the Schedule 13D filed
by the Registrant with the Commission on July 11, 1996).
10.5 Stockholders Agreement, dated as of July 1, 1996, by and among
the Registrant, N Acquisition Corporation and William D. Warren
(incorporated by reference to Exhibit 6 to the Schedule 13D filed
by the Registrant with the Commission on July 11, 1996).
10.6 Stockholders Agreement, dated as of July 1, 1996, by and among
the Registrant, N Acquisition Corporation and Timothy T.
McCaffrey (incorporated by reference to Exhibit 7 to the Schedule
13D filed by the Registrant with the Commission on July 11,
1996).
*23.1 Consent of Skadden, Arps, Slate, Meagher & Flom (contained in its
opinion in Exhibit 5.1 above).
*23.2 Consent of KPMG Peat Marwick LLP.
*23.3 Consent of Coopers & Lybrand L.L.P.
**23.4 Consent of Goldman, Sachs & Co.
*23.5 Consent of Morgan Stanley & Co. Incorporated.
*24.1 Powers of Attorney (included on the signature page of this
Registration Statement).
*99.1 Letter to Stockholders of National Re Corporation (relating to
the special meeting of stockholders of National Re Corporation
described in the Proxy Statement/Prospectus included in Part I of
this Registration Statement).
*99.2 Notice of Special Meeting of Stockholders of National Re
Corporation (relating to the
special meeting of stockholders of National Re Corporation
described in the Proxy Statement/Prospectus included in Part I of
this Registration Statement).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- -------- ----------------------------------------------------------------- ----
<S> <C> <C>
*99.3 Form of Proxy Solicited by the Board of Directors of National Re
Corporation (relating to the special meeting of stockholders of
National Re Corporation described in the Proxy
Statement/Prospectus included in Part I of this Registration
Statement).
*99.4 Form of Election/Letter of Transmittal (relating to the merger of
National Re Corporation with and into a wholly owned subsidiary
of the Registrant described in the Proxy Statement/Prospectus
included in Part I of this Registration Statement).
*99.5 Form of Notice of Guaranteed Delivery for Shares of Common Stock
of National Re Corporation (relating to the merger of National Re
Corporation with and into a wholly owned subsidiary of the
Registrant described in the Proxy Statement/Prospectus included
in Part I of this Registration Statement).
*99.6 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees (relating to the merger of National
Re Corporation with and into a wholly owned subsidiary of the
Registrant described in the Proxy Statement/Prospectus included
in Part I of this Registration Statement).
*99.7 Form of Letter to Clients of Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees (relating to the merger of
National Re Corporation with and into a wholly owned subsidiary
of the Registrant described in the Proxy Statement/Prospectus
included in Part I of this Registration Statement).
*99.8 Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
*99.9 Form of Letter to Stockholders of National Re Corporation to
accompany the Form of Election/Letter of Transmittal.
</TABLE>
- ------------------
* Filed herewith.
** To be filed by amendment.
In accordance with paragraph (b)(4)(iii) of Item 601 of Regulation S-K, the
Registrant is not filing herewith certain instruments defining the rights of
holders of long-term debt of the Registrant because the total amount of
securities authorized thereunder does not exceed 10 percent of the total assets
of the Registrant and its subsidiaries on a consolidated basis. The Registrant
hereby agrees to furnish a copy of such instruments to the Commission upon
request.
<PAGE>
EXHIBIT 5.1
August 23, 1996
General Re Corporation
695 East Main Street
Stamford, Connecticut 06904
Ladies and Gentlemen:
We have acted as special counsel to General Re Corporation, a Delaware
corporation ("General Re"), in connection with the preparation of the
Registration Statement on Form S-4 (the "Registration Statement") to be filed by
General Re with the Securities and Exchange Commission (the "Commission")
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), which
Registration Statement relates to the proposed issuance by General Re of certain
shares (the "Shares") of General Re's common stock, par value $.50 per share
(together with the attached Preferred Share Purchase Rights, the "Common
Stock"), pursuant to the Agreement and Plan of Merger, dated as of July 1, 1996
(the "Merger Agreement"), by and among General Re, National Re Corporation, a
Delaware corporation ("National Re"), and N Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of General Re ("N Acquisition"), which
Merger Agreement provides for the acquisition of National Re by means of the
merger (the "Merger") of National Re with and into N Acquisition, with N
Acquisition being the surviving corporation. The Registration Statement includes
a proxy statement/prospectus (the "Proxy Statement/Prospectus") to be furnished
to certain securityholders of National Re in connection with the approval of the
Merger Agreement.
This opinion is being furnished in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act.
<PAGE>
General Re Corporation
August 23, 1996
Page 2
In connection with rendering this opinion, we have examined and are
familiar with originals or copies, certified or otherwise identified to our
satisfaction, of such documents as we have deemed necessary or appropriate as a
basis for the opinion set forth herein, including, without limitation, (i) the
Registration Statement (together with the Proxy Statement/Prospectus); (ii) the
Restated Certificate of Incorporation of General Re, as amended, filed as
Exhibit 3.1 to the Registration Statement; (iii) the By-laws of General Re, as
amended and restated, filed as Exhibit 3.2 to the Registration Statement; (iv)
the Rights Agreement, dated as of September 11, 1991, between General Re and The
Bank of New York, as Rights Agent, filed as Exhibit 4.1 to the Registration
Statement; (v) the Merger Agreement; (vi) resolutions of the Board of Directors
of General Re relating to the transactions contemplated by the Registration
Statement; (vii) a specimen certificate evidencing the Common Stock; and (viii)
such other certificates, instruments and documents as we considered necessary or
appropriate for the purposes of this opinion.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies and the
authenticity of the originals of such copies. In making our examination of
documents executed by parties other than General Re, we have assumed that such
parties had the power, corporate or other, to enter into and perform all
obligations thereunder and also have assumed the due authorization by all
requisite action, corporate or other, and execution and delivery by such parties
of such documents and the validity and binding effect thereof. As to any facts
material to the opinion expressed herein which we have not independently
established or verified, we have relied upon statements and representations of
officers and other representatives of General Re and others.
For purposes of this opinion, we have assumed that prior to the
issuance of any of the Shares (i) the Registration Statement, as finally amended
(including all necessary post-effective amendments), becomes effective;
<PAGE>
General Re Corporation
August 23, 1996
Page 3
(ii) National Re's stockholders approve the Merger Agreement; (iii) the
Certificate of Merger which will give effect to the Merger will be properly
filed with the Secretary of State of the State of Delaware; (iv) the
transactions contemplated by the Merger Agreement will be consummated; and (v)
the certificates representing the Shares will be manually signed by an
authorized officer of the transfer agent for the Common Stock and will be
registered by the registrar for the Common Stock and will conform to the
specimen thereof examined by us.
Members of our firm are admitted to the Bar of the State of Delaware
and we express no opinion as to the laws of any other jurisdiction.
Based upon and subject to the foregoing, we are of the opinion that the
Shares, when issued in accordance with the terms and conditions of the Merger
Agreement, will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the references to us under the caption "Legal
Matters" in the Proxy Statement/Prospectus forming a part of the Registration
Statement. In giving this consent, however, we do not hereby admit that we are
within the category of persons whose consent is required under Section 7 of the
Securities Act and the rules and regulations of the Commission thereunder.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom
Skadden, Arps, Slate, Meagher & Flom
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
National Re Corporation:
We consent to the use of our reports on the consolidated financial
statements and related financial statement schedules of National Re Corporation
as of December 31, 1995 and 1994 and for each of the years in the three-year
period ended December 31, 1995 which have been incorporated by reference or
appear in the National Re Corporation Annual Report on Form 10-K which has been
incorporated by reference in the General Re Corporation Form S-4 and to the
reference to our firm under the heading "Experts" therein.
Our reports dated January 25, 1996, refer to the Company's adoption at
December 31, 1993 of Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities."
New York, New York
August 23, 1996
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
General Re Corporation (the "Company") on Form S-4, dated August 23, 1996, of
our report dated February 6, 1996, on our audits of the consolidated financial
statements and schedules of the Company as of December 31, 1995 and 1994, and
for each of the three years in the period ended December 31, 1995, which report
is included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995. We also consent to the reference to our firm under the
caption "Experts".
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
August 21, 1996
New York, New York
EXHIBIT 23.5
CONSENT OF MORGAN STANLEY & CO. INCORPORATED
August 22, 1996
General Re Corporation
Dear Sirs:
We hereby consent to the inclusion in the Registration Statement of General
Re Corporation ("General Re"), relating to the proposed merger of National Re
Corporation with and into N Acquisition Corporation, a wholly owned subsidiary
of General Re, of our opinion letter in the Proxy Statement/Prospectus which is
a part of the Registration Statement, and to the references of our firm name
therein. In giving such consent, we do not thereby admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rule and regulations adopted by the Securities
and Exchange Commission thereunder nor do we admit that we are experts with
respect to any part of such Registration Statement within the meaning of the
term "experts" as used in the Securities Act of 1933, as amended, or the rules
or regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Stephen Fromm
<PAGE>
LOGO
National Re Corporation
777 Long Ridge Road
Stamford, CT 06904
(203) 329-7700
August 27, 1996
Dear Stockholder:
You are cordially invited to attend a Special Meeting of the Stockholders
of National Re Corporation (the 'Company'), which will be held at 10:00 a.m.,
local time, on September 30, 1996 at the Company's corporate headquarters, 777
Long Ridge Road, Stamford, Connecticut, and any adjournments or postponements
thereof (the 'Special Meeting').
At the Special Meeting, holders of the Company's common stock will be asked
to consider and vote on a proposal to approve and adopt the Agreement and Plan
of Merger, dated as of July 1, 1996 (the 'Merger Agreement'), by and among
General Re Corporation ('General Re'), N Acquisition Corporation ('Sub'), a
wholly owned subsidiary of General Re, and the Company. A copy of the Merger
Agreement is included as Annex I to the attached Proxy Statement/Prospectus. On
the terms and subject to the conditions of the Merger Agreement, the Company
will be merged with and into Sub (the 'Merger'), which will continue in
existence as a subsidiary of General Re.
Upon consummation of the Merger, each outstanding share of the Company's
common stock will be converted into the right to receive, at each stockholder's
election, (a) $53 in General Re common stock; provided that General Re will not
issue more than .39259 nor less than .32121 shares of General Re common stock
per share of the Company's common stock or (b) $53 in cash. Such elections will
be subject to certain proration procedures which are described in the attached
Proxy Statement/Prospectus and in the Merger Agreement, which provide generally
that the total cash portion of the consideration paid by General Re cannot
exceed 50% of the value of the outstanding shares of the Company's common stock.
The obligations of General Re and the Company to consummate the Merger are
subject to a number of conditions, including, among other things, (i) approval
of the Merger by the Company's stockholders, (ii) receipt of all required
governmental approvals, (iii) absence of any statute or injunction that would
restrain, enjoin or prohibit the consummation of the Merger, (iv) absence of any
change that would have a material adverse effect on either General Re or the
Company, (v) receipt by each of General Re and the Company of tax opinions from
their respective tax counsel and (vi) the average per share price of General
Re's common stock not being less than $125.
YOUR BOARD OF DIRECTORS, AFTER CAREFUL CONSIDERATION, HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND DETERMINED THAT THE MERGER IS FAIR TO, AND IN
THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS THAT YOU
VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
<PAGE>
The Company is also sending you a Form of Election/Letter of Transmittal
which stockholders of the Company should use to express their preference for the
type of consideration they wish to receive in the Merger. Please note that the
deadline for submitting the Form of Election/Letter of Transmittal is September
30, 1996. The failure of a stockholder to execute and deliver a valid Form of
Election/Letter of Transmittal will result in such stockholder receiving common
stock of General Re rather than cash in the Merger.
Whether or not you plan to attend the Special Meeting in person and
regardless of the number of shares of common stock you own, please complete,
sign, date and return the enclosed proxy card promptly in the accompanying
prepaid envelope. If you attend the Special Meeting, you may vote your shares
personally whether or not you have previously submitted a proxy. Your prompt
cooperation will be greatly appreciated.
Very truly yours,
William D. Warren
Chairman and President
THE TRANSACTION TO BE CONSIDERED AT THE SPECIAL MEETING INVOLVES A MATTER
OF GREAT IMPORTANCE TO THE STOCKHOLDERS OF THE COMPANY. ACCORDINGLY,
STOCKHOLDERS ARE URGED TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED
IN THE ATTACHED PROXY STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING PREPAID ENVELOPE PROMPTLY.
2
<PAGE>
LOGO
National Re Corporation
777 Long Ridge Road
Stamford, CT 06904
(203) 329-7700
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 30, 1996
------------------------
To Our Stockholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of National
Re Corporation, a Delaware corporation (the 'Company'), will be held at 10:00
a.m., local time, on September 30, 1996 at the Company's corporate headquarters,
777 Long Ridge Road, Stamford, Connecticut, and any adjournments or
postponements thereof (the 'Special Meeting'). The Special Meeting is called for
the purpose of considering and voting upon:
1. A proposal to approve and adopt the Agreement and Plan of Merger, dated
as of July 1, 1996 (the 'Merger Agreement'), by and among General Re Corporation
('General Re'), N Acquisition Corporation ('Sub') and the Company. Pursuant to
the Merger Agreement (i) the Company will be merged with and into Sub, with Sub
as the surviving corporation and (ii) each outstanding share of the Company's
common stock (subject to the exceptions and limitations set forth in the Merger
Agreement) at the Effective Time (as defined herein) will be converted into the
right to receive, at each stockholder's election, (a) $53 in General Re common
stock; provided that General Re will not issue more than .39259 nor less than
.32121 shares of General Re common stock per share of the Company's common stock
or (b) $53 in cash, without any interest thereon. Such elections will be subject
to certain proration procedures, which provide generally that the total cash
portion of the consideration paid by General Re cannot exceed 50% of the value
of the outstanding shares of the Company's common stock. A copy of the Merger
Agreement is included as Annex I to the attached Proxy Statement/Prospectus. The
proposed merger and other related matters are more fully described in the
attached Proxy Statement/Prospectus and the Annexes thereto.
2. The transaction of such other business as may properly come before the
Special Meeting.
The close of business on August 26, 1996 has been fixed as the record date
for the determination of stockholders entitled to notice of, and to vote at, the
Special Meeting. Only holders of record of the Company's common stock on the
record date are entitled to vote at the Special Meeting.
In connection with the proposed merger, dissenters' rights will be
available to those stockholders of the Company who meet and comply with the
requirements of Section 262 of the Delaware General Corporation Law (the
'DGCL'), a copy of which is included as Annex V to the attached Proxy
Statement/Prospectus. Reference is made to the section entitled 'The
Merger--Dissenters' Rights' in the attached Proxy Statement/Prospectus for a
discussion of the procedures to be followed in asserting dissenters' rights in
connection with the proposed merger under Section 262 of the DGCL.
<PAGE>
Whether or not you plan to attend the Special Meeting in person, and
regardless of the number of shares of common stock you own, please complete,
sign, date and return the enclosed proxy card promptly in the accompanying
prepaid envelope. You may revoke your proxy at any time before the authority
granted by it is exercised. If you attend the Special Meeting, you may vote in
person even if you have previously returned an executed proxy.
By Order of the Board of Directors
Anne M. Quinn
Secretary
Date: August 27, 1996
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE AND RETURN YOUR PROXY PROMPTLY.
FAILURE TO VOTE WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER.
2
<PAGE>
NATIONAL RE CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
OF NATIONAL RE CORPORATION
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON SEPTEMBER 30, 1996
The undersigned stockholder of National Re Corporation, a Delaware
corporation ('National Re'), hereby appoints William D. Warren, Peter A. Cheney,
Robert W. Eager, Jr. and Timothy T. McCaffrey, and each of them, the lawful
attorneys and proxies of the undersigned, each with several powers of
substitution, to vote all of the shares of common stock of National Re held of
record by the undersigned on August 26, 1996 at the Special Meeting of
Stockholders, or any adjournments or postponements thereof (the 'Special
Meeting'), with all the powers the undersigned would possess if personally
present, upon all matters set forth in the Notice of Special Meeting of
Stockholders and the Proxy Statement/Prospectus, each dated August 27, 1996.
The undersigned hereby revokes any proxy or proxies heretofore given to vote
such stock, and hereby ratifies and confirms all that said attorneys and
proxies, or other substitutes, may do by virtue hereof. If only one attorney and
proxy shall be present and acting, then that one shall have and may exercise all
the powers of said attorneys and proxies.
/x/ PLEASE MARK VOTES AS IN THIS EXAMPLE
THE BOARD OF DIRECTORS OF NATIONAL RE RECOMMENDS A VOTE FOR PROPOSAL 1:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C>
1. The proposal to adopt the Agreement and Plan of Merger, dated as of July 1, 1996, by / / / / / /
and among National Re Corporation, General Re Corporation and N Acquisition
Corporation.
2. In the discretion of the Board of Directors of National Re with respect to any other
matters that may properly come before the Special Meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE HEREIN. IF THIS PROXY IS SIGNED BUT NO SPECIFICATIONS ARE MADE,
THIS PROXY WILL BE VOTED FOR PROPOSAL 1.
</TABLE>
(continued on reverse side)
<PAGE>
The undersigned hereby acknowledges receipt of the Notice of Special Meeting
of Stockholders and the Proxy Statement/Prospectus with respect to the Special
Meeting.
RECORD DATE SHARES: (__________________)
Dated: ______________, 1996
Please sign as name(s)
appear on this proxy. If a
joint account, each joint
owner must sign. If signing
for a corporation or a
partnership or as agent,
attorney or fiduciary,
indicate the capacity in
which you are signing.
___________________________
Signature(s)
Mark box at right if
comments or / /
address change have
been noted on the
reverse side of this
card.
- --------------------------------------------------------------------------------
DETACH CARD DETACH CARD
<PAGE>
FORM OF ELECTION/LETTER OF TRANSMITTAL
TO ACCOMPANY CERTIFICATES FOR SHARES OF
COMMON STOCK
OF
NATIONAL RE CORPORATION
WHEN SUBMITTED PURSUANT TO AN ELECTION
IN CONNECTION WITH THE PROPOSED
MERGER OF NATIONAL RE CORPORATION WITH
AND INTO A WHOLLY OWNED SUBSIDIARY OF
GENERAL RE CORPORATION
This Form of Election/Letter of Transmittal is to be completed by
stockholders of National Re Corporation ('National Re') if stock certificates
(the 'Share Certificates') for shares of common stock ('National Re Common
Stock' or 'Shares'), no par value per share, of National Re are to be forwarded
herewith or if delivery of Shares are to be made by book-entry transfer to the
Exchange Agent's account at The Depository Trust Company or the Philadelphia
Depository Trust Company (each, a 'Book-Entry Transfer Facility' and
collectively, the 'Book-Entry Transfer Facilities') pursuant to book-entry
transfer procedures, or if a guarantee of delivery of such Share Certificates,
and all other required documents, are to be delivered to the Exchange Agent by
5:00 p.m., New York City time, on September 30, 1996, unless extended, in order
to effect an Election (as defined herein) in connection with the proposed merger
of National Re with and into a wholly owned subsidiary of General Re Corporation
('General Re').
The Exchange Agent is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C>
By Hand or Overnight Delivery: By Mail:
American Stock Transfer American Stock Transfer
& Trust Company & Trust Company
40 Wall Street, 46th Floor 40 Wall Street, 46th Floor
New York, New York 10005 New York, New York 10005
</TABLE>
By Facsimile
(for Eligible Institutions Only):
(718) 234-5001
Confirm by Telephone:
(800) 937-5449
------------------------
DELIVERY OF THIS FORM OF ELECTION/LETTER OF TRANSMITTAL TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OR TELEX
TRANSMISSION OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
YOU MUST SIGN THIS FORM OF ELECTION/LETTER OF TRANSMITTAL WHERE INDICATED BELOW
AND COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED BELOW.
The instructions accompanying this FORM OF ELECTION/LETTER OF TRANSMITTAL
should be read carefully before this Form of Election/Letter of Transmittal is
completed.
THE DEADLINE FOR SUBMITTING THIS FORM OF ELECTION/LETTER OF TRANSMITTAL,
TOGETHER WITH YOUR SHARE CERTIFICATES, IS 5:00 P.M., NEW YORK CITY TIME,
ON SEPTEMBER 30, 1996, UNLESS EXTENDED.
National Re stockholders whose Share Certificates are not immediately
available or who cannot deliver their Share Certificates and all other documents
required hereby to the Exchange Agent prior to 5:00 p.m., New York City time, on
September 30, 1996, unless extended (the 'Election Deadline'), and who wish to
make an Election must do so pursuant to the guaranteed delivery procedure
described in Instruction A2.
NATIONAL RE STOCKHOLDERS MAY CHOOSE TO MAKE A STOCK ELECTION AND/OR A CASH
ELECTION WITH RESPECT TO ALL OR ANY PORTION OF THE SHARES HELD BY SUCH HOLDER.
/ / CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
EXCHANGE AGENT'S ACCOUNT AT ONE OF THE BOOK-ENTRY FACILITIES AND COMPLETE
THE FOLLOWING:
Name of Electing Institution: _____________________________________________
Check Box of Applicable Book-Entry Transfer Facility:
/ / The Depository Trust Company / / Philadelphia Depository Trust
Company
Account Number _______________ Transaction Code Number ______________
<PAGE>
/ / CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s): ___________________________________________
Date of Execution of Notice of Guaranteed Delivery: _______________________
Name of Institution that Guaranteed Delivery: _____________________________
If Delivered by Book-Entry Transfer, Check Box of Book-Entry Transfer
Facility:
/ / The Depository Trust Company / / Philadelphia Depository Trust
Company
Account Number _______________ Transaction Code Number_______________
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
<TABLE>
<S> <C> <C> <C> <C>
TYPE OF ELECTION (SEE INSTRUCTIONS B1, B2 AND B3)
SHARES SUBMITTED (ATTACH SEPARATE SIGNED LIST IF NECESSARY)
TOTAL NUMBER CASH ELECTION STOCK ELECTION
OF SHARES
NAME(S) AND ADDRESS(ES) OF CERTIFICATE REPRESENTED BY (NUMBER OF (NUMBER OF
REGISTERED HOLDER(S) NUMBER(1) CERTIFICATE SHARES) SHARES)
-------------------- --------- ----------- ------- -------
------------- ------------- ------------- -------------
TOTAL SHARES
------------- ------------- ------------- -------------
</TABLE>
(1) Stockholders who hold National Re Common Stock in book-entry form, should
list their account number.
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE INSTRUCTIONS SET FORTH
IN THIS FORM OF ELECTION/LETTER OF TRANSMITTAL CAREFULLY.
Ladies and Gentlemen:
In connection with the proposed merger (the 'Merger') of National Re with
and into a wholly owned subsidiary of General Re Corporation ('General Re'), the
undersigned hereby submits the Share Certificates evidencing shares of National
Re Common Stock listed above, or hereby transfers ownership of such Share
Certificates on the account books maintained by a Book-Entry Transfer Facility,
and elects, subject to the proration and other limitations set forth below, to
have each share of National Re Common Stock represented by such Share
Certificates converted into (i) $53 in shares of common stock, par value $.50
per share (the 'General Re Common Stock'), of General Re (the 'Stock
Consideration'), provided that General Re will not issue more than .39259 nor
less than .32121 shares of General Re Common Stock per share of National Re
Common Stock or (ii) $53 in cash, without interest thereon (the 'Cash
Consideration'). It is understood that the following election is subject to (i)
the terms, conditions and limitations set forth in the Proxy
Statement/Prospectus, dated August 27, 1996, relating to the Merger (the 'Proxy
Statement/Prospectus'), receipt of which is hereby acknowledged by the
undersigned, (ii) the terms of the Agreement and Plan of Merger, dated as of
July 1, 1996 (the 'Merger Agreement'), attached as Annex I to the Proxy
Statement/Prospectus and (iii) the accompanying instructions. General Re's
acceptance of Shares delivered pursuant to this Form of Election/Letter of
Transmittal will constitute a binding agreement between the undersigned and
General Re upon the terms and subject to the conditions of (i), (ii) and (iii)
listed above.
ALTHOUGH THERE CAN BE NO ASSURANCE THAT A HOLDER OF SHARES OF NATIONAL RE
COMMON STOCK WHO DESIRES TO RECEIVE THE CASH CONSIDERATION WILL RECEIVE SUCH
CONSIDERATION AS TO ALL OF HIS SHARES, A HOLDER OF SHARES OF NATIONAL RE COMMON
STOCK HAVING A PREFERENCE FOR THE CASH CONSIDERATION SHOULD MAKE AN ELECTION
BECAUSE SHARES AS TO WHICH AN ELECTION HAS NOT BEEN MADE WILL RECEIVE THE STOCK
CONSIDERATION IN THE MERGER. NONE OF GENERAL RE, NATIONAL RE, THE NATIONAL RE
BOARD OF DIRECTORS OR THE GENERAL RE BOARD OF DIRECTORS MAKES ANY RECOMMENDATION
AS TO WHETHER STOCKHOLDERS SHOULD ELECT TO RECEIVE THE CASH CONSIDERATION OR THE
STOCK CONSIDERATION IN THE MERGER. EACH STOCKHOLDER MUST MAKE HIS OR HER OWN
DECISION WITH RESPECT TO SUCH ELECTION.
Failure of a holder of Shares to complete properly and to return this Form
of Election/Letter of Transmittal together with his or her Share Certificates,
or with an appropriate guarantee of delivery of Share Certificates, to the
Exchange Agent by the Election Deadline, or a holder of Shares who cannot
complete the procedure for delivery by book-entry transfer on a timely basis,
and who fails to comply with the election procedures described in the Proxy
Statement/Prospectus and this Form of Election/Letter of Transmittal (including
the instructions hereto) will cause such holder's Shares to be converted into
the right to receive the Stock Consideration without regard to the preference of
such holder of Shares.
The undersigned authorizes and instructs you, as Exchange Agent, to deliver
the Share Certificates listed above and to receive on behalf of the undersigned,
in exchange for the Shares represented thereby, any check for the cash or any
certificate for the shares of General Re Common Stock issuable in the Merger. If
certificates are not delivered herewith, there is furnished a guarantee of
delivery of such Share Certificates from an Eligible Institution (as defined
herein).
The undersigned represents and warrants that the undersigned has full power
and authority to surrender the Share Certificate(s) surrendered herewith or
covered by a guarantee of delivery, free and clear of any liens, claims, charges
or encumbrances whatsoever. The undersigned understands and acknowledges that
the method of delivery of the Share Certificate(s) and all other required
documents is at the option and risk of the undersigned and that the risk of loss
of such Share Certificate(s) shall pass only after the Exchange Agent has
actually received the Share Certificate(s). All questions as to the validity,
form and eligibility of any Election and surrender of Share Certificates
hereunder shall be determined by General Re (which may delegate power in whole
or in part to the Exchange Agent), and such determination shall be final and
binding. The undersigned, upon request, shall execute and deliver all additional
documents deemed by the Exchange Agent or General Re to be necessary or
desirable to complete the sale, assignment, transfer, cancellation and
retirement of the Shares delivered herewith. No authority hereby conferred or
agreed to be conferred hereby shall be affected by, and all such authority shall
survive, the death or incapacity of the undersigned. All obligations of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
The undersigned understands that the purpose of the election procedure is
to permit holders of Shares to express their preferences for the type of
consideration they wish to receive in the Merger, provided that the Total Cash
Consideration (as defined in the Proxy Statement/Prospectus) cannot exceed 50%
of the value of the outstanding shares of National Re Common Stock. Subject to
the proration and the limitations described below and in the Merger Agreement,
the Exchange Agent will honor the stock elections and cash elections made by
holders of Shares when it issues shares of General Re Common Stock and the Cash
Consideration after the Effective Time (as defined in the Proxy
Statement/Prospectus).
The undersigned understands that in lieu of any fractional share of General
Re Common Stock, General Re will pay to each former stockholder of National Re
who otherwise would be entitled to receive a fractional share of General Re
Common Stock an amount in cash determined by multiplying (i) the Average General
Re Share Price (as defined in the Merger Agreement) on the date on which the
Effective Time occurs by (ii) the fractional interest in a share of General Re
Common Stock to which such holder would otherwise be entitled.
Unless otherwise indicated in the box entitled 'Special Payment
Instructions,' please issue any check and register any certificate for shares of
General Re Common Stock in the name of the registered holder(s) of the Shares
appearing above
<PAGE>
under 'Type of Election.' Similarly, unless otherwise indicated in the box
entitled 'Special Delivery Instructions,' please mail any check and any
certificate for shares of General Re Common Stock to the registered holder(s) of
the Shares at the address(es) of the registered holder(s) appearing above under
'Type of Election.' In the event that the boxes entitled 'Special Payment
Instructions' and 'Special Delivery Instructions' are both completed, please
issue any check and any certificate for shares of General Re Common Stock in the
name(s) of, and mail such check and such certificate to, the person(s) so
indicated.
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS A1 AND C3) (SEE INSTRUCTIONS A1 AND C3)
To be completed ONLY if the check is to be made To be completed ONLY if the check or the certificates
payable to, or the certificates for shares of General Re for shares of General Re Common Stock are to be mailed to
Common Stock are to be registered in, the name of someone someone other than the undersigned or to the undersigned
other than the undersigned. at an address other than that shown under 'Type of Election.'
Name:
----------------------------------------------------
(PLEASE PRINT) MAIL CHECK AND/OR CERTIFICATES TO:
Address: Name:
------------------------------------------------- --------------------------------------------------
(PLEASE PRINT)
- --------------------------------------------------------- Address: ------------------------------------------------
(ZIP CODE)
- --------------------------------------------------------- ---------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) (ZIP CODE)
(SEE SUBSTITUTE FORM W-9 BELOW)
</TABLE>
<TABLE>
<S> <C>
SIGN HERE
IMPORTANT: COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 BELOW
Name(s):
- --------------------------------------------------------- ------------------------------------------------
(PLEASE PRINT)
- --------------------------------------------------------- Capacity (full title):
(SIGNATURE(S) OF OWNER(S)) -----------------------------------
Address:
- --------------------------------------------------------- -----------------------------------------------
- --------------------------------------------------------- ---------------------------------------------------------
Must be signed by registered owner(s) exactly as name(s) (ZIP CODE)
appear(s) on stock certificate(s) or by person(s)
authorized to become registered holder(s) by certificates ---------------------------------------------------------
and documents transmitted herewith. If signature is by (AREA CODE AND TELEPHONE NUMBER)
attorney, executor, administrator, trustee or guardian or
others acting in a fiduciary capacity, set forth full ---------------------------------------------------------
title and see Instruction C2. (TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NUMBER)
Dated:
--------------------------------------------------
<CAPTION>
GUARANTEE OF SIGNATURE(S)
<S> <C>
If you have filled out the Special Payment Instructions Authorized
above, you must have your signatures guaranteed. (See Signature:
Instructions A1 and C3.) -----------------------------------------------
Name:
----------------------------------------------------
(PLEASE PRINT)
Firm:
----------------------------------------------------
Dated: Address:
--------------------------------------------------- --------------------------------------------------
---------------------------------------------------------
(ZIP CODE)
---------------------------------------------------------
(AREA CODE AND TELEPHONE NUMBER)
</TABLE>
<PAGE>
IMPORTANT TAX INFORMATION
In order to ensure compliance with federal income tax requirements, each
holder of Shares is requested to provide the Exchange Agent with his or her
correct Taxpayer Identification Number and to certify whether he or she is
subject to backup federal income tax withholding by completing and signing the
Substitute Form W-9 below. See Instruction C6 and accompanying Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9.
PAYOR'S NAME: AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C>
PART 1--PLEASE PROVIDE YOUR TIN IN Social Security Number or
THE BOX AT RIGHT AND CERTIFY BY SIGNING AND Taxpayer Identification Number
SUBSTITUTE DATING BELOW. ----------------------------------------
FORM W-9 PART 2--Awaiting TIN / /
DEPARTMENT OF THE
TREASURY CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT (1) the
INTERNAL REVENUE SERVICE number shown on this form is my correct taxpayer identification number (or I am
waiting for a number to be issued to me) and (2) I am not subject to backup withholding
either because (a) I am exempt from backup withholding, (b) I have not been notified by the
PAYOR'S REQUEST FOR TAXPAYER Internal Revenue Service that I am subject to backup withholding as a result of
IDENTIFICATION NUMBER (TIN) the failure to report all interest or dividends, or (c) the Internal Revenue Service has
notified me that I am no longer subject to backup withholding.
Signature Date
------------------------------ ------------------
You must cross out item (2) above if you have been notified by the Internal
Revenue Service that you are currently subject to backup withholding because of
under reporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding, you
receive another notification from the IRS that you are no longer subject to
backup withholding, do not cross out such item (2).
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP WITHHOLDING OF 31% OF
ANY CASH PAYMENTS MADE TO YOU PURSUANT TO THE MERGER. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF
THE SUBSTITUTE FORM W-9.
CERTIFICATION OF AWAITING TAXPAYER
IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number has
not been issued to me, and either that (i) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (ii)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a Taxpayer Identification Number by the time of payment, 31%
of all reportable payments made to me will be withheld, but that such amounts
will be refunded to me if I then provide a Taxpayer Identification Number within
sixty (60) days.
Signature Date
------------------------------------------ --------------------
<PAGE>
INSTRUCTIONS
A. FORM OF ELECTION/LETTER OF TRANSMITTAL
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Form of Election/Letter of Transmittal must be guaranteed by
a firm which is a member of any registered national securities exchange or a
member of the National Association of Securities Dealers, Inc. or a bank,
broker, dealer, credit union, savings association or other entity that is a
member in good standing of the Securities Transfer Agent's Medallion Program,
the New York Stock Exchange Medallion Signature Guarantee Program or the Stock
Exchange Medallion Program (each, an 'Eligible Institution'). No signature
guarantee is required on this Form of Election/Letter of Transmittal if (a) this
Form of Election/Letter of Transmittal is signed by the registered holder(s)
(which term, for purposes of this document, shall include any participant in a
Book-Entry Transfer Facility whose name appears on a security position listing
as the owner of Shares) of Shares delivered herewith, unless such holder(s) has
completed either the box entitled 'Special Delivery Instructions' or the box
entitled 'Special Payment Instructions' on the reverse hereof. If a Share
Certificate is registered in the name of a person other than the signer of this
Form of Election/Letter of Transmittal, or if checks or certificates are to be
payable to the order of or registered in the name of a person other than the
registered holder(s), then the Share Certificate must be endorsed or accompanied
by appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on the Share Certificate, with the signature(s)
on such Share Certificate or stock powers guaranteed as described above. See
Instruction C2.
2. Delivery of Form of Election/Letter of Transmittal and Share
Certificates; Notice of Guaranteed Delivery. This Form of Election/Letter of
Transmittal is to be used either if Share Certificates are to be forwarded
herewith, if Shares are to delivered by book-entry transfer pursuant to
book-entry transfer procedures or if delivery of Shares is to be guaranteed.
Share Certificates evidencing all delivered Shares, or confirmation of a
book-entry transfer of such Shares, if such procedure is available, into the
Exchange Agent's account at one of the Book-Entry Transfer Facilities pursuant
to book-entry transfer procedures together with a properly completed and duly
executed Form of Election/Letter of Transmittal (or facsimile thereof) with any
required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message, as defined below) and any other documents required by this Form
of Election/Letter of Transmittal, must be received by the Exchange Agent at its
address set forth on the reverse hereof prior to the Election Deadline. If Share
Certificates are forwarded to the Exchange Agent in multiple deliveries, a
properly completed and duly executed Form of Election/Letter of Transmittal must
accompany each such delivery. National Re stockholders whose Share Certificates
are not immediately available and who cannot deliver their Share Certificates
and all other required documents to the Exchange Agent prior to the Election
Deadline or who cannot complete the procedure for delivery by book-entry
transfer on a timely basis may deliver their Shares pursuant to the guaranteed
delivery procedure. Pursuant to such procedure: (i) such delivery must be made
by or through an Eligible Institution; (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form provided
herewith, must be received by the Exchange Agent prior to the Election Deadline;
and (iii) in the case of a guarantee of Shares, the Share Certificates, in
proper form for transfer, or a confirmation of a book-entry transfer of such
Shares, if such procedure is available, into the Exchange Agent's account at one
of the Book-Entry Transfer Facilities, together with a properly completed and
duly executed Form of Election/Letter of Transmittal (or manually signed
facsimile thereof) with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message), and any other documents required by
this Form of Election/Letter of Transmittal, must be received by the Exchange
Agent within three New York Stock Exchange, Inc. trading days after the date of
execution of the Notice of Guaranteed Delivery. The term 'Agent's Message' means
a message, transmitted by a Book-Entry Transfer Facility to, and received by,
the Exchange Agent and forming a part of a book-entry confirmation, which states
that such Book-Entry Transfer Facility has received an express acknowledgment
from the participant in such Book-Entry Transfer Facility delivering the Shares,
that such participant has received and agrees to be bound by the terms of this
Form of Election/Letter of Transmittal and that General Re may enforce such
agreement against the participant.
Record holders of Shares who are nominees only may submit a separate Form
of Election/Letter of Transmittal for each beneficial owner for whom such record
holder is a nominee; provided, however, that at the request of the Exchange
Agent, such record holder shall certify to the satisfaction of the Exchange
Agent that such record holder holds such National Re Common Stock as nominee for
the beneficial owner thereof. Each
<PAGE>
beneficial owner for which a Form of Election/Letter of Transmittal is submitted
will be treated as a separate holder of National Re Common Stock.
National Re stockholders whose Forms of Election/Letters of Transmittal and
Share Certificates, or appropriate Notices of Guaranteed Delivery, are not
received prior to the Election Deadline or who cannot complete the procedure for
delivery by book-entry transfer on a timely basis will not be entitled to
specify their preference(s) and will receive shares of General Re Common Stock
in the Merger.
THE METHOD OF DELIVERY OF THIS FORM OF ELECTION/LETTER OF TRANSMITTAL,
SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF
THE STOCKHOLDER, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY, AND
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE TIMELY DELIVERY.
3. Inadequate Space. If the space provided herein under 'Type of Election'
is inadequate, the Share Certificate numbers, the number of Shares evidenced by
such Share Certificates and the number of Shares delivered should be listed on a
separate signed schedule and attached hereto.
4. Change or Revocation of Election. Any holder of Share Certificates may,
at any time prior to the Election Deadline, change his or her Election by
submitting to the Exchange Agent a properly completed and signed revised Form of
Election/Letter of Transmittal and all required additional documents, provided
that the Exchange Agent receives such revised Form of Election/Letter of
Transmittal and other necessary documents prior to the Election Deadline. Any
holder of Shares may, at any time prior to the Election Deadline, revoke his or
her prior valid Election by written notice received by the Exchange Agent prior
to the Election Deadline or by written withdrawal prior to the Election Deadline
of his or her Share Certificates (or of the Notice of Guaranteed Delivery of
such certificates) previously deposited with the Exchange Agent.
5. Automatic Revocations of Elections. All Elections will be revoked
automatically if the Exchange Agent is notified in writing by General Re that
the Merger Agreement has been terminated, and Share Certificates will be
promptly returned to the persons who have submitted them.
B. ELECTION AND ALLOCATION PROCEDURES
1. Elections. By completing the appropriate box above and completing this
Form of Election/Letter of Transmittal in accordance with the instructions
hereto, a National Re stockholder will be permitted to make a stock election
and/or a cash election (each, an 'Election') with respect to all or any portion
of the Shares held by such holder, provided that the Total Cash Consideration
cannot exceed 50% of the value of the outstanding shares of National Re Common
Stock.
Each National Re stockholder should consult his or her own financial
advisor and tax advisor as to the specific consequences of the Merger and
Election to such stockholder.
No alternative, conditional or contingent Elections will be accepted.
2. Allocations. If the Total Cash Consideration to be paid pursuant to
Cash Elections plus cash to be paid for fractional shares and for which
appraisal rights are exercised under Section 262 of the Delaware General
Corporation Law would be 50% or less of the value of the outstanding shares of
National Re Common Stock, each share for which a Cash Election is received will
be converted in the Merger into the right to receive the Cash Consideration. If
the Total Cash Consideration to be paid would exceed 50% of the value of the
outstanding shares of National Re Common Stock, the shares for which Cash
Elections are received will be converted into the right to receive the Cash
Consideration and the Stock Consideration in the following manner: (i) the
Exchange Agent would distribute the Cash Consideration for a fraction of such
shares for which a Cash Election has been made, the numerator of which would be
50% of the value (based on the closing price of shares of National Re Common
Stock on the last full trading day prior to the Effective Time) of the
outstanding shares of National Re Common Stock and the denominator would be the
value (based on the closing price of shares of National Re Common Stock on the
last full trading day prior to the Effective Time) of the aggregate number of
shares for which a Cash Election has been made plus cash to be paid for
fractional shares and for which appraisal rights are exercised under Section 262
of the Delaware General Corporation Law; and (ii) the Exchange Agent will
2
<PAGE>
distribute the Stock Consideration for any shares of National Re Common Stock
for which a Cash Election has been made and which are not fully converted into
the right to receive the Cash Consideration.
3. Treatment of Non-Electing Shares. Each Non-Electing Share will be
converted into the Stock Consideration without regard to the preference of such
holder of Shares.
4. Election Deadline. The Election Deadline for submitting this Form of
Election/Letter of Transmittal to the Exchange Agent is 5:00 p.m., New York City
time, on September 30, 1996, unless extended. General Re may extend the Election
Deadline to a later date so long as such later date is no later than the date on
which the Merger is consummated. If the Election Deadline is extended, General
Re will announce such extension in a news release delivered to the Dow Jones New
Service.
Failure of a holder of Shares to complete properly and to return this Form
of Election/Letter of Transmittal together with his or her Share Certificates,
or with an appropriate guarantee of delivery of Share Certificates, to the
Exchange Agent by the Election Deadline, or a holder of Shares who cannot
complete the procedure for delivery by book-entry transfer on a timely basis,
and who fails to comply with the election procedures described in the Proxy
Statement/Prospectus and this Form of Election/Letter of Transmittal (including
the instructions hereto) will cause each of such holder's Shares to be treated
as a 'Non-Electing Share' in the Merger and converted into the right to receive
the Stock Consideration without regard to the preference of such holder of
Shares.
* * *
A more complete description of the election and allocation procedures is
set forth in the Proxy Statement/Prospectus under 'The Merger--Election
Procedures.' All Elections are subject to compliance with the election
procedures provided for in the Merger Agreement. In connection with making any
Election, a National Re stockholder should read carefully, among other matters,
the description and statement of the information contained in the Proxy
Statement/Prospectus under 'The Merger--Certain Federal Income Tax
Consequences.'
C. RECEIPT OF MERGER CONSIDERATION, SIGNATURES, SPECIAL INSTRUCTIONS, TAXES AND
ADDITIONAL COPIES
1. Receipt of Merger Consideration. As soon as practicable after the
Effective Time, checks and certificates representing shares of General Re Common
Stock will be distributed to those holders who are entitled thereto and who have
surrendered their Share Certificates to the Exchange Agent for cancellation.
2. Signatures on Form of Election/Letter of Transmittal; Stock Powers and
Endorsements. (a) If this Form of Election/Letter of Transmittal is signed by
the registered holder(s) of the Shares delivered herewith, the signature(s) must
correspond with the name(s) as written on the face of the Share Certificates
evidencing such Shares without alteration, enlargement or any other change
whatsoever.
(b) If any Share delivered herewith is owned of record by two or more
persons, all such persons must sign this Form of Election/Letter of Transmittal.
(c) If any of the Shares delivered herewith are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Forms of Election/Letters of Transmittal as there are different
registrations of such Shares.
(d) If this Form of Election/Letter of Transmittal is signed by the
registered holder(s) of the Shares delivered herewith, no endorsements of Share
Certificates or separate stock powers are required, unless checks are to be
payable to the order of, or certificates evidencing shares of General Re Common
Stock are to be registered in the name of, a person other than the registered
holder(s), in which case, the Share Certificate(s) evidencing the Shares
delivered herewith must be endorsed or accompanied by appropriate stock powers,
in either case signed exactly as the name(s) of the registered holder(s)
appear(s) on such Share Certificate(s). Signatures on such Share Certificate(s)
and stock powers must be guaranteed by an Eligible Institution (unless signed by
an Eligible Institution).
(e) If this Form of Election/Letter of Transmittal is signed by a person
other than the registered holder(s) of the Shares delivered herewith, the Share
Certificate(s) evidencing the Shares delivered herewith must be
3
<PAGE>
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear(s) on such Share
Certificate(s). Signatures on such Share Certificate(s) and stock powers must be
guaranteed by an Eligible Institution (unless signed by an Eligible
Institution).
(f) If this Form of Election/Letter of Transmittal or any Share Certificate
or stock power is signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, such person should so indicate when signing, and
proper evidence satisfactory to General Re of such person's authority so to act
must be submitted.
3. Special Payment and Delivery Instructions. If any check or certificates
evidencing shares of General Re Common Stock are to be payable to the order of,
or registered in the name of, a person other than the person(s) signing this
Form of Election/Letter of Transmittal or if such checks or such certificates
are to be sent to someone other than the person(s) signing this Form of
Election/Letter of Transmittal or to the person(s) signing this Form of
Election/Letter of Transmittal but at an address other than that shown in the
box entitled 'Type of Election,' the appropriate boxes on this Form of
Election/Letter of Transmittal must be completed.
4. Stock Transfer Taxes. General Re will bear the liability for any state
stock transfer taxes applicable to the issuance and delivery of checks and
certificates in connection with the Merger, provided, however, that if any such
check or certificate is to be issued in a name other than that in which the
Share Certificates surrendered in exchange therefor are registered, it shall be
a condition of such exchange, and the issuance of any check or certificate, that
the person requesting such exchange shall either (i) pay to the Exchange Agent
the amount of any stock transfer taxes (whether imposed on the registered holder
or such person), payable on account of the transfer to such person, or (ii)
provide the Exchange Agent with satisfactory evidence of the payment of such
taxes or exemption therefrom.
EXCEPT AS PROVIDED IN THIS INSTRUCTION C4, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATES EVIDENCING THE
SHARES DELIVERED HEREWITH.
5. Requests for Assistance or Additional Copies. Requests for assistance
may be directed to the Exchange Agent at its address or telephone number set
forth above. Additional copies of the Proxy Statement/Prospectus, this Form of
Election/Letter of Transmittal and the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 may be obtained (i) from the
Exchange Agent, (ii) from D.F. King & Co., Inc., by calling (800) 669-5550, or
(iii) from brokers, dealers, commercial banks or trust companies.
6. Substitute Form W-9. Under the federal income tax law, a stockholder
who delivers Shares is required by law to provide the Exchange Agent (as payor)
with such stockholder's correct Taxpayer Identification Number ('TIN') on
Substitute Form W-9. If such stockholder is an individual, the TIN is such
stockholder's social security number. If the Exchange Agent is not provided with
the correct TIN, the stockholder may be subject to a $50 penalty imposed by the
Internal Revenue Service. In addition, payments of Cash Consideration that are
made to such stockholder with respect to Shares purchased pursuant to the Merger
may be subject to backup withholding of 31%. Certain stockholders (including,
among others, all corporations and certain foreign individuals) are not subject
to these backup withholding and reporting requirements. In order for a foreign
individual to qualify as an exempt recipient, such individual must submit a
statement, signed under penalties of perjury, attesting to such individual's
exempt status. Forms of such statements can be obtained from the Exchange Agent.
See the enclosed Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9 for additional instructions. If backup withholding
applies with respect to a stockholder, the Exchange Agent is required to
withhold 31% of any cash payments made to such stockholder. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
To prevent backup withholding on payments of Cash Consideration that are
made to a stockholder with respect to Shares delivered herewith, the stockholder
is required to notify the Exchange Agent of such stockholder's correct TIN by
completing the form below certifying (a) that the TIN provided on Substitute
Form W-9 is correct (or that such stockholder is awaiting a TIN) and (b) that
(I) such stockholder has not been notified by the Internal Revenue Service that
such stockholder is subject to backup withholding as a result of a failure to
4
<PAGE>
report all interest or dividends or (ii) the Internal Revenue Service has
notified such stockholder that such stockholder is no longer subject to backup
withholding.
The stockholder is required to give the Exchange Agent the TIN of the
record holder of the Shares tendered hereby. If the Shares are in more than one
name or are not in the name of the actual owner, consult the enclosed Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional guidance on which TIN to report. If the stockholder has not been
issued a TIN and has applied for a TIN or intends to apply for a TIN in the near
future, the stockholder should check the box in Part 2, sign and date the
Substitute Form W-9 and complete the Certification of Awaiting Taxpayer
Indentification Number. Notwithstanding that the box in Part 2 is checked and
the Certification of Awaiting Taxpayer Identification Number is completed, the
Exchange Agent will withhold 31% of all payments of Cash Consideration to such
stockholder until a properly certified TIN is provided to the Exchange Agent.
However, such amounts will be refunded to such stockholder if a TIN is provided
to the Exchange Agent within 60 days.
7. Lost, Destroyed or Stolen Share Certificates. If any Share
Certificate(s) representing Shares has been lost, destroyed or stolen prior to
the Effective Time, the National Re stockholder should promptly notify Chase-
Mellon Shareholder Services, LLC, the transfer agent for National Re, at 450
West 33rd Street, New York, NY 10001-2697, telephone number (212) 946-7490. The
National Re stockholder will then be instructed as to the steps that must be
taken in order to replace the Share Certificate(s). This Form of Election/Letter
of Transmittal and related documents cannot be processed until the procedures
for replacing lost or destroyed Share Certificates have been followed. Following
the Effective Time, if any Share Certificate(s) representing Shares has been
lost, destroyed or stolen, the stockholder should promptly notify the Exchange
Agent. The Exchange Agent's address is American Stock Transfer & Trust Company,
40 Wall Street, 46th Floor, New York, New York 10005, and its telephone number
is (800) 937-5449.
5
<PAGE>
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
(TO BE USED ONLY IF CERTIFICATES ARE NOT SURRENDERED WITH
THE FORM OF ELECTION/LETTER OF TRANSMITTAL)
A FORM OF ELECTION/LETTER OF TRANSMITTAL, PROPERLY COMPLETED AND SIGNED, MUST BE
SUBMITTED ALONG WITH THIS GUARANTEE OF DELIVERY IN ORDER TO MAKE AN EFFECTIVE
ELECTION. SUBMISSION OF THIS GUARANTEE OF DELIVERY ALONE, WITHOUT A PROPERLY
COMPLETED AND SIGNED FORM OF ELECTION/LETTER OF TRANSMITTAL, DOES NOT CONSTITUTE
AN EFFECTIVE ELECTION AND WILL NOT PRESERVE THE HOLDER'S RIGHT TO MAKE AN
ELECTION.
Ladies and Gentlemen:
In connection with the proposed Merger (as defined in the Form of
Election/Letter of Transmittal), the undersigned record holder hereby agrees to
deliver, subject to the conditions set forth in the Form of Election/Letter of
Transmittal, the number of Shares indicated below pursuant to the guaranteed
delivery procedures set forth in the Form of Election/Letter of Transmittal.
<TABLE>
<S> <C>
-------------------------------------------------
Number of Shares:
- ------------------------------------------------- -------------------------------------------------
Certificate Nos. (if available): (NAME(S) OF RECORD HOLDER(S)--PLEASE PRINT)
-------------------------------------------------
- -------------------------------------------------
Check ONE box if Shares will be delivered by book-entry -------------------------------------------------
transfer and note account number: (ADDRESS(ES))
/ / The Depository Trust Company -------------------------------------------------
/ / Philadelphia Depository Trust Company (ZIP CODE)
-------------------------------------------------
Account Number: (AREA CODE AND TELEPHONE NO.)
------------------------------
-------------------------------------------------
(SIGNATURE OF RECORD HOLDER)
-------------------------------------------------
Dated:
----------------------------------------
</TABLE>
<TABLE>
<S> <C>
The undersigned is an Eligible Institution (as defined in the -------------------------------------------------
Form of Election/Letter of Transmittal), and guarantees to (NAME OF FIRM)
deliver to the Exchange Agent the certificates representing -------------------------------------------------
the Shares to which the accompanying Form of Election/Letter (AUTHORIZED SIGNATURE)
of Transmittal relates, duly endorsed in blank or otherwise in -------------------------------------------------
form acceptable for transfer on the books of National Re, (ADDRESS)
along with a properly completed and signed Form of -------------------------------------------------
Election/Letter of Transmittal and any other required doc- (ZIP CODE)
uments, no later than 5:00 p.m., New York City time, prior to -------------------------------------------------
the third New York Stock Exchange trading day after the (AREA CODE AND TELEPHONE NUMBER)
Election Deadline.
Dated:
------------------------------------------
</TABLE>
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS FORM. SHARE CERTIFICATES
SHOULD ONLY BE SENT WITH YOUR FORM OF ELECTION/LETTER OF TRANSMITTAL.
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
SHARES OF COMMON STOCK
OF
NATIONAL RE CORPORATION
As set forth in the Form of Election/Letter of Transmittal, this form, or
one substantially equivalent hereto, must be used to effectuate an Election (as
defined in the Form of Election/Letter of Transmittal) if certificates for
shares of the common stock, no par value per share ('National Re Common Stock'
or the 'Shares'), of National Re Corporation, a Delaware corporation ('National
Re'), are not immediately available or if the procedure for book-entry transfer
cannot be completed on a timely basis or time will not permit certificates
representing Shares covered by the Form of Election/Letter of Transmittal to
reach the Exchange Agent by 5:00 p.m., New York City time, on September 30,
1996, unless such deadline is extended. This Notice of Guaranteed Delivery must
be delivered (the method of delivery is at the option and risk of the
stockholder) to American Stock Transfer & Trust Company (the 'Exchange Agent').
See the Instructions to the Form of Election/Letter of Transmittal.
The Exchange Agent is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By Hand or Overnight Delivery: By Mail:
American Stock Transfer & Trust Company American Stock Transfer & Trust Company
40 Wall Street, 46th Floor 40 Wall Street, 46th Floor
New York, New York 10005 New York, New York 10005
By Facsimile
(For Eligible Institutions Only):
(718) 234-5001
Confirm by Telephone:
(800) 937-5449
------------------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON THE
FORM OF ELECTION/LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN
'ELIGIBLE INSTITUTION' (AS DEFINED UNDER THE INSTRUCTIONS THERETO), SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE FORM OF ELECTION/LETTER OF TRANSMITTAL.
<PAGE>
MERGER OF
NATIONAL RE CORPORATION
WITH AND INTO
N ACQUISITION CORPORATION,
A WHOLLY OWNED SUBSIDIARY OF
GENERAL RE CORPORATION
August 29, 1996
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees
In connection with the proposed merger (the 'Merger') of National Re
Corporation ('National Re') with and into N Acquisition Corporation, a wholly
owned subsidiary of General Re Corporation ('General Re'), each share of common
stock, no par value per share, of National Re ('National Re Common Stock' or the
'Shares') will, subject to certain limitations, be converted into the right to
receive (i) $53 in shares of common stock, par value $.50 per share, of General
Re (the 'General Re Common Stock'), together with the attached preferred share
purchase rights (the 'Stock Consideration'); provided that General Re will not
issue more than .39259 nor less than .32121 shares of General Re Common Stock
per share of National Re Common Stock or (ii) $53 in cash, without interest
thereon (the 'Cash Consideration').
Record holders of Shares may elect to receive Cash Consideration or Stock
Consideration in the Merger by completing the enclosed Form of Election/Letter
of Transmittal. Only record holders of Shares can execute the Form of
Election/Letter of Transmittal and thus make an election as described in the
enclosed materials. Such elections are subject to (i) the terms, conditions and
limitations described in the Proxy Statement/Prospectus dated August 27, 1996
relating to the Merger (the 'Proxy Statement/Prospectus'), (ii) the terms of the
Agreement and Plan of Merger, dated as of July 1, 1996 (the 'Merger Agreement'),
attached as Annex I to the Proxy Statement/Prospectus and (iii) the instructions
set forth in the Form of Election/Letter of Transmittal enclosed herewith.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following documents:
1. The Proxy Statement/Prospectus, dated August 27, 1996, relating to
the Merger;
2. The Form of Election/Letter of Transmittal pursuant to which a
record holder of Shares may elect to receive the Cash Consideration or the
Stock Consideration in the Merger;
3. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9;
4. A letter that may be sent to your clients for whose account you
hold Shares registered in your name or in the name of your nominees, with
space provided for obtaining clients' instructions with respect to the Form
of Election/Letter of Transmittal;
5. A Notice of Guaranteed Delivery to be used if certificates for
Shares are not immediately available or if the procedure for book-entry
transfer cannot be completed on a timely basis or time will not permit
certificates for Shares covered by the Form of Election/Letter of
Transmittal to reach American Stock Transfer & Trust Company, the Exchange
Agent, by the current election deadline, 5:00 p.m., New York City time, on
September 30, 1996; and
6. A return envelope addressed to the Exchange Agent.
WE URGE YOU TO CONTACT YOUR CLIENTS AS SOON AS POSSIBLE. THE DEADLINE FOR
RECEIPT OF FORMS OF ELECTION/LETTERS OF TRANSMITTAL BY THE EXCHANGE AGENT IS
5:00 P.M., NEW YORK CITY TIME, ON SEPTEMBER 30, 1996, UNLESS EXTENDED.
<PAGE>
ALTHOUGH THERE CAN BE NO ASSURANCE THAT A HOLDER OF SHARES OF NATIONAL RE
COMMON STOCK WHO DESIRES TO RECEIVE THE CASH CONSIDERATION WILL RECEIVE SUCH
CONSIDERATION AS TO ALL OF HIS OR HER SHARES, A HOLDER OF SHARES OF NATIONAL RE
COMMON STOCK HAVING A PREFERENCE FOR THE CASH CONSIDERATION SHOULD MAKE AN
ELECTION BECAUSE SHARES AS TO WHICH AN ELECTION HAS NOT BEEN MADE WILL RECEIVE
THE STOCK CONSIDERATION IN THE MERGER. NONE OF GENERAL RE, NATIONAL RE, THE
NATIONAL RE BOARD OF DIRECTORS OR THE GENERAL RE BOARD OF DIRECTORS MAKES ANY
RECOMMENDATION AS TO WHETHER STOCKHOLDERS SHOULD ELECT TO RECEIVE THE CASH
CONSIDERATION OR THE STOCK CONSIDERATION IN THE MERGER. EACH STOCKHOLDER MUST
MAKE HIS OR HER OWN DECISION WITH RESPECT TO SUCH ELECTION. IF A STOCKHOLDER
MAKES NO ELECTION, HE OR SHE WILL RECEIVE THE STOCK CONSIDERATION IN THE MERGER
AS DESCRIBED IN THE PROXY STATEMENT/PROSPECTUS.
Failure of a record holder of Shares to complete properly and to return the
Form of Election/Letter of Transmittal together with his or her Share
certificates, or with an appropriate guarantee of delivery of Share
certificates, to the Exchange Agent by the Election Deadline, or a record holder
of Shares who cannot complete the procedure for delivery by book-entry transfer
on a timely basis, and who fails to comply with the election procedures
described in the Proxy Statement/Prospectus and the Form of Election/Letter of
Transmittal (including the instructions thereto) will cause such holder's Shares
to be converted into the right to receive the Stock Consideration without regard
to the preference of such holder of Shares.
Record holders of Shares whose Share certificates are not immediately
available and who cannot deliver their Share certificates and all other required
documents to the Exchange Agent prior to the Election Deadline or who cannot
complete the procedure for delivery by book-entry transfer on a timely basis may
deliver their Shares pursuant to the guaranteed delivery procedures described in
Instruction 2 to the Form of Election/Letter of Transmittal.
Requests for assistance may be directed to the Exchange Agent at its
address or telephone number set forth on the first page of the Form of
Election/Letter of Transmittal. Additional copies of the Proxy Statement/
Prospectus, the Form of Election/Letter of Transmittal or any of the enclosed
materials may be obtained from the (i) Exchange Agent or (ii) D.F. King & Co.,
Inc., by calling (800) 669-5550.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY PERSON AS AN AGENT OF GENERAL RE, NATIONAL RE, THE EXCHANGE AGENT OR ANY
AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY PERSON TO USE ANY
DOCUMENTS OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE
MERGER OTHER THAN THE DOCUMENTS ENCLOSED AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE>
MERGER OF
NATIONAL RE CORPORATION
WITH AND INTO
N ACQUISITION CORPORATION,
A WHOLLY OWNED SUBSIDIARY OF
GENERAL RE CORPORATION
August 29, 1996
To Our Clients:
Enclosed for your consideration is a copy of the Proxy
Statement/Prospectus, dated August 27, 1996 (the 'Proxy Statement/Prospectus'),
the related Form of Election/Letter of Transmittal and the Internal Revenue
Service's Guidelines for Certification of Taxpayer Identification Number in
connection with the merger (the 'Merger') of National Re Corporation, a Delaware
corporation ('National Re'), with and into N Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of General Re Corporation, a Delaware
corporation ('General Re').
As described in the enclosed materials, in connection with the Merger, each
share of the common stock, no par value per share, of National Re ('National Re
Common Stock' or the 'Shares') will be converted into the right to receive, at
the election of the record holder thereof, (i) $53 in shares of common stock,
par value $.50 per share, of General Re (the 'General Re Common Stock'),
together with the attached preferred share purchase rights (the 'Stock
Consideration'); provided that General Re will not issue more than .39259 nor
less than .32121 shares of General Re Common Stock per share of National Re
Common Stock or (ii) $53 in cash, without interest thereon (the 'Cash
Consideration'). Such elections are subject to (i) the terms, conditions and
limitations described in the Proxy Statement/Prospectus, (ii) the terms of the
Agreement and Plan of Merger, dated as of July 1, 1996 (the 'Merger Agreement'),
attached as Annex I to the Proxy Statement/Prospectus and (iii) the instructions
set forth in the Form of Election/Letter of Transmittal enclosed herewith.
This material is being sent to you as the beneficial owner of Shares held
by us for your account but not registered in your name. We are the holder of
record of the Shares held by us in your account. Accordingly, you must give us
instructions using the instruction form provided below (and not using the Form
of Election/Letter of Transmittal, which is furnished for your information only)
as to whether you wish to receive, for each share of National Re Common Stock
held by us in your account, the Cash Consideration or the Stock Consideration.
Only we, as record holder of your Shares, can execute and submit a Form of
Election/Letter of Transmittal on your behalf.
ALTHOUGH THERE CAN BE NO ASSURANCE THAT A BENEFICIAL HOLDER OF SHARES OF
NATIONAL RE COMMON STOCK WHO DESIRES TO RECEIVE THE CASH CONSIDERATION WILL
RECEIVE SUCH CONSIDERATION AS TO ALL OF HIS OR HER SHARES, A BENEFICIAL HOLDER
OF SHARES OF NATIONAL RE COMMON STOCK HAVING A PREFERENCE FOR THE CASH
CONSIDERATION SHOULD PROVIDE INSTRUCTIONS SO THAT WE MAY MAKE A CASH ELECTION ON
HIS OR HER BEHALF BECAUSE SHARES AS TO WHICH AN ELECTION HAS NOT BEEN MADE WILL
RECEIVE THE STOCK CONSIDERATION IN THE MERGER. NONE OF GENERAL RE, NATIONAL RE,
THE NATIONAL RE BOARD OF DIRECTORS OR THE GENERAL RE BOARD OF DIRECTORS MAKES
ANY RECOMMENDATION AS TO WHETHER STOCKHOLDERS SHOULD ELECT TO RECEIVE THE CASH
CONSIDERATION OR THE STOCK CONSIDERATION IN THE MERGER. EACH STOCKHOLDER MUST
MAKE HIS OR HER OWN DECISION WITH RESPECT TO SUCH ELECTION. IF A STOCKHOLDER
MAKES NO ELECTION, HE OR SHE WILL RECEIVE THE STOCK CONSIDERATION IN THE MERGER
AS DESCRIBED IN THE PROXY STATEMENT/PROSPECTUS.
<PAGE>
You do not have to submit any certificates for Shares. As record holder, we
will submit the certificates on your behalf.
THE DEADLINE BY WHICH WE MUST SUBMIT YOUR ELECTION TO AMERICAN STOCK TRANSFER &
TRUST COMPANY, THE EXCHANGE AGENT, IS 5:00 P.M., NEW YORK CITY TIME, ON
SEPTEMBER 30, 1996, UNLESS EXTENDED. PLEASE RETURN THIS INSTRUCTION FORM AS
PROMPTLY AS PRACTICABLE SO WE MAY SUBMIT YOUR ELECTION TO THE EXCHANGE AGENT BY
SUCH ELECTION DEADLINE. IF INSTRUCTIONS ARE NOT PROVIDED TO US IN A TIMELY
FASHION, YOU WILL RECEIVE THE STOCK CONSIDERATION IN EXCHANGE FOR YOUR SHARES.
WITH RESPECT TO SHARES HELD BY US IN YOUR ACCOUNT, YOU CAN ONLY MAKE AN
ELECTION USING THE INSTRUCTION FORM PROVIDED BELOW. DO NOT COMPLETE THE FORM OF
ELECTION/LETTER OF TRANSMITTAL WITH RESPECT TO SHARES HELD BY US IN YOUR ACCOUNT
AS ONLY WE, AS RECORD HOLDER OF YOUR SHARES, CAN EXECUTE AND SUBMIT A FORM OF
ELECTION/LETTER OF TRANSMITTAL ON YOUR BEHALF.
2
<PAGE>
INSTRUCTION FORM
WITH RESPECT TO THE
MERGER OF
NATIONAL RE CORPORATION
WITH AND INTO
N ACQUISITION CORPORATION,
A WHOLLY OWNED SUBSIDIARY OF
GENERAL RE CORPORATION
The undersigned acknowledge(s) receipt of the Proxy Statement/Prospectus,
the related Form of Election/Letter of Transmittal and the Internal Revenue
Service's Guidelines for Certification of Taxpayer Identification Number.
This form will instruct you that the undersigned hereby elects to receive
the Cash Consideration and/or the Stock Consideration as indicated below,
subject to (i) the terms, conditions and limitations described in the Proxy
Statement/Prospectus, (ii) the terms of the Merger Agreement and (iii) the
instructions set forth in the related Form of Election/Letter of Transmittal.
1. Cash Consideration for ____________ Shares.
2. Stock Consideration for ____________ Shares.
DATED: _______________________________
--------------------------------------
--------------------------------------
(SIGNATURE(S) OF OWNER(S))
NAME(S): _____________________________
(PLEASE PRINT)
--------------------------------------
CAPACITY (FULL TITLE): _______________
ADDRESS(ES): _________________________
--------------------------------------
--------------------------------------
(ZIP CODE)
--------------------------------------
(AREA CODE AND TELEPHONE NUMBER(S))
--------------------------------------
(TAX IDENTIFICATION OR SOCIAL
SECURITY NUMBER(S))
3
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ------------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ------------------------------------------------------------
<S> <C> <C>
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of the account or,
account) if combined funds, the first
individual on the account(1)
3. Husband and wife (joint account) The actual owner of the account or,
if joint funds, either person(1)
4. Custodian account of a minor (Uniform The minor(2)
Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the minor is the
only contributor, the minor(1)
6. Account in the name of guardian or The ward, minor, or incompetent
committee for a designated ward, person(3)
minor, or incompetent person
7. a. The usual revocable savings trust The grantor-trustee(1)
account (grantor is also trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust under
State law
8. Sole proprietorship account The owner(4)
</TABLE>
- ------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ------------------------------------------------------------
<S> <C> <C>
9. A valid trust, estate, or pension The legal entity (Do not furnish the
trust identifying number of the personal
representative or trustee unless the
legal entity itself is not designated
in the account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or educational The organization
organization account
12. Partnership account held in the name The partnership
of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a State or local
government, school district, or
prison) that receives agricultural
program payments
</TABLE>
- ------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
o A corporation.
o A financial institution.
o An organization exempt from tax under section 501(a), or an individual
retirement plan.
o The United States or any agency or instumentality thereof.
o A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
o A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
o An international organization, or any agency or instrumentality thereof.
o A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under section 584(a).
o An exempt charitable remainder trust, or a nonexempt trust described in
section 4947(a)(1).
o An entity registered at all times under the Investment Company Act of 1940.
o A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
o Payments to nonresident aliens subject to withholding under section 1441.
o Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
o Payments of patronage dividends where the amount received is not paid in
money.
o Payments made by certain foreign organizations.
o Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
o Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
o Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
o Payments described in section 6049(b)(5) to non-resident aliens.
o Payments on tax-free covenant bonds under section 1451.
o Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYOR, CERTIFY YOUR TAXPAYER
IDENTIFICATION NUMBER ON PART II OF THE FORM, WRITE 'EXEMPT' ON THE FACE OF THE
FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYOR. IF THE PAYMENTS ARE
INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6042, 6044, 6045, 6049, 6050A, and 6050N.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payors must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payor. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. --If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be subject to a
penalty of 20% on any portion of an under-payment attributable to that failure
unless it is shown that you acted with reasonable cause and in good faith.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--
Falsifying certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
NATIONAL RE CORPORATION
777 LONG RIDGE ROAD
STAMFORD, CT 06904
(203) 329-7700
August 29, 1996
Dear Stockholder:
Enclosed for your consideration is a copy of the Form of Election/Letter of
Transmittal and the Internal Revenue Service's Guidelines for Certification of
Taxpayer Identification Number in connection with the merger (the 'Merger') of
National Re Corporation, a Delaware corporation ('National Re'), with and into N
Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of
General Re Corporation, a Delaware corporation ('General Re') pursuant to which
you may elect to receive the Stock Consideration (as defined below) or the Cash
Consideration (as defined below). Also enclosed is a return envelope addressed
to American Stock Transfer & Trust Company, the Exchange Agent, for you to
return the Form of Election/Letter of Transmittal.
As described in the Proxy Statement/Prospectus, dated August 27, 1996 (the
'Proxy Statement/Prospectus'), which was distributed under separate cover, in
connection with the Merger, each share of the common stock, no par value per
share, of National Re ('National Re Common Stock' or the 'Shares') will be
converted into the right to receive, at the election of the record holder
thereof, (i) $53 in shares of common stock, par value $.50 per share, of General
Re (the 'General Re Common Stock'), together with the attached preferred share
purchase rights (the 'Stock Consideration'); provided that General Re will not
issue more than .39259 nor less than .32121 shares of General Re Common Stock
per share of National Re Common Stock or (ii) $53 in cash, without interest
thereon (the 'Cash Consideration'). Such elections are subject to (i) the terms,
conditions and limitations described in the Proxy Statement/Prospectus, (ii) the
terms of the Agreement and Plan of Merger, dated as of July 1, 1996 (the 'Merger
Agreement'), attached as Annex I to the Proxy Statement/Prospectus and (iii) the
instructions set forth in the Form of Election/Letter of Transmittal enclosed
herewith.
ALTHOUGH THERE CAN BE NO ASSURANCE THAT A HOLDER OF SHARES OF NATIONAL RE
COMMON STOCK WHO DESIRES TO RECEIVE THE CASH CONSIDERATION WILL RECEIVE SUCH
CONSIDERATION AS TO ALL OF HIS OR HER SHARES, A HOLDER OF SHARES OF NATIONAL RE
COMMON STOCK HAVING A PREFERENCE FOR THE CASH CONSIDERATION SHOULD MAKE A CASH
ELECTION BECAUSE SHARES AS TO WHICH AN ELECTION HAS NOT BEEN MADE WILL RECEIVE
THE STOCK CONSIDERATION IN THE MERGER. NONE OF GENERAL RE, NATIONAL RE, THE
NATIONAL RE BOARD OF DIRECTORS OR THE GENERAL RE BOARD OF DIRECTORS MAKES ANY
RECOMMENDATION AS TO WHETHER STOCKHOLDERS SHOULD ELECT TO RECEIVE THE CASH
CONSIDERATION OR THE STOCK CONSIDERATION IN THE MERGER. EACH STOCKHOLDER MUST
MAKE HIS OR HER OWN DECISION WITH RESPECT TO SUCH ELECTION. IF A STOCKHOLDER
MAKES NO ELECTION, HE OR SHE WILL RECEIVE THE STOCK CONSIDERATION IN THE MERGER
AS DESCRIBED IN THE PROXY STATEMENT/PROSPECTUS.
<TABLE>
<S> <C>
THE DEADLINE BY WHICH YOU MUST SUBMIT YOUR ELECTION TO AMERICAN STOCK TRANSFER & TRUST COMPANY, THE EXCHANGE
AGENT, IS 5:00 P.M., NEW YORK CITY TIME, ON SEPTEMBER 30, 1996, UNLESS EXTENDED.
<CAPTION>
</TABLE>
Your prompt cooperation will be greatly appreciated.
Very truly yours,
Anne M. Quinn
Secretary
