<PAGE> 1
OMB APPROVAL
-------------------------
OMB Number. 3235-0145
Expires: August 31, 1991
Estimated average burden
hours per response..14 gn
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )*
Warner Insurance Services, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, par value $.01 per share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
934467 10 1
- --------------------------------------------------------------------------------
(CUSIP Number)
Kathryn Pietrowiak, Esquire, CIGNA Corporation, S-215, 900 Cottage Grove Road,
Hartford, CT, 06152-2215, Tel: 203-726-8908, with a copy to Steven N. Haas,
Esquire, Cozen and O'Connor, 1900 Market Street, Philadelphia, PA 19103,
Tel: 215-665-4171
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
March 1, 1996
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with the statement /X/. (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE> 2
SCHEDULE 13D
CUSIP NO. 934467 10 1 PAGE 2 OF 15 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
CIGNA Corporation
Tax I.D. #: 06-1059331
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) / /
(b) /X/
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
Other - 00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES -0-
BENEFICIALLY -----------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 3,657,797
PERSON -----------------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
-0-
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
3,657,797
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,657,797
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
28.14%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
HC
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 3
SCHEDULE 13D
CUSIP NO. 934467 10 1 PAGE 3 OF 15 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Atlantic Employers Insurance Company
Tax I.D. #23-2173820
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) / /
(b) /X/
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
Other - 00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEW JERSEY
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES -0-
BENEFICIALLY -----------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 3,657,797
PERSON -----------------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
-0-
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
3,657,797
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,657,797
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
28.14%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IC
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 4
CUSIP NO. 934467 10 1 Schedule 13D Page 4 of 15 Pages
Item 1 Security and Issuer
This statement relates to shares of Common Stock, par
value $.01 per share (the "Shares"), of Warner Insurance
Services, Inc. (the "Issuer"). The principal executive
offices of the Issuer are located at 17-01 Pollitt Drive,
Fair Lawn, NJ 07410.
Item 2 Identity and Background
(a)-(c) This statement is being filed by Atlantic Employers
Insurance Company, a New Jersey corporation ("Atlantic"), and
CIGNA Corporation, a Delaware corporation ("CIGNA"). CIGNA is
deemed to beneficially own the Shares which are the subject of
this statement because it is the ultimate parent corporation
of Atlantic. The principal business address of Atlantic is
Two Liberty Place, 1601 Chestnut Street, Philadelphia, PA
19192. The principal business address of CIGNA is One Liberty
Place, 1650 Market Street, Philadelphia, PA 19192. The
present principal business of Atlantic is to transact property
and casualty insurance. The present principal business of
CIGNA is to act as a holding company for various subsidiaries
which provide insurance, healthcare and financial services.
The directors and executive officers of Atlantic are
as follows:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Barry L. Adams Vice President, Assistant Treasurer
Harold W. Albert Director
Paul Bergsteinsson Vice President, Assistant Treasurer
Marcy F. Blender Vice President, Treasurer
Robert W. Burgess Director
Michael J. Daly Vice President
Darrell L. DeMoss Vice President
Robert H. Dowe Vice President
</TABLE>
<PAGE> 5
CUSIP NO. 934467 10 1 Schedule 13D Page 5 of 15 Pages
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Richard C. Franklin President, Chief Underwriting Officer, Director
Michael E. Grady Vice President
Sharon I. Helldorfer Vice President
Richard A. Hinckely, Jr. Vice President
Robert P. Irvan Director, Vice President,
Chief Financial Officer, Chief Actuary
Gerald A. Isom Chairman of the Board, Director
Dennis P. Kane Director, Vice President
Mac D. Livingston Vice President
John A. Murphy, Jr. Director, Vice President, Chief Counsel
William Palgutt Director
Jane E. Pell Vice President
Geraldine F. Prusko Director, Vice President
Arthur C. Reeds, III Director
James A. Sears Vice President, Controller
Joseph Stagliano Vice President, Assistant Controller
Richard W. Wratten Director
</TABLE>
The principal business address of Messrs. Albert,
Burgess and Reeds is c/o CIGNA Corporation, 900 Cottage Grove
Road, Hartford, CT 06152. The principal business address of
each of the other above-listed persons is c/o Atlantic, Two
Liberty Place, 1601 Chestnut Street, Philadelphia, PA 19192.
The present principal occupation of each of the above-named
individuals is fulfilling his or her duties in a
<PAGE> 6
CUSIP NO. 934467 10 1 Schedule 13D Page 6 of 15 Pages
management position on behalf of CIGNA or one or more of its
wholly-owned affiliates.
The directors and executive officers of CIGNA are as
follows:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Robert P. Bauman Director
Robert H. Campbell Director
Alfred C. DeCrane Director
James F. English, Jr. Director
Bernard M. Fox Director
H. Edward Hanway President, CIGNA Healthcare
Gerald A. Isom President, CIGNA Property & Casualty
Frank S. Jones Director
Thomas C. Jones President, CIGNA Individual Insurance
Gerald D. Laubach, Ph.D. Director
John K. Leonard President, CIGNA Group Insurance-Life Accident Disability
Donald M. Levinson Executive Vice President, Human Resources
Marilyn W. Lewis Director
Francine M. Newman President, CIGNA Reinsurance-Life Accident Health
Byron D. Oliver President, CIGNA Retirement & Investment Services
Paul F. Oreffice Director
</TABLE>
<PAGE> 7
CUSIP NO. 934467 10 1 Schedule 13D Page 7 of 15 Pages
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Arthur C. Reeds President, CIGNA Investment Management
Kingsley Schubert President, CIGNA International
Charles R. Shoemate Director
James G. Stewart Executive Vice President, Chief Financial Officer
Louis W. Sullivan, M.D. Director
Wilson H. Taylor Chairman of the Board, Chief Executive Officer, Director
Thomas J. Wagner Executive Vice President, General Counsel
Carol Cox Wait Director
Ezra K. Zilkha Director
</TABLE>
The principal business address of Mr. Oliver is CIGNA
Corporation, Metro Center, 350 Church Street, P.O. Box 2975,
Hartford, CT 06104-3120. The principal business address of
Messrs. Hanway, T. Jones, and Reeds and Ms. Newman is CIGNA
Corporation, 900 Cottage Grove Road, Hartford, CT 06152.
The principal business address of Messrs. Isom, Leonard and
Schubert is c/o CIGNA Corporation, Two Liberty Place, 1601
Chestnut Street, Philadelphia, PA 19192. The principal
business address of each of the other above-listed persons is
c/o CIGNA Corporation, One Liberty Place, 1650 Market Street,
Philadelphia, PA 19192.
The present principal occupation of each of Messrs.
Hanway, Isom, T. Jones, Leonard, Levinson, Oliver, Reeds,
Schubert, Stewart, Taylor, Wagner and Ms. Newman is fulfilling
his or her respective duties as an officer and/or director of
CIGNA.
Mr. Bauman presently is the Non-Executive Chairman
of British Aerospace plc.
Mr. Campbell presently is the Chairman, President
and Chief Executive Officer of Sun Company, Inc.
<PAGE> 8
CUSIP NO. 934467 10 1 Schedule 13D Page 8 of 15 Pages
Mr. DeCrane presently is the Chairman of the Board and
Chief Executive Officer of Texaco, Inc.
Mr. English presently is President Emeritus, Trinity
College.
Mr. Fox presently is the President and Chief Executive
Officer of Northeast Utilities.
Mr. F. Jones presently is Ford Professor Emeritus of
Urban Affairs at the Massachusetts Institute of Technology.
Dr. Laubach is a retired President of Pfizer, Inc.
Ms. Lewis presently is the Chairman of American Water
Works Company.
Mr. Oreffice is a retired Chairman of the Board of The
Dow Chemical Company.
Mr. Shoemate presently is the Chairman, President and
Chief Executive Officer of CPC International, Inc.
Dr. Sullivan presently is the President of Morehouse
School of Medicine.
Ms. Cox Wait presently is the President of the
Committee for a Responsible Federal Budget.
Mr. Zilkha presently is President of Zilkha & Sons,
Inc.
(d) During the last five years, none of Atlantic, CIGNA or any of
their respective directors or executive officers referred to above
(collectively the "Management") has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors).
(e) During the last five years, none of Atlantic, CIGNA or any of
the Management has been a party to any civil proceeding of a judicial
or administrative body of competent jurisdiction as a result of which
it or he/she was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violations
with respect to such laws.
<PAGE> 9
CUSIP NO. 934467 10 1 Schedule 13D Page 9 of 15 Pages
(f) All of the natural persons listed above are citizens of the
United States.
Item 3 Source and Amount of Funds or Other Consideration
Atlantic acquired beneficial ownership of 3,657,797 Shares,
including 1,181,250 Shares issuable upon the exercise of a Common
Stock Purchase Warrant exercisable within 60 days (the "Warrant), as a
result of the restructuring of the Issuer (the "Transaction") pursuant
to the terms of a Restructuring Agreement dated March 1, 1996 among
the Issuer, Atlantic, Pacific Employers Insurance Company ("Pacific"),
Electric Insurance Company ("Electric"), The Robert Plan Corporation
("RPC"), Material Damage Adjustment Corporation ("MDAC"), Lion
National Insurance Company ("Lion"), and National Consumer Insurance
Company ("NCIC") (the "Restructuring Agreement"). A copy of the
Restructuring Agreement and Warrant are attached hereto as Exhibits 1
and 2, respectively. Pacific also is an indirect wholly-owned
subsidiary of CIGNA, but is not deemed a beneficial owner of Shares
pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Act").
The Transaction was effectuated to improve the Issuer's
financial position and to permit the Issuer to focus on the business
of its wholly-owned subsidiary, COVER-ALL Systems, Inc. ("COVER-ALL"),
which develops software products for the property and casualty
insurance industry. As reported in the Issuer's Forms 10-Q for the
Quarters June 30 and September 30, 1995, the Issuer encountered
financial difficulties resulting from, among other things: (i)
litigation between the Issuer and MDAC; (ii) litigation between the
Issuer and NCIC, Lion and RPC; (iii) litigation between the Issuer and
a former officer of the Issuer, who also was an officer and director
of COVER-ALL; (iv) operational losses suffered by its insurance
services group ("ISG"); and (v) operational losses suffered by
COVER-ALL.
Prior to the Transaction, the Issuer, through its ISG,
provided services to the automobile insurance industry including,
among other services, underwriting, data processing and claims and
policy administration. The Issuer provided those services to Atlantic
and Pacific in support of their respective automobile insurance
businesses in New Jersey in accordance with
<PAGE> 10
CUSIP NO. 934467 10 1 Schedule 13D Page 10 of 15 Pages
the terms of a Service Agreement dated April 25, 1991 (the "Service
Agreement").
Pursuant to the Service Agreement, the Issuer was obligated to
provide to Atlantic and Pacific, among other services, claims and
policy administration, and was subject to certain loss ratio
incentives and penalties. As of the closing of the Transaction, the
Issuer was, or was estimated to become, indebted to Atlantic and
Pacific for amounts in excess of $15,000,000 for the value of
pre-paid services and contingent loss ratio fees over the remainder
of the term of the Service Agreement.
Through the Transaction, the Issuer was restructured
principally as follows: (i) the Issuer sold the assets related to the
ISG to MDA Services, Inc.; (ii) Atlantic and the other ISG customers,
including Pacific, terminated their respective service agreements with
the Issuer and released the Issuer from liability thereunder; and
(iii) the Issuer settled its litigation with MDAC, RPC, Lion and NCIC.
Specifically, under the Restructuring Agreement, Atlantic and
Pacific terminated the Service Agreement and released the Issuer from
future liability thereunder, in consideration for which the Issuer
issued to Atlantic 2,476,547 Shares (the "Settlement Shares"), the
Warrant to purchase an additional 1,181,250 Shares (the "Warrant
Shares"), and $675,000 in cash. In addition, Atlantic was granted
the right (together with the other parties to the Restructuring
Agreement to whom Shares also were issued) to designate one member to
the Issuer's Board of Directors. The Settlement Shares and the
Warrant Shares carry certain registration rights as more specifically
set forth in the Restructuring Agreement.
Subject to the terms of the Warrant, Atlantic is entitled to
purchase the Warrant Shares at any time on or before February 28, 2001
for an exercise price of $2.00 per Warrant Share, subject to
adjustment upon the occurrence of certain events to prevent dilution.
Other than the Settlement Shares and the Warrant, none of
Atlantic, CIGNA or any of the Management is the beneficial owner of
any Shares.
Item 4 Purpose of Transaction
The information set forth under Item 3 is incorporated herein
by reference.
<PAGE> 11
CUSIP NO. 934467 10 1 Schedule 13D Page 11 of 15 Pages
Pursuant to the Restructuring Agreement, Atlantic has agreed
that, for the period ending February 28, 1998, it will not, without
the Issuer's consent, initiate or otherwise participate in any
activity in a manner the intent of which would require it to file with
the Securities and Exchange Commission (the "Commission") a Schedule
13D, either individually or as a member of a group, to report the
occurrence of any of the events described in Item 4 of Schedule 13D;
provided, that Atlantic is not prevented from (i) acquiring, or
selling, securities of the Issuer in each case in the ordinary course,
which would require Atlantic to amend this statement solely due to an
increase or decrease in Atlantic's beneficial ownership of the
Issuer's securities; (ii) voting its Shares on any matter as it
determines in its sole discretion; or (iii) tendering its Shares in
connection with any tender, exchange or similar offer made by a third
party.
(a) The Warrant evidences Atlantic's right to purchase an
additional 1,181,250 Shares. Pursuant to the Restructuring Agreement,
the Issuer has the option to purchase 50% of the Settlement Shares at
the price specified in the Restructuring Agreement and to purchase 50%
of the Warrant at a cash price of $1.00 per Warrant Share represented
thereby, for a period of six months, which expires on August 31, 1996.
Except as described herein, none of Atlantic, CIGNA or any of the
Management presently has plans or proposals to either acquire
additional Shares or other securities of the Issuer or to dispose of
any Shares. Atlantic will evaluate its investment in the Shares on a
continuing basis, and depending upon certain factors, including
general economic and financial conditions, may in the future decide to
dispose of all or a portion of its holdings of the Shares. For
internal management and asset control purposes of CIGNA, the Shares
held by Atlantic may be transferred from Atlantic to another
subsidiary or indirect subsidiary of CIGNA. In addition, Atlantic or
other affiliates of CIGNA may purchase additional Shares.
(b) None of Atlantic, CIGNA or any of the Management presently has
any plans or proposals which would result in an extraordinary
corporate transaction, such as a merger, reorganization or
liquidation, involving the Issuer.
<PAGE> 12
CUSIP NO. 934467 10 1 Schedule 13D Page 12 of 15 Pages
(c) None of Atlantic, CIGNA or any of the Management presently has
any plans which would result in a sale or transfer of a material
amount of assets of the Issuer.
(d) Other than having the right to designate one member to the
Issuer's Board of Directors pursuant to Section 7.1 of the
Restructuring Agreement and as described in Item 3, none of Atlantic,
CIGNA or any of the Management presently intends to effectuate a
change in the composition of the Board of Directors or management of
the Issuer.
(e) None of Atlantic, CIGNA or any of the Management presently has
any plans or proposals which would result in any material change in
the present capitalization or dividend policy of the Issuer.
(f) None of Atlantic, CIGNA or any of the Management presently
intends to effectuate changes in the Issuer's business or corporate
structure.
(g) None of Atlantic, CIGNA or any of the Management presently has
any plans or proposals which would result in any changes in the
Issuer's Certificate of Incorporation or By-laws or other actions
which may impede the acquisition of control of the Issuer by any
person.
(h) On or about March 4, 1996, the Issuer was de-listed from the
New York Stock Exchange (the "NYSE") for failing to meet the NYSE's
criteria for net tangible assets and three year average net income.
None of Atlantic, CIGNA or any of the Management participated in,
planned or proposed the de-listing of the Shares from the NYSE. None
of Atlantic, CIGNA or any of the Management presently has any plans or
proposals which would result in causing a class of securities of the
Issuer to be de-listed from any other national securities exchange or
to cease to be authorized to be quoted in an inter-dealer quotation
system of a registered national securities association.
(i) None of Atlantic, CIGNA or any of the Management presently has
any plans or proposals which would result in a class of equity
securities of the Issuer becoming eligible for termination of
registration pursuant to Section 12(g)(4) of the Act.
<PAGE> 13
CUSIP NO. 934467 10 1 Schedule 13D Page 13 of 15 Pages
(j) Except as set forth above, none of Atlantic, CIGNA or any of
the Management presently has any other plans or proposals which would
result in any action similar to those enumerated in (a) - (i) above.
Item 5 Interest in Securities of the Issuer
(a) As a result of the Transaction and as of the date hereof,
Atlantic is deemed to beneficially own 3,657,797 Shares (including the
1,181,250 Warrant Shares). Pursuant to the Transaction, as of March
1, 1996, there were 12,998,355 Shares outstanding. Thus, Atlantic is
deemed to beneficially own 28.14% of the outstanding Shares (including
the Warrant Shares).
As a result of the Transaction and as of the date hereof,
CIGNA, solely by reason of its capacity as the ultimate corporate
parent of Atlantic, is deemed to beneficially own 3,657,797 Shares
(including the 1,181,250 Warrant Shares). Pursuant to the
Transaction, as of March 1, 1996, there are 12,998,355 Shares
outstanding. Thus, CIGNA, solely by reason of its capacity as the
ultimate corporate parent of Atlantic, is deemed to beneficially own
28.14% of the outstanding Shares (including the 1,181,250 Warrant
Shares). This ownership interest is the same as, and not in addition
to, the ownership interest of Atlantic described above.
(b) Atlantic, has the power to vote or to direct the vote of,
dispose or direct the disposition of, all of the Shares it
beneficially owns (including the 1,181,250 Warrant Shares). CIGNA,
through its indirect ownership of Atlantic, may be deemed to have
shared power to vote or to direct the vote of, and dispose or direct
the disposition of, all of the Shares beneficially owned by Atlantic
(including the 1,181,250 Warrant Shares).
(c)-(e) Not Applicable.
Item 6 Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of Issuer
The information set forth under Item 3 is incorporated herein
by reference.
Pursuant to the Restructuring Agreement, Atlantic has granted
the Issuer a right of first refusal in the
<PAGE> 14
CUSIP NO. 934467 10 1 Schedule 13D Page 14 of 15 Pages
event that Atlantic receives a bona fide offer to purchase 35% or more
of the Settlement Shares. The right of first refusal will require the
Issuer to meet the same terms and conditions, including purchase
price, as contained in the bona fide offer. In addition, the Issuer
has the option to purchase 50% of the Settlement Shares issued to
Atlantic at the price specified in the Restructuring Agreement and to
purchase 50% of the Warrant at a cash price of $1.00 per Warrant Share
represented thereby, for a period of six months, which expires on
August 31, 1996.
Item 7 Materials to be Filed as Exhibits
Exhibit 1 - The Restructuring Agreement dated March 1,
1996 among Warner Insurance Services, Inc.,
Atlantic Employers Insurance Company, Pacific
Employers Insurance Company, Electric
Insurance Company, The Robert Plan
Corporation, Material Damage Adjustment
Corporation, Lion National Insurance Company,
and National Consumer Insurance Company
Exhibit 2 - The Warrant to Purchase Common Stock of
Warner Insurance Services, Inc.
Exhibit 3 - The Joint Filing Agreement between CIGNA
Corporation and Atlantic Employers Insurance
Company dated March 11, 1996.
<PAGE> 15
CUSIP NO. 934467 10 1 Schedule 13D Page 15 of 15 Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information with respect to me set forth in this statement is
true, complete and correct.
CIGNA CORPORATION
By: /s/ Carol J. Ward
--------------------------------------
Name: Carol J. Ward
Title Corporate Secretary
ATLANTIC EMPLOYERS INSURANCE COMPANY
By: /s/ Richard A. Hinckley, Jr.
--------------------------------------
Name: Richard A. Hinckley, Jr.
Title Vice President
Dated: March 11, 1996
<PAGE> 1
RESTRUCTURING AGREEMENT
RESTRUCTURING AGREEMENT dated as of the ____ day of March, 1996 by and
among WARNER INSURANCE SERVICES, INC., a Delaware corporation ("Warner"),
ATLANTIC EMPLOYERS INSURANCE COMPANY ("AEIC"), a New Jersey corporation,
PACIFIC EMPLOYERS INSURANCE COMPANY ("PEIC"), a California corporation,
ELECTRIC INSURANCE COMPANY ("Electric"), a Massachusetts corporation, (each of
AEIC, PEIC and Electric are sometimes individually herein referred to as a
"Customer" or collectively as the "Customers"), THE ROBERT PLAN CORPORATION
("RPC"), a Delaware corporation, MATERIAL DAMAGE ADJUSTMENT CORPORATION
("MDA"), a New York corporation, LION INSURANCE COMPANY ("LIC"), a New Jersey
corporation and NATIONAL CONSUMER INSURANCE COMPANY ("NCIC"), a New Jersey
corporation (all parties hereto, other than Warner, are sometimes herein
individually called a "Releasee" or collectively the "Releasees")
W I T N E S S E T H:
WHEREAS, Warner is a party to certain insurance services contracts with
certain of the Customers as listed on SCHEDULE 1 hereto (collectively, the
"Services Contracts") and Warner and the Customers wish to restructure their
arrangements under the Services Contracts on the terms herein set forth; and
WHEREAS, Warner, RPC, MDA, LIC and NCIC are parties to the lawsuits
described on SCHEDULE 2 annexed hereto (the "RPC Lawsuits") and wish to settle
the RPC Lawsuits on the terms herein set forth; and
WHEREAS, Warner has performed insurance services pursuant to the
Services Contracts, and as part of the transactions contemplated hereby and to
induce the Customers to release Warner from its obligations under the Services
Contracts, Warner is entering into an Asset Purchase Agreement (the "Asset
Purchase Agreement") of even date herewith with MDA Services, Inc., a New
Jersey corporation ("Newco") pursuant to which Warner will transfer to Newco
the assets of Warner relating to the insurance services business and Newco will
enter into new insurance services contracts with the Customers on revised terms
and the Customers will release Warner from its obligations under the Services
Contracts as herein set forth; and
WHEREAS, to further induce the Customers to release Warner from its
obligations under the Services Contracts, to induce the Customers to enter into
new contracts with Newco and to settle the RPC Lawsuits, Warner will (i) issue
an aggregate of 3,256,201 shares of common stock, par value $.01 per share, of
Warner ("Common Stock") (the "Settlement Shares") to the
<PAGE> 2
Releasees which shall represent 27.55% of the outstanding shares of Common
Stock of Warner after the issuance thereof, (ii) issue to the Releasees
five-year warrants (the "Warrants") to acquire an aggregate of 1,553,125 shares
of Common Stock at $2.00 per share (the Warrants being in the form annexed
hereto as Exhibit A), and (iii) assign to the Releasees the cash collateral
(the "Cash Collateral") described on SCHEDULE 3 annexed hereto securing the
Letter of Credit also described on SCHEDULE 3 annexed hereto.
NOW, THEREFORE, in consideration of the mutual premises and the
representations, warranties and covenants herein contained, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree
as follows:
1. Description of Transaction.
1.1 Issuance of Settlement Shares and Warrants. On the Closing
Date, Warner shall issue and deliver certificates representing all of the
Settlement Shares and the Warrants to the Releasees in the amounts indicated
next to the name of each Releasee as set forth on SCHEDULE 4 annexed hereto.
1.2 Cash Collateral. Upon the expiration of the Letter of Credit
described in SCHEDULE 3 annexed hereto and the termination by Chase Manhattan
Bank, N.A. of all of its right, title and interest in the Cash Collateral also
described in said SCHEDULE 3, Warner shall deposit $887,500 of the Cash
Collateral into an escrow account with Reid & Priest LLP, as escrow agent. On
the Closing Date, the Cash Collateral shall be released from escrow to the
Releasees listed on SCHEDULE 5 annexed hereto, in the percentage amounts
indicated next to the name of each Releasee on said SCHEDULE 5.
2. Services Contract Releases. On the Closing Date, in
consideration of the issuance by Warner of the Settlement Shares, the Warrants
and the payment of the Cash Collateral pursuant to Section 1 hereof, each
Customer shall separately release Warner from its obligations under the
Services Contract with such Customer (collectively, the "Services Contract
Releases"), such release to be substantially in the form annexed hereto as
Exhibit B, and each such Customer shall enter into a new services contract (the
"Revised Newco Service Agreements") with Newco.
3. Robert Plan Corporation Lawsuits. On the Closing Date, the RPC
Lawsuits shall be settled and dismissed with prejudice, such settlement and
dismissal to be pursuant to the Stipulation in the form annexed hereto as
Exhibit C (the "Stipulation"), the Mutual General Release (the "Mutual General
-2-
<PAGE> 3
Release") in the form annexed hereto as Exhibit D and the CWP Assignment
Agreement (the "CWP Assignment") in the form annexed hereto as Exhibit E.
4. Closing Date. The closing of the transactions herein
contemplated (the "Closing") will take place on March ___, 1996 at 10:00
A.M. at the offices of Reid & Priest LLP, 40 West 57th Street, New York, New
York 10019 or such other date and time as the parties may mutually agree upon
(the "Closing Date").
5. Representations and Warranties of Warner. In order to induce
each Releasee to enter into this Agreement and to consummate the transactions
contemplated hereunder, Warner hereby represents and warrants to each Releasee
as follows:
5.1 Corporate Existence and Qualification. Warner is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to carry
on its business as now being conducted and to own, lease and operate its
properties as and in the places where such business is now conducted and such
properties are now owned, leased or operated. Warner has all requisite
corporate power to execute and deliver this Agreement, the Asset Purchase
Agreement, the Services Contract Releases, the Warrants, the Stipulation, the
Mutual General Release and the CWP Assignment (the Asset Purchase Agreement,
the Services Contract Releases, the Warrants, the Stipulation, the Mutual
General Release and the CWP Assignment are sometimes collectively called the
"Related Agreements"), and to perform its obligations under each such
agreement.
5.2 Capitalization. The authorized capital stock of Warner
consists of 20,000,000 shares of Common Stock, $.01 par value. As of the date
hereof, 8,560,904 shares of Common Stock are issued and outstanding, and such
shares have been duly authorized, and are validly issued, fully paid and
non-assessable. On the date hereof and with the contemporaneous public
announcement of the transactions contemplated by this Agreement and the Related
Agreements, the shares of Common Stock of Warner shall be suspended from
trading on the New York Stock Exchange ("NYSE") and Warner has been advised by
the NYSE that its shares will subsequently be delisted by and from the NYSE.
Except as set forth on SCHEDULE 6 hereto, there are no other shares of capital
stock or other equity securities of Warner issued or issuable. All Settlement
Shares to be issued by Warner hereunder shall, upon issuance thereof, be duly
authorized, validly issued, fully paid and non-assessable shares of Common
Stock of Warner. The Warrants have been duly authorized for issuance and the
shares of Common Stock to be issued upon the exercise thereof in accordance
with the terms thereof will be
-3-
<PAGE> 4
duly authorized, validly issued, fully paid and non-assessable shares of Common
Stock of Warner.
5.3 Authorization of Agreements; Validity. The execution and
delivery by Warner of this Agreement, and the Related Agreements and the
consummation by Warner of the transactions contemplated hereby and thereby have
been duly authorized by all requisite corporate action on behalf of Warner.
Except as set forth on SCHEDULE 7 hereto, this Agreement has been duly executed
and delivered by Warner, and this Agreement constitutes, and, when executed,
the Related Agreements will constitute, the legal, valid and binding
obligations of Warner, enforceable against Warner in accordance with their
respective terms, except to the extent that such validity, binding effect and
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting creditors' rights generally
from time to time in effect and by general equitable principles.
5.4 Effect of Agreements. Except as set forth on SCHEDULE 8
hereto, neither the execution and delivery of this Agreement, or any of the
Related Agreements by Warner, nor the consummation of the transactions
contemplated hereby and thereby nor compliance by Warner with the provisions of
this Agreement or any of the Related Agreements by Warner (i) violates or will
violate, conflicts or will conflict with, or results or will result in a breach
of any provision, term or condition of, or constitutes or will constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of a Lien upon any of the properties or assets
of Warner or any subsidiary of Warner under the terms, conditions or provisions
of (x) the Certificate of Incorporation, as amended, the By-Laws, as amended,
of Warner, or of any of its subsidiaries, or (y) any other agreement or
instrument to which Warner or any subsidiary of Warner is a party, or by which
any of them is bound, or any of their respective properties or assets, may be
subject, or (ii) violates any judgment, ruling, order, writ, injunction,
decree, law, statute, ordinance, rule or regulation, domestic or foreign
(collectively, "Law"), applicable to Warner or any other subsidiary of Warner
or any of their respective properties or assets, except in the case of each of
clauses (i) and (ii) above, for such violations, conflicts, breaches, defaults,
terminations, accelerations or creations of Liens, which, in the aggregate,
would not have any material adverse effect on the condition (financial or
otherwise) or the operations of Warner and its subsidiaries taken as a whole,
the business or on the ability of the parties to consummate the transactions
contemplated hereby.
-4-
<PAGE> 5
5.5 Private Sale. Warner has not, either directly or through any
agent, offered the Settlement Shares or the Warrants to or solicited any offer
to acquire the Settlement Shares or the Warrants from, or otherwise approached,
negotiated or communicated in respect of the Settlement Shares or the Warrants
with, any person so as to require that the Settlement Shares or the Warrants be
registered pursuant to the provisions of Section 5 of the Securities Act of
1933, as amended (the "Securities Act") or any applicable state securities law.
5.6 Filings, Notices, Consents and Approvals. Except as set
forth on SCHEDULE 9 annexed hereto, no notice to, filing with, or
authorization, consent or approval of, any domestic or foreign governmental or
public body, agency or authority or any person not a party to this Agreement,
is necessary in connection with the execution, delivery and performance of this
Agreement or any of the Related Agreements by Warner or the consummation by
Warner of the transactions contemplated, except where failure to give such
notice, make such filings, or obtain such authorizations, consents or approvals
would, in the aggregate, not have a material adverse effect on the condition
(financial or otherwise) or operations of Warner and its subsidiaries taken as
a whole, or on the ability of the parties to consummate the transactions
contemplated hereby.
5.7 Performance Representation. Except as set forth on SCHEDULE 10
annexed hereto, Warner represents and warrants that as of the date hereof and
through the Closing Date, it has performed and will perform its obligations
incurred in the ordinary course of business in all material respects, including
all obligations under the Services Contracts in all material respects.
5.8 Solvency Representation. Warner represents and warrants that
it is receiving fair and adequate consideration, as a result of arms length
negotiations, for the transfer of the assets pursuant to the Asset Purchase
Agreement and other assets being transferred and issued pursuant to this
Agreement in that the RPC Lawsuits are being settled and the Services Contract
Releases are being executed. Warner further represents and warrants that its
current net worth deficit should be decreased as a result of the consummation
of the transactions contemplated by this Agreement and the Asset Purchase
Agreement and that Warner currently intends to pay its retained liabilities in
accordance with their terms as they mature.
6. Representations and Warranties of the Releasees. In order to
induce Warner to enter into this Agreement and to consummate the transactions
contemplated hereunder, each Releasee hereby represents and warrants to Warner
severally as to itself as follows:
-5-
<PAGE> 6
6.1 Corporate Existence and Qualification. Such Releasee is a
corporation duly incorporated, validly existing and in good standing under the
laws of its respective state of incorporation and has all requisite corporate
power and authority to carry on its business as now being conducted and to own,
lease and operate its properties as and in the places where such business is
now conducted and such properties are now owned, leased or operated. Such
Releasee has all requisite power to execute and deliver this Agreement and to
perform its obligations hereunder.
6.2 Authorization of Agreements. The execution and delivery by
such Releasee of this Agreement, any Related Agreement, and the Revised Newco
Service Agreement and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by all requisite corporate action
on behalf of such Releasee. This Agreement has been duly executed and
delivered by such Releasee, and this Agreement constitutes, and when executed,
each of the Related Agreements and the Revised Newco Service Agreements will
constitute the legal, valid and binding obligation of such Releasee,
enforceable against such Releasee in accordance with their respective terms,
except to the extent that such validity, binding effect and enforceability may
be limited by applicable bankruptcy, reorganization, insolvency, moratorium and
other laws affecting creditors' rights generally from time to time in effect
and by general equitable principles.
6.3 Securities Laws. (a) Each Releasee acknowledges and
understands that the Settlement Shares and the Warrants have not been
registered under the Securities Act, or the securities laws of any state, and
that such Settlement Shares and the Warrants may not be offered or sold unless
first registered under the Securities Act and any applicable state securities
laws, or unless such offer or sale is exempt from registration.
(b) Except to the extent contemplated by the Customers pursuant to
Section 7.2, each Releasee is purchasing the Settlement Shares and the Warrants
for investment purposes, has no current intention to sell the Settlement Shares
or the Warrants and will not sell or dispose of the Settlement Shares and the
Warrants in violation of applicable United States federal and state securities
laws.
(c) Each Releasee has received a copy of the most recent annual report
on Form 10-K and the three most recent quarterly reports on Form 10-Q, and is
aware that Warner has suffered significant losses, will report additional
losses in the fourth quarter and has serious cash flow problems.
-6-
<PAGE> 7
(d) Each Releasee agrees that the following legend may be placed on any
certificates evidencing the Settlement Shares and on any other securities
issued in respect of the Settlement Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
PURSUANT TO ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN
COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF
1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION
OF COUNSEL TO THE COMPANY OR OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED."
Each Releasee understands that, so long as the above legend remains on the
certificates representing the Settlement Shares, Warner may maintain
appropriate "stop transfer" orders with respect to the Settlement Shares on its
books and records and with its registrar and transfer agent. Each Releasee
agrees that prior to any proposed transfer of the Settlement Shares and as a
condition thereto, if such transfer is not made pursuant to an effective
Registration Statement under the Securities Act or an opinion of counsel to
Warner (or other counsel reasonably acceptable to Warner and its counsel) that
the Settlement Shares may be sold publicly without registration under the
Securities Act, the respective Releasee will, if requested by Warner, deliver
to Warner (i) an agreement by such transferee to the impression of the
restrictive legends set forth above on the Settlement Shares and (ii) an
agreement by such transferee that Warner may place a "stop transfer" order with
Warner's transfer agent and registrar.
7. Covenants of Warner.
7.1 Election of Director to Board of Directors. For a period of three
years after the Closing Date, Warner shall elect to its Board of Directors one
designee selected by the holders of a majority in amount of the Settlement
Shares issued pursuant to this Agreement. Such designee shall be elected as a
director in the Class of 1998 (due to the staggered director provisions
contained in Warner's By-Laws, as amended), such designee will be subject to
reelection at the 1998 Annual Meeting of Stockholders of Warner called for the
election of directors (the "1998 Annual Meeting") on the Closing Date, or as
soon thereafter as Warner is notified in writing of such designation. Beginning
with the 1998 Annual Meeting, Warner shall include such
-7-
<PAGE> 8
designee, or any successor designee selected as described in the preceding
sentence, as a nominee in management's slate of directors for election at such
annual meeting, and Warner shall recommend to its stockholders the election of
such designee or successor, as a director at the 1998 Annual Meeting. In the
event that said designee shall not be elected as a director at the 1998 Annual
Meeting, Warner shall, following said meeting, elect said designee to its Board
of Directors and amend its By-Laws to create any vacancy, if required, to serve
for a period equal to the remainder of the three-year term contained herein.
Warner agrees that if such designee dies or resigns, his successor shall be
designated as herein provided.
7.2 Registration Rights.
7.2.1 Demand Registration. (a) At any time following the filing with
the United States Securities and Exchange Commission (the "Commission") by
Warner of its Annual Report on Form 10-K for the fiscal year ended December 31,
1995, upon receipt by Warner of a written request executed by one or more of
the Releasees receiving Settlement Shares (the "Initiating Holder") requesting
registration of a number of shares of Common Stock at least equal to (i) thirty
percent (30%) or more of the Settlement Shares and the shares of Common Stock
underlying the Warrants (the "Warrant Shares") then held by the Holders or (ii)
the entire remaining number of Settlement Shares and the Warrant Shares owned
by the Initiating Holder, Warner will give notice of such request to each other
Holder (the "Other Holders") and give them the right to participate therein in
accordance with this Section 7.2.1.
(b) Upon receipt of the request given pursuant to Subsection (a)
above, Warner shall promptly prepare and file with the Commission a
registration statement (the "Registration Statement") under the Securities Act
covering the Settlement Shares and/or the Warrant Shares requested to be sold
under a Registration Statement by the Initiating Holder and by the Other
Holders who elect to have their Settlement Shares and/or Warrant Shares
included in a Registration Statement by providing written notice of its
election to Warner within 30 days from receipt by such Other Holders of notice
from Warner pursuant to Section 7.2.1(a) (the "Registered Shares") and shall
otherwise comply with its obligations under Section 7.2.1.
(c) Warner's obligations under Section 7.2.1 shall be limited to
two (2) effective Registration Statements under the Securities Act; provided,
however, that if the Settlement Shares and/or Warrant Shares may be registered
by means of a Registration Statement on Form S-3 or a successor form thereto,
the Holders of Settlement Shares and/or Warrant Shares shall be entitled to
exercise their rights under Section 7.2 on an
-8-
<PAGE> 9
unlimited number of occasions, but not more than once every fiscal quarter,
until all of the Settlement Shares and/or Warrant Shares are either subject to
an effective Registration Statement under the Securities Act or have been sold.
7.2.2 Piggy Back Registration Rights. (a) At any time after the
receipt by the Holders of any Settlement Shares, Warner will send written
notice to the Holders then owning Settlement Shares and/or Warrant Shares, at
least twenty (20) days prior to the filing of each and every Registration
Statement filed by Warner, whether or not pursuant to this Agreement (other
than a Registration Statement covering exclusively securities under an employee
option or stock purchase plan, a merger, acquisition or similar transaction)
and give to such Holders the right to have included therein any Settlement
Shares and/or Warrant Shares then held by the Holders. Such notice must specify
the proposed offering price and the plan of distribution. Warner must receive
written notice from such Holders within fifteen days after the date of Warner's
written notice, indicating the full name and address of each Holder desiring to
have Settlement Shares and/or Warrant Shares included for sale in such
Registration Statement and the number of Settlement Shares or Warrant Shares
requested to be covered.
(b) If the registration of which Warner gives notice is for a
registered public offering involving an underwriting, Warner shall so advise
the Holders as a part of the written notice given pursuant to Section 7.2.2(a).
To the extent Holders propose to distribute their Settlement Shares
or Warrant Shares through such underwriting, such Holders shall, together with
Warner, enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by Warner which
underwriting agreement shall also be reasonably acceptable to the Holders.
Warner shall use its reasonable best efforts to cause the managing underwriter
of such proposed underwritten offering to permit the Settlement Shares or
Warrant Shares proposed to be included in such registration to be included in
the registration statement for such offering on no less than the most favorable
terms and conditions as any similar securities of Warner included therein.
Notwithstanding any other provision of this Section 7.2.2, the Holders shall be
entitled to include in the registration all of the shares which they desire to
sell for their own account, and if the managing underwriter determines that
general marketing conditions are such that the inclusion of all of the shares
to be sold by the Holders for their own accounts would jeopardize the sale of
shares for the account of Warner, the managing underwriter may reduce the
similar securities to be included in such registration for the accounts of the
Holders, pro rata among the Holders whose shares are
-9-
<PAGE> 10
included in the registration, but only after the shares of Warner to be
included in the registration for the account of persons other than Warner and
the Holders are first reduced, to zero if necessary.
If any Holder disapproves of the terms of any such underwriting, such
person may elect to withdraw therefrom by written notice to Warner and the
managing underwriter. Any Settlement Shares or Warrant Shares excluded or
withdrawn from such underwriting shall not be transferred prior to sixty (60)
days after the effective date of the registration statement relating thereto,
or such other shorter period of time as the underwriters may require.
7.2.3 Miscellaneous Registration Provisions. (a) In connection with
any Registration Statement filed pursuant to Sections 7.2.1 or 7.2.2 hereof:
(i) Warner's obligation under this Agreement to include
Settlement Shares or Warrant Shares in a Registration Statement shall mean
shares of Common Stock or any security received by a Holder in exchange or upon
reclassification of the present Common Stock or the securities then owned by a
Holder by reason of a prior exchange or reclassification of or on account of
present Common Stock;
(ii) the Holders of Settlement Shares or Warrant Shares (herein
"Registering Holders") shall furnish to Warner in writing such information as
shall be required by the Securities Act or the rules and regulations
promulgated thereunder in respect of the Holder or the Settlement Shares or
Warrant Shares to be included in the Registration Statement;
(iii) the Registering Holders and Warner shall enter into the
usual and customary form of underwriting agreement agreed to by Warner and any
underwriter with respect to any such offering, if required, and such
underwriting agreement shall contain the customary reciprocal rights of
indemnity and contribution between Warner, the underwriters, and the selling
shareholder, including the Registering Holders, to the extent the obligations
of the Registering Holders do not exceed those set forth in Subsections (f) and
(g) herein; provided, however, that no Registering Holder shall be obligated to
refrain from selling or otherwise disposing of such Registering Holder's shares
for a period of in excess of sixty (60) days from the effective date of the
Registration Statement;
(iv) the Registering Holders shall agree that they shall
execute, deliver and/or file with or supply to Warner, any underwriters, the
Commission and/or any state or other regulatory authority such information,
documents, representations,
-10-
<PAGE> 11
undertakings and/or agreements necessary to carry out the provisions of the
registration covenants contained in this Agreement and/or to effect the
registration or qualification of their Settlement Shares or Warrant Shares
under the Securities Act and/or any of the laws and regulations of any state or
governmental instrumentality; and
(v) the Registering Holders shall furnish Warner with such
questionnaires and other documents regarding their identity and background as
may be necessary to permit the offer and sale of the Settlement Shares and/or
Warrant Shares in those jurisdictions requested by the Registering Holders.
(b) if and whenever Warner is required to effect the registration
of any Settlement Shares or Warrant Shares pursuant to Section 7.2.1 or 7.2.2,
Warner will use its best efforts to effect such registration to permit the sale
of such Settlement Shares or Warrant Shares in accordance with the intended
method or methods of disposition thereof, and pursuant thereto it will, as
promptly as is practicable:
(i) prepare and file with the Commission such amendments
(including post-effective amendments) and supplements to such Registration
Statement and the prospectus used in connection therewith as may be necessary
to keep such Registration Statement effective and to comply with the provisions
of the Securities Act with respect to the disposition of all Settlement Shares
or Warrant Shares covered by such Registration Statement until such time as all
of such Settlement Shares or Warrant Shares have been disposed of in accordance
with the intended methods of disposition set forth in such Registration
Statement;
(ii) furnish to the Holders and to any underwriter of Settlement
Shares or Warrant Shares such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included in
such Registration Statement (including each preliminary prospectus and any
summary prospectus) and any amendment or supplement thereto, in conformity with
the requirements of the Securities Act, such documents incorporated by
reference in such Registration Statement or prospectus, and such other
documents, as the Holders or such underwriter may reasonably request, and, if
requested, a copy of any and all transmittal letters or other correspondence
to, or received from, the Commission or any other governmental agency or
self-regulatory body or other body having jurisdiction (including any domestic
or foreign securities exchange) relating to such offering;
-11-
<PAGE> 12
(iii) use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of such Registration Statement at the
earliest possible moment;
(iv) use its best efforts to list all such Settlement Shares
or Warrant Shares covered by such Registration Statement on the principal
securities exchange and inter-dealer quotation system on which a class of
common equity securities of Warner is then listed, and to pay all fees and
expenses in connection therewith;
(v) cooperate and assist in any filings required to be made
and with any performance of any due diligence investigation by any underwriter;
and
(c) Warner shall pay all out-of-pocket expenses and disbursements
incurred by Warner and the Holders in connection with the Registration
Statements filed by it pursuant to Sections 7.2.1 and 7.2.2 or, including,
without limitation, all legal and accounting fees, Commission filing fees,
exchange filing fees, printing costs, registration or qualification fees and
expenses to comply with state Blue Sky or other state securities laws, the fees
of other experts, and any expenses or other compensation paid to the
underwriters; provided, however, that such registration expenses shall not
include underwriting commissions and discounts and transfer taxes, if any.
(d) Warner shall be obligated to keep any Registration Statement
filed by it under Sections 7.2.1 and 7.2.2 effective under the Securities Act
until such time as all of the Settlement Shares or Warrant Shares covered by
such Registration Statement have been disposed of in accordance with the
intended methods of disposition set forth in such Registration Statement and to
prepare and file such supplements and amendments necessary to maintain an
effective Registration Statement for such period. As a condition to Warner's
obligation under this Subsection (d), the Registering Holders will take all
actions as shall be necessary to comply with the relevant provisions of the
Securities Act.
(e) Warner shall use its best efforts to register or qualify the
Registered Shares under such securities or Blue Sky laws in such jurisdictions
within the United States as the Registering Holders may reasonably request;
provided, however, that Warner reserves the right, in its sole discretion, not
to register or qualify such Registered Shares in any jurisdiction where such
Registered Shares do not meet with the requirements of such jurisdiction after
having taken reasonable steps to meet such requirements or where Warner is
required to qualify as a foreign corporation to do business in such
jurisdiction and is not so qualified therein.
-12-
<PAGE> 13
(f) The Registering Holders agree that upon notification by Warner
that, in the opinion of its counsel, the prospectus contains an untrue
statement of a material fact or omits to state a fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, they shall immediately
upon receipt of such notification (i) cease to offer or sell any securities of
Warner which must be accompanied by such prospectus; (ii) return all such
prospectuses in their hands to Warner; and (iii) shall not offer or sell any
securities of Warner until they have been provided with a current prospectus
and Warner has given them notification permitting them to resume offers and
sales. Warner covenants to promptly correct such prospectus and file with the
Commission such amended prospectus or supplement and shall use its best efforts
to cause such amended prospectus or supplement to be declared effective by the
Commission.
(g) As a condition to the filing of a Registration Statement
pursuant to this Agreement, Warner shall indemnify and hold harmless each
Registering Holder and each underwriter and each of such Registering Holder's
and underwriter's officers, directors, employees, agents and counsel and each
other person, if any, who controls such Registering Holder or underwriter
within the meaning of the Securities Act or the Securities Exchange Act of
1934, as amended from and against any and all losses, claims, damages, expenses
or liabilities whatsoever caused by any failure of Warner to comply with the
Securities Act or any rule or regulation promulgated thereunder in connection
with the registration in which the Settlement Shares or Warrant Shares have
been included or any untrue statement of a material fact contained in the
Registration Statement, any post-effective amendment to such registration
statements, or any prospectus included therein required to be filed or
furnished by reason of this Agreement or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statements
or alleged untrue statements or omissions based upon information furnished or
required to be furnished in writing to Warner by the party seeking
indemnification expressly for use therein; provided, however, that Warner shall
not be obligated to so indemnify the Registering Holders or any such
underwriter or other person referred to above unless the Registering Holders or
underwriter or other person, as the case may be, shall at the same time
indemnify Warner, its directors, each officer signing the Registration
Statement and each person, if any, who controls Warner within the meaning of
the Securities Act, from and against any and all losses, claims, damages and
liabilities caused by any untrue statement or alleged untrue statement of a
material fact
-13-
<PAGE> 14
contained in the Registration Statement, any registration statement or any
prospectus required to be filed or furnished by reason of this Agreement or
caused by any omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, insofar as
such losses, claims, damages or liabilities are caused by any untrue statement
or alleged untrue statement or omission based upon information furnished in
writing to Warner by the Holder or underwriter expressly for inclusion therein;
provided, however, that the extent of any Registering Holder's indemnification
obligation hereunder shall be limited to the aggregate net proceeds received by
such Registering Holder upon the sale of the Settlement Shares and/or the
Warrant Shares included in such Registration Statement.
(h) Each party entitled to indemnification under paragraph (g)
above (the "Indemnified Party") shall, promptly after receipt of notice of any
claim or the commencement of any action against such Indemnified Party in
respect of which indemnity may be sought, notify the party required to provide
indemnification (the "Indemnifying Party") in writing of the claim or the
commencement thereof; provided that the failure of the Indemnified Party to
notify the Indemnifying Party shall not relieve the Indemnifying Party from any
liability which it may have to an Indemnified Party pursuant to the provisions
of paragraph (g), unless the Indemnifying Party was materially prejudiced by
such failure, and in no event shall such failure relieve the Indemnifying Party
from any other liability which it may have to such Indemnified Party. If any
such claim or action shall be brought against an Indemnified Party, it shall
notify the Indemnifying Party thereof and the Indemnifying Party shall be
entitled to participate therein, and, to the extent that it wishes, jointly
with any other similarly notified Indemnifying Party, to assume the defense
thereof with counsel reasonably satisfactory to the Indemnified Party. After
notice from the Indemnifying Party to the Indemnified Party of its election to
assume the defense of such claim or action, the Indemnifying Party shall not be
liable (except to the extent the proviso to this sentence is applicable, in
which event it will be so liable) to the Indemnified Party under paragraph (g)
for any legal or other expenses subsequently incurred by the Indemnified Party
in connection with the defense thereof other than reasonable costs of
investigation: provided that each Indemnified Party shall have the right to
employ separate counsel to represent it and assume its defense (in which case,
counsel to the Indemnifying Party shall not represent it) if (i) upon the
advice of counsel, the representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them
(in which case, if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the
-14-
<PAGE> 15
Indemnifying Party will not have the right to assume the defense of such claim
or action on behalf of such Indemnified Party), or (ii) in the event the
Indemnifying Party has not assumed the defense thereof within ten (10) days of
receipt of notice of such claim or commencement of action, in which case the
fees and expenses of one such separate counsel shall be paid by the
Indemnifying Party. If any Indemnified Party employs such separate counsel it
will not enter into any settlement agreement which is not approved by the
Indemnifying Party, such approval not to be unreasonably withheld. If the
Indemnifying Party so assumes the defense thereof (and by so assuming shall be
solely responsible for liabilities relating to such claim or action, and shall
release the Indemnified Party from such liabilities to the extent permitted by
law, except to the extent the Indemnified Party is not entitled to be
indemnified pursuant to paragraph (g), it may not agree to any settlement of
any such claim or action as the result of which any remedy or relief, other
than monetary damages for which the Indemnifying Party shall be responsible
hereunder, shall be applied to or against the Indemnified Party, without the
prior written consent of the Indemnified Party. No Indemnified Party will
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
of such claim or action. In any action hereunder as to which the Indemnifying
Party has assumed the defense thereof with counsel satisfactory to the
Indemnified Party, the Indemnified Party shall continue to be entitled to
participate in the defense thereof, with counsel of its own choice, but, except
as set forth above, the Indemnifying Party shall not be obligated hereunder to
reimburse the Indemnified Party for the costs thereof.
(i) If for any reason the indemnification provided for above is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, claim, damage, liability or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party thereunder, shall contribute to the amount paid or payable by the
Indemnified Party as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by the Indemnified Party and the Indemnifying Party, but also the relative
fault of the Indemnified Party and the Indemnifying Party, as well as any other
relevant equitable considerations, subject in all events, to the limitations
described in the last proviso set forth in Subsection 7.2(g).
7.3 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit
the sale of the Settlement Shares and
-15-
<PAGE> 16
the Warrant Shares to the public without registration, Warner agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from
and after the issuance of the Settlement Shares and the Warrant Shares;
(b) Not take any action which would cause Warner to no longer be
registered under Section 12(g) of the Exchange Act;
(c) File with the Commission in a timely manner all reports and
other documents required of Warner under the Securities Act and the Exchange
Act at any time after it has become subject to such reporting requirements; and
(d) Furnish to the Holders forthwith upon request: a written
statement by Warner as to its compliance with the reporting requirements of
Rule 144 and of the Securities Act and the Exchange Act; a copy of the most
recent annual or quarterly report of Warner filed under the Exchange Act; and
such other reports and documents so filed as the Holder shall be required to
have in order to avail itself of any rule or regulation of the Commission
allowing the Holder to sell any of the Settlement Shares and the Warrant
Shares without registration.
7.4 Access to Records and Operations Of Warner. (a) Pending the
Closing of the transactions contemplated by this Agreement, each Customer shall
have the right to designate a representative who shall have access to the
premises of Warner for the purpose of reviewing records and operations of
Warner with respect to such Customer. Further, in the event that Warner shall,
pending the Closing, cease operations, commence a bankruptcy or insolvency
proceeding or commit a performance default under an existing service contract,
such designated representative shall have the right to communicate,
independently of Warner, with Micro Graphics Corporation, regarding graphic
imaging record retrieval.
(b) From and after the Closing Date the Customers shall have
reasonable access to the books and records of Warner relating to the details of
Warner's performance under the Services Contracts from and before the Closing
Date.
7.5 Escrow of Portion of Proceeds from Sale or Liquidation of Alerion
Insurance Company. On the date hereof, Warner agrees to deposit into an escrow
account with Reid & Priest LLP, as escrow agent, pursuant to the terms and
conditions of an escrow agreement in the form annexed hereto as Exhibit F, a
portion of the proceeds to be received by Warner upon the liquidation of its
wholly-owned insurance company, Alerion
-16-
<PAGE> 17
Insurance Company ("Alerion"), in the amount of $920,000 for the purpose of
paying certain due and unpaid legal and administrative expenses ("ALE") of
Warner, as well as accrued but unbilled ALE obligations of Warner, in
connection with insurance services performed by Warner under existing Services
Contracts with the Customers. SCHEDULE 11 annexed hereto contains an updated
list prepared by Warner of ALE accrued expenses through February 19, 1996.
After the Closing Date, such escrowed funds will be released in payment of such
ALE in accordance with the procedures set forth in Exhibit F. The balance of
the funds received from the liquidation of Alerion have been used to pay the
expenses outlined in SCHEDULE 11.
7.6 Covenant to Maintain Certain Insurance. Warner covenants and
agrees to maintain its current third party administrators professional
liability insurance coverage of up to $5 million in the aggregate, as contained
in Policy Number 243-30-95 issued by Lexington Insurance Company, through the
expiration date of such policy on December 31, 1996.
7.7 Employee Compensation. Warner covenants for a period of two
years from the Closing Date that it will not renew the employment contracts
currently in effect with Harvey Krieger, Theodore I. Botter or Bradley J.
Hughes and that beginning August 1, 1996, the aggregate annual compensation
payable to such persons shall not exceed $250,000.
7.8 Covenant to Execute the Related Agreements. Warner covenants
and agrees to execute the Related Agreements on the Closing Date.
8. Covenants of Each Releasee.
8.1 Control of Warner. Each Releasee covenants and agrees that,
for a period of two (2) years from the Closing Date, such Releasee, or any of
its affiliates as such term is defined under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), will not, without the prior approval of
Warner's Board of Directors, initiate or otherwise participate in any activity
in a manner the intent of which would require such Releasee or affiliate to
file with the Commission a Schedule 13D, either individually or as a member of
a group, to report the occurrence of any of the events described in Item 4 of
Schedule 13D; provided, however, that nothing herein shall prevent Releasee or
its affiliates from: (i) acquiring additional securities of Warner, or from
selling securities of Warner, in each case in the ordinary course which would
require such Releasee or affiliate to file or amend a previously filed Schedule
13D solely due to an increase or decrease in such Releasee's or affiliates'
beneficial ownership of securities of Warner; (ii) voting its shares of Warner
on any matter as it
-17-
<PAGE> 18
determines in its sole discretion, or (iii) tendering its shares of Warner in
connection with any tender, exchange or similar offer made by a third party.
8.2 Right of First Refusal.
(a) Bona Fide Offer. Except as provided in Section 8.2(b) below,
until July 31, 1996 each Releasee covenants and agrees that it shall not sell,
assign, transfer, pledge, encumber or in any other manner dispose of
thirty-five percent (35%) or more of the Settlement Shares of Warner acquired
by each such Releasee pursuant to the terms and conditions of this Agreement,
except upon receipt by such Releasee of a bona fide offer in writing from an
unrelated third party (hereinafter referred to as a "Bona Fide Offer") to
purchase such Settlement Shares. The Bona Fide Offer shall specify the name
and background of the third party, the number of Settlement Shares subject to
the Bona Fide Offer, the amount to be paid for the Settlement Shares and the
terms of payment, and all other material conditions of such offer. Upon receipt
of a Bona Fide Offer, such Releasee shall promptly offer in writing
(hereinafter referred to as the "Reoffer") to sell such Settlement Shares to
Warner or to a third party acceptable to Warner (the "Selected Purchaser"),
upon the same terms and conditions contained in the Bona Fide Offer. The
Reoffer may be accepted by Warner or the Selected Purchaser at any time within
fifteen (15) business days next following its receipt and shall expire on the
close of business on such 15th business day. Acceptance of a Reoffer must be
made unconditionally by notice to such Releasee prior to its expiration, which
notice shall set forth a time and place for closing no earlier than the day
after the expiration date of the Reoffer and no later than thirty (30) days
thereafter.
Upon the expiration of the Reoffer, such Releasee shall be free to
accept the Bona Fide Offer provided that the third party offeror agrees to hold
such Settlement Shares subject to all terms, conditions and restrictions of
this Agreement. Any Bona Fide Offer shall be deemed to have expired ninety
(90) days after it was made unless accepted in accordance with its original
terms and may not thereafter be accepted. If the amount of a Bona Fide Offer
should be reduced, or if any of its terms or provisions should be changed, then
it shall be treated as a new Bona Fide Offer and may not be accepted unless the
provisions of this subsection shall have been complied with and a Reoffer made
with respect to it.
(b) Unrestricted Transfers. The restrictions specified in this
Section 8.2 shall not apply to the sale or transfer of the Settlement Shares
held by a Releasee to a wholly-owned subsidiary, partnership or affiliate of
such Releasee; provided, however, that such sale or transfer shall not relieve
-18-
<PAGE> 19
such Releasee of its obligations hereunder. Prior to such transfer, such
wholly-owned subsidiary, partnership or affiliate, shall agree in writing to be
bound by the terms and conditions of this Agreement.
8.3 Payment of All Amounts Under Services Contracts. Pending
the Closing of the transactions contemplated by this Agreement, each Customer
covenants and agrees to continue to make all regularly required payments under
existing Services Contracts with Warner consistent with past billing practices
in order to enable Warner to continue to perform its obligations in accordance
with the terms of such contracts. The amount of such payments which are or
will be due and payable on or prior to the Closing Date are set forth on
SCHEDULE 12 hereto. At the Closing, Warner shall deliver to the Customers a
Certificate of the President and Chief Executive Officer of Warner certifying
that the amounts set forth on SCHEDULE 12 are true and correct and have been
calculated in accordance with Warner's past, ordinary billing practices and
procedures. The parties agree that, upon payment of such amounts as reflected
in said Schedule, no other amounts will be required to be paid by each Customer
and/or Warner in accordance with the terms of their respective Services
Contracts.
8.4 Option of Warner to Purchase Settlement Shares and Warrants. (a)
For a period of six months after the Closing Date, Warner shall have the option
to acquire from the Releasees 50% of the Settlement Shares at a cash price
equal to the greater of $3.00 or 50% of the then market price of a share of
Warner Common Stock. For purposes of this subsection, market price shall mean
the average closing price for a share of Warner Common Stock on such market
which is or may become the major trading market for Warner Common Stock for the
five (5) business days immediately prior to the notice of exercise of such
option, as provided for in subsection (c) below.
(b) For a period of six months after the Closing Date Warner shall
have the option to acquire from the Releasees 50% of the Warrants at a cash
price equal to $1.00 per Warrant.
(c) The options granted hereunder shall be exercisable by written
notice by Warner to the Releasees, which notice shall set a date and time and
place of closing, which closing date shall be no earlier than five (5) business
days after the date of such notice and no later than ten (10) business days
after the date of such notice, at which closing Warner shall deliver the
consideration by certified check payable to the order of each Releasee, and
each Releasee shall deliver the securities being acquired by Warner duly
endorsed for transfer. The options granted hereunder shall be exercised pro
rata as to each Releasee based upon the original number of Settlement Shares
and/or
-19-
<PAGE> 20
Warrants issued to such Releasee. The certificates for such securities will be
appropriately legended to reflect the options granted hereunder.
(d) Warner shall have the right to assign the options granted herein in
its sole discretion subject to such assignee agreeing in writing to be bound by
the provisions of this Section 8.4.
8.5 Covenant As To Related Agreements. Each Releasee agrees to
execute and deliver any Related Agreement which is required to be executed by
it on the Closing Date.
9. Covenant and Indemnification Among Warner, RPC and MDA.
The agreements among Warner, RPC, NCIC and MDA relating to the RPC
lawsuits and the settlements thereof are contained in the Stipulation, the
Mutual General Release and the CWP Assignment annexed hereto as Exhibits C, D
and E, respectively.
10. Conditions to Obligations of Warner. This Agreement and the
obligations of Warner to perform hereunder are subject to the satisfaction by
each Releasee, or a waiver in writing by Warner, of the following conditions,
each of which is individually hereby deemed material, at or prior to the
Closing:
10.1 Concurrent Agreements. Each Releasee will execute and deliver
its respective Services Contract Release and its respective Revised Newco
Service Agreement and any Related Agreements referred to in this Agreement.
10.2 Wausau Services Contract Release. Employers Insurance of
Wausau, a Mutual Company, a Wisconsin corporation, Wausau Underwriters
Insurance Company, a Wisconsin corporation, and Providian Auto and Home
Insurance Company (formerly Worldwide Underwriters Insurance Company), a
Missouri corporation (collectively "Wausau") shall each execute a Services
Contract Release, such release to be substantially in the form annexed hereto
as Exhibit B.
10.3 Representations, Warranties and Obligations. All
representations and warranties of each Releasee contained in this Agreement and
in the Exhibits hereto shall be true and correct commencing as of the date
hereof and ending with and on the Closing Date as though made on and as of such
Closing Date. Each Releasee shall have performed and complied with all of
their respective covenants and obligations under this Agreement in all material
respects.
-20-
<PAGE> 21
11. Conditions to Obligations of Releasees. This Agreement and the
obligations of each Releasee to perform hereunder are subject to the
satisfaction by Warner, or a waiver in writing by the all of the Releasees, of
the following conditions, each of which is individually hereby deemed material,
at or prior to the Closing:
11.1 Concurrent Agreements. Warner will have entered into the Asset
Purchase Agreement on the date hereof, and on the Closing Date, will execute
and deliver all the Related Agreements and each Releasee will have executed and
delivered its Revised Newco Service Agreement and any Related Agreement related
to it.
11.2 Corporate Authorization. On the Closing Date, Warner shall
have delivered to each Releasee certified copies of the resolution(s) of the
Board of Directors of Warner authorizing the execution, delivery and
performance by Warner of this Agreement and the Related Agreements and the
consummation of the transactions contemplated hereby and thereby.
11.3 Representations, Warranties and Obligations. All
representations and warranties of Warner contained in this Agreement and in the
Exhibits hereto shall be true and correct in all material respects commencing
as of the date hereof and ending with and on the Closing Date as though made on
and as of such Closing Date. Warner shall have performed and complied with all
of their respective covenants and obligations under this Agreement in all
material respects.
11.4 Issuance and Delivery of Settlement Shares and Warrants to the
Releasees. Warner shall issue and deliver certificates to the Releasees
representing all of the Settlement Shares and Warrants.
11.5 Payment of a Portion of the Cash Collateral. Warner shall direct
the Escrow Agent to release from escrow to the Releasees $887,500 of the Cash
Collateral in accordance with the terms of Section 1.2 hereof.
11.6 Legal Opinion. On the Closing Date, Reid & Priest LLP, counsel
to Warner, shall deliver an opinion of counsel dated as of the Closing Date and
addressed to the Releasees, in the form set forth in Exhibit G annexed hereto.
12. Survival; Indemnification. The representations,
warranties, covenants and agreements of Warner on the one hand, and each
Releasee on the other hand, contained in this Agreement, and the Exhibits
hereto, shall survive and remain operative and in full force following the
execution and delivery of this Agreement and the Related Agreements. The
following provisions are applicable to claims made under these Agreement(s):
-21-
<PAGE> 22
12.1 Obligation of Warner to Indemnify. Warner hereby agrees to
indemnify, defend and hold harmless each Releasee (and its directors, officers,
employees, affiliates and assigns) from and against all claims, losses, suits,
proceedings, demands, judgments, damages, expenses and costs (including
reasonable attorneys' fees and disbursements) (collectively, "Losses") which
any Releasee may incur relating to (i) any material inaccuracy in, or any
material breach of, any representation, warranty, covenant or agreement of
Warner contained in this Agreement or the Exhibits hereto or (ii) any claim by
a third party who is a creditor or shareholder of Warner or any of its
subsidiaries relating to damages caused to such third party by the transfer of
assets by Warner pursuant to the provisions of the Asset Purchase Agreement.
12.2 Obligation of Each Releasee to Indemnify. Each Releasee hereby
agrees to indemnify, defend and hold harmless Warner (and its directors,
officers, employees, affiliates and assigns) from and against any Losses which
it may incur arising from any material inaccuracy in, or any material breach
of, any representation, warranty, covenant or agreement of such Releasee
contained in this Agreement.
12.3 Notice to Indemnitor. Promptly after any party hereto (i)
receives notice of any claim or the commencement of any action or proceeding
against it, (ii) has knowledge of any claim, action or proceeding against it,
or (iii) has knowledge of any matter for which it intends to seek
indemnification hereunder, the party seeking indemnification (the "Indemnitee")
shall, if a claim for indemnity with respect thereto is to be made against any
party hereto obligated to provide indemnification under Sections 12.1 or 12.2
hereof (the "Indemnitor"), give the Indemnitor written notice of such claim or
the commencement of such action or proceeding, in all cases within sufficient
time to respond to such claim or to answer or otherwise plead in any such
action. Such notice shall be a condition precedent to the Indemnitor's
obligation to provide indemnification under this Section 12.
12.4 Right to Defend; Compromise of Claims. The Indemnitor shall
have the duty to defend and right to compromise, at its own expense and by its
own counsel, any matter involving the asserted liability of any Indemnitee;
provided, however, that no compromise of any claim shall be made without the
consent of the Indemnitee unless such compromise results in the full and
unconditional release of all claims against the Indemnitee by the party
asserting such claim. The opportunity to compromise or defend as herein
provided shall be a condition precedent to any liability of an Indemnitor under
the provisions of this Section 12.4. If any Indemnitor shall undertake to
compromise or defend any such asserted liability, it shall promptly notify the
-22-
<PAGE> 23
Indemnitee of its intention to do so and provide the Indemnitee with reasonable
assurance as to the ability of the Indemnitor to defend and/or compromise such
matter, which, in the case of Warner, as Indemnitor, shall include
documentation evidencing the ability of Warner to pay any judgment with regard
to any such asserted liability. The Indemnitee at Indemnitor's expense shall
cooperate with the Indemnitor and its counsel in the defense against any such
asserted liability and in any compromise thereof. Such cooperation shall
include, but not be limited to, furnishing the Indemnitor with any books,
records or information reasonably requested by the Indemnitor and taking such
action as the Indemnitor may reasonably request to mitigate or reduce any
claim. After an Indemnitor has notified an Indemnitee of its intention to
defend any asserted liability, the Indemnitor shall not be liable for any
additional legal expenses incurred by the Indemnitee unless the Indemnitor
fails to prosecute the defense of such claim. If the Indemnitor shall desire
to compromise any such asserted liability by the payment of a liquidated amount
which the party asserting such liability is willing to accept in exchange for
fully and unconditionally releasing all claims against the Indemnitee, and the
Indemnitee shall refuse to consent to such compromise, then the Indemnitor's
liability under this Section 12 with respect to such asserted liability shall
be limited to the amount so offered in compromise. Under no circumstances
shall the Indemnitee compromise any asserted liability without the written
consent of the Indemnitor.
13. Miscellaneous.
13.1 Entire Agreement. This Agreement and the Related Agreements
and the Exhibits and Schedules annexed hereto and made a part hereof, contain
the entire agreement between Warner and each Releasee with respect to the
matters set forth herein and supersede all prior agreements and understandings
among them as to the subject matter thereof. No party shall be bound by nor
shall be deemed to have made any representations, warranties or covenants
except those contained herein.
13.2 Benefits. All of the terms and provisions of this Agreement and
the Related Agreements shall bind and inure to the benefit of Warner and each
Releasee and their respective successors and assigns.
13.3 Notices, Etc. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to be duly
given (i) upon receipt, if personally delivered with receipt acknowledged, (ii)
not less than three (3) business days after mailing, if mailed by registered or
certified mail, first class, postage prepaid, and (iii) on the next business
day, if delivered by a nationally recognized overnight
-23-
<PAGE> 24
courier service or if transmitted by facsimile machine addressed as follows:
(i) if to Warner:
Warner Insurance Services, Inc.
17-01 Pollitt Drive
Fair Lawn, New Jersey 07410
Tel: (201) 794-4800
Fax: (201) 791-9113
Attention: President
with a copy to:
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Attention: Leonard Gubar, Esq.
Tel: (212) 603-2000
Fax: (212) 603-2001
or to such other address or such other person(s) as Warner may designate by
written notice to the other parties hereto.
(ii) if to the Releasees, at the addresses set
forth on SCHEDULE 13 annexed hereto.
or to such other address or such other person(s) as each Customer may designate
by written notice to the other parties hereto.
13.4 Governing Law; Submission to Jurisdiction. (i) This Agreement
shall be construed in accordance with and governed by the internal laws of the
State of New York.
(ii) The parties hereto (A) submit for themselves in any legal
action or proceeding relating to the enforcement of the rights of and the
obligations under this Agreement to the jurisdiction of the New York State
Supreme Court, New York County, Commercial Part and the appellate courts
therefrom, (B) consent that any such action or proceeding shall be brought in
such courts, and waive any objection each may have now or hereafter have to the
venue of any such action or proceeding in any such court, (C) agree that
service of process of any such action or proceeding may be effected by
certified mail (or substantially similar form of mail), postage prepaid, to the
appropriate party at its address as set forth herein and service made shall be
deemed to be completed upon the earlier of actual receipt or five (5) days
after the same shall have been posted as aforesaid, and (D) agree that nothing
herein shall affect the right to effect service of process in any other manner
permitted by law.
-24-
<PAGE> 25
13.5 Severability. If any provision of this Agreement shall be held
invalid or unenforceable, such invalidity or unenforceability shall attach only
to such provision and shall not in any manner affect or render invalid or
unenforceable any other severable provision of this Agreement, and this
Agreement shall be carried out as if any such invalid or unenforceable
provision were not contained herein.
13.6 Modification, Waivers, Etc. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally but
only by an instrument in writing signed by the party against whom enforcement
of the change, waiver, discharge or termination is sought.
13.7 Captions. The captions of sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
13.8 Further Assurances. At any time and from time to time, upon
the reasonable request of any party hereto, the requested party shall execute,
deliver and acknowledge, or cause to be executed, delivered and acknowledged,
such further documents and instruments and do such other acts and things as the
requesting party may reasonably request in order to fully effect this
Agreement.
-25-
<PAGE> 26
13.9 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which, when
taken together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto either individually or by their
duly authorized representatives have caused this Agreement to be executed and
delivered in their respective names as of the date and year first above
written.
<TABLE>
<S> <C>
WARNER INSURANCE SERVICES, INC. ELECTRIC INSURANCE COMPANY
By: /s/ By: /s/
-------------------------- --------------------------
Name: Alfred J. Moccia Name: Laurence J. Cohen
Title: President and Chief Executive Officer Title: Vice President and
Treasurer
ATLANTIC EMPLOYERS INSURANCE COMPANY THE ROBERT PLAN CORPORATION
By: /s/ By: /s/
-------------------------- --------------------------
Name: John A. Murphy, Jr. Name: Carl Hollander
Title: Vice President Title: Secretary
PACIFIC EMPLOYERS INSURANCE COMPANY MATERIAL DAMAGE ADJUSTMENT
CORPORATION
By: /s/ By: /s/
-------------------------- --------------------------
Name: John A. Murphy, Jr. Name: Philbert A. Nezamoodeen
Title: Vice President Title: Secretary
NATIONAL CONSUMER INSURANCE LION INSURANCE COMPANY
COMPANY
By: /s/ By: /s/
-------------------------- --------------------------
Name: Philbert A. Nezamoodeen Name: Philbert A. Nezamoodeen
Title: Secretary Title: Secretary
</TABLE>
-26-
<PAGE> 27
LIST OF SCHEDULES AND EXHIBITS
TO
THE RESTRUCTURING AGREEMENT
Schedules:
1 - List of Services Contracts
2 - Description of RPC Lawsuits
3 - Description of Cash Collateral and Letter of Credit
4 - Number of Settlement Shares to be Issued to each Releasee
5 - Percentage Amounts of Cash Collateral to be received
by each Releasee
6 - Shares of Capital Stock of Warner Issued or Issuable
7 - Exceptions to Due Execution and Delivery
8 - List of Conflicts, etc.
9 - Notices, Consents, Approvals Required
10 - Exceptions to Performance of Obligations
11 - List of ALE Accrued Expenses through February 19, 1996 and
Expenses Paid with Balance of Funds
12 - Amounts Payable through the Closing Date under the
Services Contracts
13 - Notice Address for each Customer
Exhibits:
A - Form of Warrant
B - Form of Services Contract Release
C - Form of Stipulation in respect of the RPC Lawsuits
D - Form of Mutual General Release in respect of the RPC Lawsuits
E - Form of CWP Assignment
F - Form of Escrow Agreement
G - Form of Legal Opinion from Reid & Priest LLP
<PAGE> 1
THIS WARRANT AND THE UNDERLYING COMMON STOCK HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD
OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF.
VOID AFTER 5:00 P.M., NEW YORK TIME, ON FEBRUARY 28, 2001, OR IF NOT A BUSINESS
DAY, AS DEFINED HEREIN, AT 5:00 P.M., NEW YORK TIME, ON THE NEXT FOLLOWING
BUSINESS DAY.
No. W-1 WARRANT TO PURCHASE
1,181,250 Shares of Common Stock
WARRANT TO PURCHASE COMMON STOCK
OF
WARNER INSURANCE SERVICES, INC.
TRANSFER RESTRICTED -- SEE SECTION 6.02
This certifies that, for good and valuable consideration, pursuant to
that certain Restructuring Agreement dated as of March 1, 1996 among WARNER
INSURANCE SERVICES, INC., a Delaware corporation (the "Company") and the
Releasees listed therein (the "Restructuring Agreement"), Atlantic Employers
Insurance Company, a New Jersey corporation, and its registered, permitted
assigns (collectively, the "Warrantholder" or "Holder"), is entitled to
purchase from the Company, subject to the terms and conditions hereof, at any
time before 5:00 P.M., New York time, on February 28, 2001 (or, if such day is
not a business day, at or before 5:00 P.M., New York time on the next following
business day), the number of fully paid and non-assessable shares of Common
Stock, par value $.01 per share, of the Company (the "Common Stock") stated
above at the exercise price of $2.00 per share (the "Exercise Price"). The
Exercise Price and the number of shares purchasable hereunder are subject to
adjustment as provided in Article II hereof. Pursuant to Section 8.4(b) of the
Restructuring Agreement, for a period of six months after the issuance of this
Warrant, the Company has the right to acquire up to one half of the Warrants at
a cash price equal to $1.00 per Warrant. This Warrant is being issued to the
Holder in accordance with Section 1.1 of the Restructuring Agreement and is one
in a series of Warrants being similarly issued with the Restructuring
Agreement. Capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to them in the Restructuring Agreement.
THIS WARRANT IS ONE OF A SERIES OF WARRANTS WITH LIKE PROVISIONS TO PURCHASE,
IN THE AGGREGATE, 1,553,125 SHARES OF COMMON STOCK.
THE COMPANY HAS THE RIGHT, PURSUANT TO SECTION 8.4(b) OF THE RESTRUCTURING
AGREEMENT TO ACQUIRE ONE HALF OF THE WARRANTS ON A PRO RATA BASIS AT A CASH
PRICE EQUAL TO $1.00 PER WARRANT FOR A PERIOD ENDING ON AUGUST 31, 1996.
<PAGE> 2
ARTICLE I
Duration and Exercise of Warrant
Section 1.01: Duration of Warrant. Subject to the terms contained
herein, this Warrant may be exercised at any time before 5:00 P.M., New York
time, on February 28, 2001 (the "Expiration Date"), (or, if such day is not a
business day, at or before 5:00 P.M., New York time, on the next following
business day). If this Warrant is not exercised at or before 5:00 P.M., New
York time, on the Expiration Date, it shall become void, and all rights
hereunder shall thereupon cease.
Section 1.02: Exercise of Warrant.
(a) The Warrantholder may exercise this Warrant, in whole or
in part, upon surrender of this Warrant with the Subscription Form hereon duly
executed, to the Company at its corporate office at 17-01 Pollitt Drive, Fair
Lawn, New Jersey 07410, or to such office as duly designated by the Company to
the Warrantholder, together with the full Exercise Price for each Warrant
Share to be purchased by tendering in lawful money of the United States, or by
certified check or bank draft payable in United States Dollars to the order of
the Company.
(b) Upon receipt of this Warrant with the Subscription Form
duly executed and accompanied by payment of the aggregate Exercise Price for the
Warrant Shares for which this Warrant is then being exercised, the Company will
promptly cause to be issued certificates for the total number of whole shares
of Common Stock for which this Warrant is being exercised (adjusted to reflect
the effect of the provisions contained in Article II hereof, if any, and as
provided in Section 4.04 hereof) in such denominations as are required for
delivery to the Warrantholder, and the Company shall thereupon deliver such
certificates to the Warrantholder. If at the time this Warrant is exercised a
registration statement is not in effect to register under the Securities Act,
the Warrant Shares issuable upon exercise of this Warrant, the Company may
place such legends on certificates representing the Warrant Shares to indicate
that the Warrant Shares have not been registered and may not be transferred
except upon compliance with the registration requirements of the Securities Act
of 1933, as amended, and applicable state securities laws or an opinion of
counsel to the Company or of counsel reasonably satisfactory to the Company
that such registration is not required, or such other legends as may be
reasonably required in the opinion of counsel to the Company to permit the
Warrant Shares to be issued without such registration. From and after receipt
by the Company of the duly executed Subscription Form and the aggregate
exercise prices and notwithstanding that certificates in respect of the Warrant
Shares may not have been delivered, the Warrantholder shall be considered a
shareholder of the Company in respect of the Warrant Shares for all intents and
purpose.
-2-
<PAGE> 3
(c) In case the Warrantholder shall exercise this Warrant with
respect to less than all of the Warrant Shares that may be purchased under this
Warrant, the Company will execute a new warrant in the form of this Warrant for
the balance of such Warrant Shares and deliver such new warrant to the
Warrantholder.
(d) The Company covenants and agrees that it will pay when due and
payable any and all costs, expenses, charges and stock transfer and similar
taxes which may be payable in respect of the issue of this Warrant or in
respect of the issue of any Warrant Shares. The Company shall not, however, be
required to pay any tax imposed on income or gross receipts or any tax which
may be payable in respect of any transfer involved in the issuance or delivery
of this Warrant or at the time of surrender.
ARTICLE II
Adjustment of Warrant Shares
Purchasable and of Exercise Price
The Exercise Price and the number and kind of Warrant Shares shall be
subject to adjustment from time to time upon the happening of certain events as
provided in this Article II.
Section 2.01: Mechanical Adjustments.
(a) Anti-Dilution Provisions; Adjustment of Exercise Price. The
Exercise Price shall be subject to adjustment from time to time as hereinafter
provided. Upon each adjustment of the Exercise Price, the Warrantholder shall
thereafter be entitled to purchase, at the Exercise Price resulting from such
adjustment, the number of Warrant Shares obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of Warrant
Shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Exercise Price resulting from such
adjustment.
(b) Exercise Price Adjustment Formulas. If and whenever after the
date of this Warrant, the Company shall issue or sell any shares of Common
Stock (except as provided in subsection 2.01(h)) for a consideration per share
less than 95% of the Market Price on the date of such issuance or sale, then
forthwith the Exercise Price shall be reduced to the prices (calculated to the
nearest tenth of a cent) determined by multiplying the Exercise Price in effect
immediately prior to the time of such issuance or sale by a fraction, the
numerator of which shall be (i) the sum of (A) the number of shares of Common
Stock outstanding immediately prior to such issuance or sale (assuming the
conversion of all securities convertible into shares of Common Stock)
multiplied by the Market Price immediately prior to such issuance or sale, and
(B) the consideration, if any, received and deemed received by the Company upon
such issuance or sale, divided by (ii) the total number of shares of Common
Stock outstanding and deemed outstanding immediately after
-3-
<PAGE> 4
such issuance or sale, and the denominator of which shall be the Market Price
immediately prior to such issuance or sale.
No adjustment of the Exercise Price, however, shall be made in an amount less
than $.01 per share, but any such lesser adjustment shall be carried forward
and shall be made at the time and together with the next subsequent adjustment
which together with any adjustments so carried forward shall amount to $.01 per
share or more.
(c) Constructive Issuances of Stock; Convertible Securities; Rights
and Options; Stock Dividends. For the purposes of subsection 2.01(b) above,
the following provisions (i) to (viii), inclusive, shall also be applicable:
(i) In case at any time subsequent to the date hereof, the
Company shall in any manner grant any rights to subscribe for or to
purchase, or any options for the purchase of, shares of Common Stock or
any stock or securities convertible into or exchangeable for shares of
Common Stock (such convertible or exchangeable stock or securities
being hereinafter called "Convertible Securities"), whether or not such
rights or options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the
consideration per share for which shares of Common Stock are issued or
sold upon the exercise of such Convertible Securities (determined by
dividing (A) the total amount, if any, received or receivable by the
Company as consideration for the granting of such rights or options,
plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the exercise of such rights or options,
plus, in the case of any such rights or options which relate to such
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issuance or sale of such
Convertible Securities (and, if such convertible securities constitute
obligations of the Company, the principal amount of such obligations so
converted) and upon the conversion or exchange thereof, by (B) the
total maximum number of shares of Common Stock issuable upon the
exercise of such rights or options or upon the conversion or exchange
of all such Convertible Securities issuable upon the exercise of such
rights or options) shall be less than 95% of the Market Price
determined as of the date of granting such price or options, as the
case may be, then the total maximum number of shares of Common Stock
issuable upon the exercise of such rights or options (or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such rights or options) shall
be deemed to be outstanding and to have been issued for such price per
share. Except as provided in subsection 2.01(c)(iii) below, no further
adjustments of the Exercise Price shall be made upon the actual
issuance of such shares of Common Stock or of such Convertible
Securities upon exercise of such rights or options or upon the
-4-
<PAGE> 5
actual issuance of such shares of Common Stock upon conversion
or exchange of such Convertible Securities.
(ii) In case at any time the Company shall in any manner
issue or sell any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the
price per share for which shares of Common Stock are issuable upon such
conversion or exchange (determined by dividing (A) the total amount
received or receivable by the Company as consideration for the issuance
or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company upon
the conversion or exchange thereof, by (B) the total maximum number of
shares which would be issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than 95% of the Market Price
determined as of the date of such issuance or sale, then the total
maximum number of shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall (as of the date of
the issuance or sale of such Convertible Securities) be deemed to be
outstanding and to have been issued for such price per share; except as
otherwise specified in subsection 2.01(c)(iii) below, no further
adjustments of the Exercise Price shall be made upon the actual
issuance of such shares of Common Stock upon conversion or exchange of
such Convertible Securities.
(iii) If the purchase price provided for in any right or option
referred to in subsection 2.01(c)(i), or the additional consideration,
if any, payable upon the conversion or exchange of any Convertible
Securities referred to in subsection 2.01(c)(ii), or the rate at which
any Convertible Securities referred to in subsections 2.01(c)(i) or
(ii) are convertible into or exchangeable for shares of Common Stock,
shall change or a different purchase price or rate shall become
effective at any time or from time to time (other than under or by
reason of provisions designed to protect against dilution) then, upon
such change becoming effective, the Exercise Price then in effect at
the time of such event shall forthwith be increased or decreased to
such Exercise Price as would have been obtained had the rights, options
or Convertible Securities still outstanding provided for such changed
purchase price, additional compensation or rate of commission or
exchange, as the case may be, at the time initially granted, issued or
sold. On the expiration of any such option or right or the termination
of any such right to convert or exchange such Convertible Securities,
the Exercise Price then in effect hereunder shall forthwith be
increased to such Exercise Price as would have been obtained at the
time of such expiration or termination had such option, right or
convertible securities never been issued. If the purchase price
provided for in any right or option referred to in subsection
2.01(c)(i), or the additional consideration payable upon the exchange
or conversion of any Convertible Securities referred to in subsections
2.01(c)(i) or (ii), or the rate
-5-
<PAGE> 6
at which any Convertible Securities referred to in subsections
2.01(c)(i) or (ii) are convertible into or exchangeable for shares of
Common Stock, shall decrease at any time under or by reason of
provisions with respect thereto designed to protect against dilution,
then, in the case of the delivery of shares of Common Stock upon the
exercise of any such right or option or upon conversion or exchange of
any such right or option or upon conversion or exchange of any such
Convertible Securities, the Exercise Price then in effect hereunder
shall forthwith be decreased to such Exercise Price as would have been
obtained had the adjustments made upon issuance of such right or option
or Convertible Securities been made upon the basis of the issuance of
(and the total consideration computed in accordance with subsections
2.01(c)(i) or (ii), as the case may be, received for) the shares of
Common Stock delivered as aforesaid.
(iv) In case of the issuance of shares of Common Stock or
Convertible Securities of the Company as a dividend or distribution
upon any shares of Common Stock of the Company, such shares of Common
Stock or Convertible Securities, as the case may be, issuable in
payment of such dividend or distribution shall be deemed to have been
issued or sold without consideration.
(v) In case at any time any shares of Common Stock or
Convertible Securities or any rights or options to purchase any such
shares of Common Stock or Convertible Securities shall be issued or
sold for cash, the consideration received therefor shall be deemed to
be the amount payable to the Company therefor, without deduction
therefrom of any expenses incurred or any underwriting or selling
commissions or concessions paid by the Company in connection therewith
or any underwriting or selling discounts allowed by the Company in
connection therewith. In case any shares of Common Stock or
Convertible Securities or any rights or options to purchase any such
shares of Common Stock or Convertible Securities shall be issued or
sold for a consideration other than cash, the amount of the
consideration other than cash payable to the Company shall be deemed to
be the fair value of such consideration as determined by the Board of
Directors of the Company, without deduction therefrom of any expenses
incurred or any underwriting or selling commissions or concessions paid
by the Company in connection therewith or any underwriting or selling
discounts allowed by the Company in connection therewith. In case any
shares of Common Stock or Convertible Securities shall be issued in
connection with any merger of another corporation into the Company, the
amount of consideration therefor shall be deemed to be the fair value,
as determined by the Board of Directors of the Company, of such portion
of the assets of such merged corporation as such Board shall determine
to be attributable to such shares of Common Stock, Convertible
Securities, rights or options, as the case may be.
-6-
<PAGE> 7
(vi) In case at any time the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them
(A) to receive a dividend or other distribution payable in shares of
Common Stock or in Convertible Securities, or (B) to subscribe for or
purchase shares of Common Stock or Convertible Securities, then such
record date shall be deemed to be the date of the issuance or sale of
the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution
or the date of the granting of such right or subscription or purchase,
as the case may be.
(vii) "Market Price" shall mean, as of any day, the
closing sale price of the shares of Common Stock on such day on the New
York Stock Exchange or the American Stock Exchange (or if the Common
Stock shall not then be listed on either such exchange, the closing
sale price on the principal (determined by the highest volume averaged
for a period of twenty consecutive business days prior to the day as to
which "Market Price" is being determined) national securities exchange
(as defined in the Securities Exchange Act of 1934, as amended) on
which the Common Stock may then be listed) or, if there shall have been
no sales on such exchange or exchanges on such day, the averages of the
high and low sales prices of the Common Stock on such day on the NASDAQ
National Market System or, if the Common Stock is not included in the
NASDAQ National Market System, the average of the bid and asked prices
at the end of such day or, if the Common Stock shall not be so listed,
the average of the bid and asked prices at the end of the day in the
over-the-counter market as reported by NASDAQ or, if the Common Stock
is not included on NASDAQ, as reported by the National Quotation
Bureau, Inc. or any successor organization, in each such case, averaged
for a period of twenty consecutive business days prior to the day as to
which "Market Price" is being determined.
(viii) The number of shares of Common Stock outstanding at
any given time shall not include shares owned or held by or for the
account of the Company, and the disposition of any such shares shall be
considered an issuance or sale of shares of Common Stock for the
purposes of subsection 2.01(b).
(d) Effect of Certain Dividends. In case at any time the
Company shall declare a dividend upon the shares of Common Stock payable
otherwise than out of earnings or earned surplus (other than in a partial or
total liquidation or dissolution of the Company) and otherwise than in shares
of Common Stock or Convertible Securities, the Exercise Price in effect
immediately prior to the declaration of such dividend shall be reduced by an
amount equal, in the case of a dividend in cash, to the amount thereof payable
per share of Common Stock or, in the case of any other dividend, to the fair
value thereof per share of Common Stock as determined by the Board of Directors
of the
-7-
<PAGE> 8
Company. For the purposes of the foregoing, a dividend other than in cash
shall be considered payable out of earnings or earned surplus only to the
extent that such earnings or earned surplus are charged an amount equal to the
fair value of such dividend as determined by the Board of Directors of the
Company. Such reductions shall take effect as of the date on which a record is
taken for the purpose of such dividend, or if a record is not taken, the date
as of which the holders of record of shares of Common Stock entitled to such
dividends are to be determined. As used in this subsection 2.01(d), the term
"dividend" shall mean any distribution to the holders of shares of Common
Stock. Except as provided in this subsection 2.01(d), no adjustment in the
Exercise Price and no change in the number of Warrant Shares so purchasable
shall be made pursuant to this Section 2.01 as a result of or by reason of any
such dividend.
(e) Stock Splits and Reverse Splits. In case at any time the
Company shall subdivide its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares
purchasable pursuant to this Warrant immediately prior to such subdivision
shall be proportionately increased, and conversely, in case at any time the
Company shall combine its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of shares of
Common Stock purchasable upon the exercise of this Warrant immediately prior to
such combination shall be proportionately reduced. Except as provided in this
subsection 2.01(e), no adjustment in the Exercise Price and no exchange in the
number of Warrant Shares so purchasable shall be made pursuant to this Section
2.01 as a result of or by reason of any such subdivision or combination.
(f) Effect of Reorganization and Assets Sales. If any capital
reorganization or reclassification of the capital stock of the Company, or
consolidation of the Company with or merger of the Company into another
corporation, or the sale of all or substantially all of its assets to another
corporation, shall be effected in such a way that holders of shares of Common
Stock shall be entitled to receive stock, securities or assets with respect to
or in exchange for shares of Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provision shall be made whereby each holder of Warrants shall
thereafter have the right to receive upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock of the
Company immediately theretofore receivable upon the exercise of such Warrants,
such shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding stock of Common Stock
equal to the number of shares of such stock immediately theretofore so
receivable upon exercise had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case appropriate
provision shall be made with respect to the rights and interests of such holder
to the end that the provisions hereof (including, without limitation,
provisions for adjustment of the Exercise Price and of the number of shares
issuable upon exercise) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise of such Warrants. The Company shall not
-8-
<PAGE> 9
effect any such consolidation, merger or sale unless prior to or simultaneously
with the consummation thereof the successor corporation (if other than the
Company) resulting from such consolidation or merger, or of the corporation
purchasing such assets shall assume by written instrument executed and mailed
or delivered to each Warrantholder, the obligation to deliver to such
Warrantholder such shares of stock, securities or assets as, in accordance with
the foregoing provisions such Warrantholder may be entitled to receive, and
containing the express assumption of such successor corporation of the
performance and observance of the provisions of this Warrant to be performed
and observed by the Company and of all liabilities and obligation of the
Company hereunder.
(g) Accountants' Certificate. Upon each adjustment of the
Exercise Price and upon each change in the number of Warrant Shares, then and
in each such case, the Company will promptly obtain a certificate of a firm of
independent certified public accountants of recognized standing selected by the
Company's Board of Directors, who may be the regular auditors of the Company,
stating the adjusted Exercise Price and the new number of Warrant Shares so
issuable, or specifying the other shares of stock, securities or assets and the
amount thereof receivable as a result of such change in rights, and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based. The Company will promptly mail a copy of such
accountant's certificate to the Warrantholders, which certificate shall be
conclusive evidence of the correctness of the computation with respect to any
such adjustment of the Exercise Price and any such change in the number of such
Warrant Shares so issuable.
(h) No Adjustments Required. Notwithstanding anything herein to
the contrary, there shall be no adjustment in the Exercise Price in connection
with (i) the grant of any option, or the exercise of any option granted under
any employee benefit plan or stock option plan or (ii) upon the exercise of any
Convertible Security outstanding on the date of this Warrant including this
Warrant.
Section 2.02: Notice of Adjustment. Whenever the number of Warrant
Shares or the Exercise Price is adjusted as herein provided, the Company shall
prepare and deliver to the Warrantholder a certificate signed by its Chairman
of the Board, President, any Vice President, Treasurer or Secretary, setting
forth the adjusted number of Warrant Shares purchasable upon the exercise of
this Warrant and the Exercise Price of such Shares after such adjustment,
setting forth a brief statement of the facts requiring such adjustment and
setting forth the computation by which adjustment was made.
Section 2.03: No Adjustment for Dividends. Except as provided in
Section 2.01 of this Agreement, no adjustment in respect of any cash dividends
payable out of earnings or earned surplus shall be made during the term of this
Warrant or upon the exercise of this Warrant.
-9-
<PAGE> 10
Section 2.04: Form of Warrant After Adjustments. The form of this
Warrant need not be changed because of any adjustments in the Exercise Price or
the number or kind of the Warrant Shares, and any Warrant theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in this Warrant, as initially issued.
ARTICLE III
Compliance with the Securities Act
The Holder acknowledges that the Warrant Shares, in its hands, will be
restricted securities which may not be sold or offered for sale in the absence
of an effective registration statement under the Securities Act or an opinion
of counsel satisfactory to the Company that such registration is not required.
With respect to any offer, sale or other disposition of any Warrant Shares, the
Holder will give written notice to the Company prior thereto, describing
briefly the manner thereof, together with a written opinion of such Holder's
counsel, to the effect that such offer, sale or other distribution may be
effected without registration or qualification (under federal law and
applicable state law then in effect). Promptly upon receiving such written
notice and reasonably satisfactory opinion, if so requested, the Company, as
promptly as practicable, shall notify such Holder that such Holder may sell or
otherwise dispose of the Warrant Shares, all in accordance with the terms of
the notice delivered to the Company. If a determination has been made pursuant
to this Article III that the opinion of counsel for the Holder is not
reasonably satisfactory to the Company, the Company shall so notify the Holder
promptly after such determination has been made. Each certificate representing
the Warrant Shares thus transferred shall bear a legend as to the applicable
restrictions on transferability in order to ensure compliance with the
Securities Act, unless in the opinion of counsel for the Company such legend is
not required, in order to ensure compliance with the Securities Act. The
Company may issue stop transfer instructions to its transfer agent and
registrar in connection with such restrictions. The Warrant Shares are
entitled to certain rights of registration as provided in Section 7.2 of the
Restructuring Agreement.
ARTICLE IV
Other Provisions Relating
to Rights of Warrantholder
Section 4.01: No Rights as Shareholder; Notice to Warrantholder.
Nothing contained in this Warrant shall be construed as conferring upon the
Warrantholder or his transferees the right to vote or to receive dividends or
to consent or to receive notice as a shareholder in respect of any meeting of
shareholders for the election of directors of the Company or of any other
matter or any rights whatsoever as shareholders of the Company, except to the
extent specifically provided for herein; provided, however that the
Warrantholder shall be delivered all notices and other communications sent by
the Company
-10-
<PAGE> 11
to its shareholders. Without limiting the foregoing, in case at any time: (1)
the Company shall declare any dividend payable in Common Stock or any
distribution (other than cash dividends) to the holders of the Common Stock;
(2) the Company shall make an offer for subscription pro rata to the holders of
its Common Stock of any additional shares of stock of any class or other
rights; (3) there shall be any capital reorganization, or reclassification of
the capital stock of the Company, or consolidation or merger of the Company
with, or sale of all or substantially all of its assets to, another
corporation; or (4) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; then, in any one or more of such
cases, the Company shall give notice to the Warrantholder of the date on which
(a) the books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights, or (b) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up shall take place, as the case may be. Such notice shall also
specify the date as of which the holders of Common Stock of records shall
participate in such dividend, distribution or subscription rights, or shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, or winding up as the case may be. Such written
notice shall be given not less than 10 days and not more than 90 days prior to
the record date on which the Company's transfer books are closed in respect
thereto and such notice may state that the record date is subject to the
effectiveness of a registration statement under the Securities Act, or to a
favorable vote of stockholders, if either is required.
Section 4.02: Lost, Stolen, Mutilated or Destroyed Warrant. If this
Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms
as to indemnity or otherwise as it may in its reasonable discretion impose
(which shall, in the case of a mutilated Warrant, include the surrender
thereof), issue a new Warrant of like denomination and tenor as, and in
substitution for, this Warrant.
Section 4.03: Reservation of Shares.
(a) The Company covenants and agrees that at all times it shall
reserve and keep available for the exercise of this Warrant such number of
authorized shares of Common Stock or other securities as are sufficient to
permit the exercise in full of this Warrant.
(b) The Company shall use its best efforts to maintain or secure the
listing of the Warrant Shares upon the securities exchange or automated
quotation system, if any, upon which shares of its Common Stock are then
listed.
(c) The Company covenants that all shares of Common Stock issued on
exercise of this Warrant will be validly issued, fully paid, non-assessable and
free of preemptive rights.
-11-
<PAGE> 12
Section 4.04: No Fractional Shares. Anything contained herein to the
contrary notwithstanding, the Company shall not be required to issue any
fraction of a share in connection with the exercise of this Warrant. In any
case where the Warrantholder would, except for the provisions of this Section
4.04, be entitled under the terms of this Warrant to receive a fraction of a
share upon exercise of this Warrant and receipt of the Exercise Price, the
Company shall not be required to issue any fraction of a share, but rather,
will adjust the aggregate Exercise Price for such fraction of a share to which
the Warrantholder would otherwise be entitled.
ARTICLE V
Treatment of Warrantholder
Prior to due presentment for registration or transfer of this Warrant,
the Company may deem and treat the Warrantholder as the absolute owner of this
Warrant (notwithstanding any notation of ownership or other writing hereon) for
the purpose of any exercise hereof and for all other purposes of the Company
shall not be affected by any notice to the contrary.
ARTICLE VI
Split-Up, Combination,
Exchange and Transfer of Warrant
Section 6.01: Split-Up, Combination, Exchange and Transfer of
Warrant. Subject to and limited by the provisions of Section 6.02 hereof, this
Warrant may be split up, combined or exchanged for another Warrant or Warrants
containing the same terms to purchase a like aggregate number of Warrant
Shares. If the Warrantholder desires to split up, combine or exchange this
Warrant, he shall make such request in writing delivered to the Company and
shall surrender to the Company this Warrant and any other Warrants to be so
split up, combined or exchanged. Upon any such surrender for a split-up,
combination or exchange, the Company shall execute and deliver to the person
entitled thereto a Warrant or Warrants, as the case may be, as so requested.
The Company shall not be required to effect any split-up, combination or
exchange which will result in the issuance of a Warrant entitling the
Warrantholder to purchase upon exercise a fraction of a share of Common Stock
or a fractional Warrant. The Company may require such Warrantholder to pay a
sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any split-up, combination or exchange of Warrants.
Section 6.02: Restrictions on Transfer. This Warrant may be
exercised and this Warrant and the Warrant Shares may not be sold,
hypothecated, assigned or transferred (a "Transfer"), except only in accordance
with and subject to the provisions of the Securities Act and the rules and
regulations promulgated thereunder. The Warrantholder shall have
-12-
<PAGE> 13
the benefit of the certain registration rights for the Warrant Shares as
provided in the Restructuring Agreement.
ARTICLE VII
Other Matters
Section 7.01: Successors and Assigns. All the covenants and
provisions of this Warrant shall be binding upon and inure to the benefit of
the Company and the Holder and their respective successors and assigns.
Section 7.02: Amendments and Waivers. The provisions of this
Warrant, including the provisions of this sentence, may not be amended,
modified or supplemented, and waiver or consents to departures from the
provisions hereof may not be given unless the Company has obtained the written
consent of the Holder. The Warrantholder shall be bound by any consent
authorized by this Section whether or not certificates representing his Warrant
have been marked to indicate such consent.
Section 7.03: Counterparts. This Warrant may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
Section 7.04: Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of Delaware.
Section 7.05: Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provisions in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
Section 7.06: Integration/Entire Agreement. This Warrant is intended
by the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein other than as
to registration rights set forth in the Restructuring Agreement as to which the
Warrant Shares shall be entitled. This Warrant supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
Section 7.07: Notices. Any notice, request or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or mailed by registered or certified
mail or overnight courier, postage prepaid, at the respective addresses of the
parties as set forth herein. Any party hereto may
-13-
<PAGE> 14
by notice so given change its address for future notice hereunder. Notice
shall conclusively be deemed to have been given when delivered in the manner
set forth above and shall be deemed to have been received when delivered.
Copies of all notices to the Company shall be given to:
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Attention: Leonard Gubar
and all notices to the Warrantholder shall be given to:
Atlantic Employers Insurance Company
1601 Chestnut Street
TLP 44
Two Liberty Place
Philadelphia, PA 19192
Attention: James R. Stallard, Esq.
Notice or demand pursuant to this Warrant to be given or made by the
Warrantholder to or on the Company shall be sufficiently given or made if sent
by first class mail or overnight courier, postage prepaid, to the Warrantholder
at his last known address as it shall appear on the books of the Company.
Section 7.08: Headings. The Article and Section headings herein are
for convenience only and are not part of this Warrant and shall not affect the
interpretation thereof.
IN WITNESS WHEREOF, this Warrant has been duly executed by the Company
under its corporate seal as of the 1st day of March, 1996_.
WARNER INSURANCE SERVICES, INC.
By:
------------------------------------------
Name: Alfred J. Moccia
Title: President and Chief Executive Officer
(Corporate Seal)
ATTEST:
- --------------------------------
Secretary
-14-
<PAGE> 15
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, ____________________________ hereby sells, assigns
and transfers unto ________________________ the within Warrant Certificate,
together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint _____ ____________________ attorney, to
transfer said Warrant Certificate on the books of the within-named Company with
respect to the number of Warrants set forth below, with full power of
substitution in the premises:
<TABLE>
<CAPTION>
Name(s) of
Assignee(s) Address No. of Warrants
----------- ------- ---------------
<S> <C> <C>
</TABLE>
And if said number of Warrants shall not be all the Warrants represented by the
Warrant Certificate, a new Warrant Certificate is to be issued in the name of
said undersigned for the balance remaining of the Warrants represented by said
Warrant Certificate.
Dated: ________________, _____.
-----------------------------------------------------
Note: The above signature should correspond exactly
with the name on the face of this Warrant
Certificate.
<PAGE> 16
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant)
WARNER INSURANCE SERVICES, INC.
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to purchase
thereunder, shares of Common Stock, as provided for therein, and
tenders herewith payment of the purchase price in full in the form of cash or a
certified or official bank check in the amount of $ .
Please issue a certificate or certificates for such Common Stock in
the name of, and pay any cash for any fractional share to:
Name
--------------------------------
(Please Print Name, Address and Social
Security No.)
Signature
---------------------------
Note: The above signature should
correspond exactly with the name on the
first page of this Warrant Certificate
or with the name of the assignee
appearing in the assignment form below.
And if said number of shares shall not be all the shares purchasable
under the within Warrant Certificate, a new Warrant Certificate is to be issued
in the name of said undersigned for the balance remaining of the shares
purchasable thereunder less any fraction of a share paid in cash.
<PAGE> 1
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(f) under the Securities Exchange Act of
1934, as amended, the persons named below agree to the joint filing on behalf
of each of them a Statement on Schedule 13D (including amendments thereto) with
respect to the Common Stock, $0.01 par value, of Warner Insurance Services,
Inc., a Delaware corporation, and further agree that this Joint Filing
Agreement be included as an exhibit to such joint filings. In evidence
thereof, the undersigned, being duly authorized, hereby execute this Agreement
this 11th day of March, 1996.
CIGNA CORPORATION
By: /s/ Carol J. Ward
--------------------------------------
Name: Carol J. Ward
Title Corporate Secretary
ATLANTIC EMPLOYERS INSURANCE COMPANY
By: /s/ Richard A. Hinckley, Jr.
--------------------------------------
Name: Richard A. Hinckley, Jr.
Title Vice President
