<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
ORION CAPITAL CORPORATION
(Name of Subject Company)
ROYAL & SUN ALLIANCE INSURANCE GROUP PLC
ROYAL GROUP, INC.
NTG ACQUISITION CORP.
(Bidders)
Common Stock, Par Value $1.00 Per Share
(Title of Class)
686268-10-3
(CUSIP Number of Class of Securities)
----------------
Joyce W. Wheeler, Esq.
Royal Group, Inc.
9300 Arrowpoint Boulevard
Charlotte, North Carolina 28273-8135
Telephone: (704) 522-2000, Facsimile: (704) 522-3111
With a copy to:
Christopher E. Manno, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue, New York, New York 10019-6099
Telephone: (212) 728-8000, Facsimile: (212) 728-8111
----------------
CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
Transaction Valuation* Amount of Filing Fee
<S> <C>
$1,438,166,450 $287,633.29
</TABLE>
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* Estimated for purposes of calculating the amount of the filing fee only.
The filing fee calculation assumes the purchase of 28,763,329 shares of
common stock, $1.00 par value per share (the "Shares"), of Orion Capital
Corporation, at a price of $50.00 per Share in cash, without interest. The
filing fee calculation is based on the 27,355,263 Shares outstanding as of
July 9, 1999 and assumes the issuance prior to the consummation of the
Offer (as defined herein) of 1,408,066 Shares upon the exercise of
outstanding options and other rights and securities exercisable for Shares.
The amount of the filing fee calculated in accordance with Regulation
240.0-11 of the Securities Exchange Act of 1934, as amended, equals 1/50th
of one percent of the value of the transaction.
[_]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
<TABLE>
<S> <C> <C> <C>
Amount Previously Paid: Not applicable Filing Party: Not applicable
Form or Registration No.: Not applicable Date Filed: Not applicable
</TABLE>
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<PAGE>
14D-1
1. NAMES OF REPORTING PERSONS AND S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS
NTG Acquisition Corp. 06-1551933
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS
AF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(e) OR 2(f) [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
None
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [ ]
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
10. TYPE OF REPORTING PERSON
CO
2
<PAGE>
14D-1
1. NAMES OF REPORTING PERSONS AND S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS
Royal Group, Inc. 51-0233196
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ X ]
(b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS
WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(e) OR 2(f) [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
668,900
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [ ]
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
2.5%
10. TYPE OF REPORTING PERSON
CO
3
<PAGE>
14D-1
1. NAMES OF REPORTING PERSONS AND S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS
Royal & Sun Alliance Insurance Group plc
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ X ]
(b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS
AF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(e) OR 2(f) [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
United Kingdom
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
668,900
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [ ]
9.PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
2.5%
10. TYPE OF REPORTING PERSON
CO
4
<PAGE>
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to
the offer by NTG Acquisition Corp., a Delaware corporation ("Purchaser"), to
purchase all of the outstanding shares of common stock, par value $1.00 per
share (the "Common Stock"), including the associated preferred stock purchase
rights issued pursuant to the Rights Agreement, dated as of September 11,
1996, as amended, by and between the Company and First Chicago Trust Company
of New York, as Rights Agent (the "Rights" and, together with the Common
Stock, the "Shares"), of Orion Capital Corporation, a Delaware corporation
(the "Company"), at $50.00 per Share, net to the seller in cash, without
interest, upon the terms and subject to the conditions set forth in the Offer
to Purchase dated July 16, 1999 (the "Offer to Purchase"), a copy of which is
attached hereto as Exhibit (a)(1), and in the related Letter of Transmittal, a
copy of which is attached hereto as Exhibit (a)(2) (which, as amended or
supplemented from time to time, together constitute the "Offer"). Purchaser is
an indirect wholly-owned subsidiary of Royal & Sun Alliance Insurance Group
plc, a public limited company organized under the laws of England and Wales
("Royal plc") and was formed solely to effect the Offer and the transaction
contemplated thereby.
Item 1. Security and Subject Company.
(a) The name of the subject company is Orion Capital Corporation, and the
address of its principal executive offices is 9 Farm Springs Road, Farmington,
Connecticut 06032. The telephone number of the Company at such location is
(860) 674-6600.
(b) The information set forth in the "INTRODUCTION" of the Offer to Purchase
is incorporated herein by reference.
(c) The information set forth in "Price Range of the Shares; Dividends" of
the Offer to Purchase is incorporated herein by reference.
Item 2. Identity and Background.
(a)-(d), (g) This Statement is being filed by Purchaser, Purchaser's parent,
Royal Group, Inc., a Delaware corporation and an indirect wholly-owned
subsidiary of Royal plc ("Royal US"), and Royal plc. The information set forth
in the "INTRODUCTION" and "Certain Information Concerning Purchaser, Royal US
and Royal plc" of the Offer to Purchase is incorporated herein by reference.
The name, business address, present principal occupation or employment, the
material occupations, positions, offices or employments for the past five
years and citizenship of each director and executive officer of Purchaser,
Royal US and Royal plc, and the name of any corporation or other organization
in which such occupations, positions, offices and employments are or were
carried on are set forth in Schedule I to the Offer to Purchase and
incorporated herein by reference.
(e)-(f) During the last five years, none of Purchaser, Royal US or Royal plc
nor, to the best knowledge of Purchaser, Royal US and Royal plc, any of the
persons or entities listed in Schedule I to the Offer to Purchase (i) have
been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction as a result of which any such
person was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
Item 3. Past Contacts, Transactions or Negotiations with the Subject Company.
(a)(1) Other than the transactions described in Item 3(b) below and except
as described in "Certain Information Concerning Purchaser, Royal US and Royal
plc" of the Offer to Purchase (which is incorporated herein by reference),
none of Purchaser, Royal US or Royal plc nor, to the best knowledge of
Purchaser, Royal US and Royal plc, any of the persons or entities listed in
Schedule I to the Offer to Purchase have entered into any transaction with the
Company, or any of the Company's affiliates which are corporations, since the
commencement of the Company's third full fiscal year preceding the date of
this Statement, the aggregate amount of which was equal to or greater than one
percent of the consolidated revenues of the Company for (i) the fiscal year in
which such transaction occurred or (ii) the portion of the current fiscal year
which has occurred if the transaction occurred in such year.
5
<PAGE>
(a)(2) Other than the transactions described in Item 3(b) below, none of
Purchaser, Royal US or Royal plc nor, to the best knowledge of Purchaser,
Royal US and Royal plc, any of the persons or entities listed in Schedule I to
the Offer to Purchase have entered into any transaction since the commencement
of the Company's third full fiscal year preceding the date of this Statement
with the executive officers, directors or affiliates of the Company which are
not corporations, in which the aggregate amount involved in such transaction
or in a series of similar transactions, including all periodic installments in
the case of any lease or other agreement providing for periodic payments or
installments, exceeded $40,000.
(b) The information set forth in the "INTRODUCTION," "Certain Information
Concerning Purchaser, Royal US and Royal plc," "Background of the Offer;
Purpose of the Offer and the Merger; The Merger Agreement and Certain Other
Agreements" and "Plans for the Company; Other Matters" of the Offer to
Purchase is incorporated herein by reference.
Item 4. Source and Amount of Funds or Other Consideration.
(a)-(b) The information set forth in the "INTRODUCTION" and "Sources and
Amount of Funds" of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
Item 5. Purpose of the Tender Offer and Plans or Proposals of the Bidders.
(a)-(e) The information set forth in the "INTRODUCTION," "Background of the
Offer; Purpose of the Offer and the Merger; The Merger Agreement and Certain
Other Agreements" and "Plans for the Company; Other Matters" of the Offer to
Purchase is incorporated herein by reference.
(f)-(g) The information set forth in the "INTRODUCTION" and "Effect of the
Offer on the Market for the Shares; Stock Listing; Exchange Act Registration;
Margin Regulations" of the Offer to Purchase is incorporated herein by
reference.
Item 6. Interest in Securities of the Subject Company.
(a)-(b) The information set forth in the "INTRODUCTION," "Certain
Information Concerning Purchaser, Royal US and Royal plc" and "Background of
the Offer; Purpose of the Offer and the Merger; The Merger Agreement and
Certain Other Agreements" of the Offer to Purchase is incorporated herein by
reference.
Item 7. Contracts, Arrangements, Understandings or Relationships with Respect
to the Subject Company's Securities.
The information set forth in the "INTRODUCTION," "Certain Information
Concerning Purchaser, Royal US and Royal plc," "Sources and Amount of Funds,"
"Background of the Offer; Purpose of the Offer and the Merger; The Merger
Agreement and Certain Other Agreements," "Plans for the Company; Other
Matters" and "Fees and Expenses" of the Offer to Purchase is incorporated
herein by reference.
Item 8. Persons Retained, Employed or to be Compensated.
The information set forth in "Fees and Expenses" of the Offer to Purchase is
incorporated herein by reference.
Item 9. Financial Statements of Certain Bidders.
The information set forth in "Certain Information Concerning Purchaser,
Royal US and Royal plc" of the Offer to Purchase is incorporated herein by
reference.
6
<PAGE>
Item 10. Additional Information.
(a) Except as disclosed in Items 3 and 7 above, there are no present or
proposed material contracts, arrangements, understandings or relationships
between Purchaser, Royal US or Royal plc, or to the best knowledge of
Purchaser, Royal US and Royal plc, any of the persons or entities listed in
Schedule I to the Offer to Purchase, and the Company or any of its executive
officers, directors, controlling persons or subsidiaries.
(b)-(c) The information set forth in the "INTRODUCTION," "Conditions to the
Offer" and "Certain Legal Matters" of the Offer to Purchase is incorporated
herein by reference.
(d) The information set forth in "Effect of the Offer on the Market for the
Shares; Stock Listing; Exchange Act Registration; Margin Regulations" and
"Certain Legal Matters" of the Offer to Purchase is incorporated herein by
reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and
(a)(2), respectively, to the extent not otherwise incorporated herein by
reference, is incorporated herein by reference.
Item 11. Materials to be Filed as Exhibits.
<TABLE>
<C> <S>
(a)(1) Offer to Purchase, dated July 16, 1999.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Press Release of Royal plc dated July 12, 1999.
(a)(8) Press Release of Royal plc dated July 16, 1999.
(a)(9) Summary Advertisement.
(b) None.
(c)(1) Agreement and Plan of Merger, dated as of July 12, 1999, by and between
Purchaser, Royal US and the Company.
(c)(2) Stock Option Agreement, dated as of July 12, 1999, by and between Royal
US and the Company.
(c)(3) Confidentiality Agreement, dated June 18, 1999, by and between Royal &
SunAlliance USA, Inc. and the Company.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
7
<PAGE>
SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
Dated: July 16, 1999
NTG ACQUISITION CORP.
/s/ Terry Broderick
By:__________________________________
Name: Terry Broderick
Title:President
ROYAL GROUP, INC.
/s/ Terry Broderick
By:__________________________________
Name: Terry Broderick
Title:President
ROYAL & SUN ALLIANCE INSURANCE GROUP
PLC
/s/ D.J. Miller
By:__________________________________
Name: D.J. Miller
Title:Director, Legal & Secretarial
8
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequential
Exhibit Page No.
------- ----------
<C> <S> <C>
(a)(1) Offer to Purchase, dated July 16, 1999. ................
(a)(2) Letter of Transmittal...................................
(a)(3) Notice of Guaranteed Delivery...........................
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Com-
panies and Other Nominees. .............................
(a)(5) Letter to Clients for use by Brokers, Dealers, Commer-
cial Banks, Trust Companies and Other Nominees..........
(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9...........................
(a)(7) Press Release of Royal plc dated July 12, 1999..........
(a)(8) Press Release of Royal plc dated July 16, 1999..........
(a)(9) Summary Advertisement. .................................
(b) None....................................................
(c)(1) Agreement and Plan of Merger, dated as of July 12, 1999,
by and between Purchaser, Royal US and the Company......
(c)(2) Stock Option Agreement, dated as of July 12, 1999, by
and between Royal US and the Company....................
(c)(3) Confidentiality Agreement, dated June 18, 1999, by and
between Royal & SunAlliance USA, Inc. and the Company...
(d) None....................................................
(e) Not applicable..........................................
(f) None....................................................
</TABLE>
9
<PAGE>
Exhibit (a)(1)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
of
Orion Capital Corporation
at
$50.00 Net Per Share
by
NTG Acquisition Corp.
an indirect wholly-owned subsidiary of
Royal & Sun Alliance Insurance Group plc
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, AUGUST 12, 1999, UNLESS THE OFFER IS
EXTENDED.
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED
AS OF JULY 12, 1999, BY AND AMONG NTG ACQUISITION CORP. ("PURCHASER"), ROYAL
GROUP, INC. ("ROYAL US") AND ORION CAPITAL CORPORATION (THE "COMPANY"). THE
BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND
THE MERGER, AND HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER ARE
FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.
------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES WHICH REPRESENTS AT LEAST A MAJORITY OF THE TOTAL NUMBER OF SHARES
OUTSTANDING ON THE DATE SHARES ARE ACCEPTED FOR PAYMENT. THE OFFER ALSO IS
SUBJECT TO THE OTHER CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE INCLUDING
THE CONSENT OF CERTAIN STATE INSURANCE REGULATORY AUTHORITIES WHICH ARE NOT
EXPECTED TO BE RECEIVED UNTIL THE FOURTH QUARTER OF 1999. THE PARTIES EXPECT
THAT THE EXPIRATION DATE WILL BE EXTENDED IN ORDER TO PERMIT THE PARTIES TO
OBTAIN SUCH CONSENTS. SEE SECTIONS 11, 14 AND 15.
----------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares (as defined herein) should either (i) complete and sign the enclosed
Letter of Transmittal (or a facsimile thereof) in accordance with the
Instructions in the Letter of Transmittal, have such stockholder's signature
thereon guaranteed (if required by Instruction 1 to the Letter of
Transmittal), mail or deliver the Letter of Transmittal (or a facsimile
thereof) and any other required documents to the Depositary (as defined
herein) and either deliver the certificates for such Shares to the Depositary
or tender such Shares pursuant to the procedure for book-entry transfer set
forth in Section 3 of this Offer to Purchase or (ii) request such
stockholder's broker, dealer, commercial bank, trust company or other nominee
to effect the transaction for such stockholder. Any stockholder whose Shares
are registered in the name of a broker, dealer, commercial bank, trust company
or other nominee must contact such broker, dealer, commercial bank, trust
company or other nominee to tender such Shares.
Any stockholder who desires to tender Shares and whose certificates
evidencing such Shares are not immediately available, or who cannot comply
with the procedures for book-entry transfer on a timely basis, or who cannot
deliver all required documents to the Depositary prior to the expiration of
the Offer, may tender such Shares by following the procedures for guaranteed
delivery set forth in Section 3 of this Offer to Purchase.
Questions and requests for assistance may be directed to the Information
Agent (as defined herein) at its address and telephone number set forth on the
back cover of this Offer to Purchase. Requests for additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed
Delivery and other tender offer materials may be directed to the Information
Agent or brokers, dealers, commercial banks or trust companies.
----------------
The Dealer Manager for the Offer is:
Salomon Smith Barney
July 16, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION.............................................................. 1
THE OFFER................................................................. 3
1.Terms of the Offer..................................................... 3
2.Acceptance for Payment and Payment..................................... 5
3.Procedures for Tendering Shares........................................ 6
4.Withdrawal Rights...................................................... 8
5.Certain U.S. Federal Income Tax Consequences........................... 8
6.Price Range of the Shares; Dividends................................... 9
7.Effect of the Offer on the Market for the Shares; Stock Listing;
Exchange Act Registration; Margin Regulations......................... 10
8.Certain Information Concerning the Company............................. 11
9.Certain Information Concerning Purchaser, Royal US and Royal plc....... 13
10.Sources and Amount of Funds............................................ 15
11.Background of the Offer; Purpose of the Offer and the Merger; the
Merger Agreement and Certain Other Agreements......................... 15
12.Plans for the Company; Other Matters................................... 27
13.Dividends and Distributions............................................ 29
14.Conditions to the Offer................................................ 29
15.Certain Legal Matters.................................................. 30
16.Fees and Expenses...................................................... 34
17.Miscellaneous.......................................................... 34
</TABLE>
SCHEDULE I -- Information Concerning Directors And Executive Officers Of
Purchaser, Royal US and Royal plc
(i)
<PAGE>
To the Holders of Common Stock of
Orion Capital Corporation:
INTRODUCTION
NTG Acquisition Corp., a Delaware corporation ("Purchaser"), hereby offers
to purchase all outstanding shares of common stock, par value $1.00 per share
(the "Common Stock"), including the associated preferred stock purchase rights
issued pursuant to the Rights Agreement (as defined below) (the "Rights" and,
together with the Common Stock, "Shares"), of Orion Capital Corporation, a
Delaware corporation (the "Company"), at a price of $50.00 per Share, net to
the seller in cash, without interest (the "Offer Price"), upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which, as amended or supplemented from time to
time, collectively constitute the "Offer").
Purchaser was formed in connection with the Offer and the transaction
contemplated thereby. Purchaser is a direct wholly-owned subsidiary of Royal
Group, Inc., a Delaware corporation ("Royal US"). Royal US is an insurance
holding company. Royal US is an indirect wholly-owned subsidiary of Royal &
Sun Alliance Insurance Group plc, a public limited company organized under the
laws of England and Wales ("Royal plc"). For information concerning Royal US
and Royal plc, see Section 9.
Tendering stockholders of record who tender Shares directly will not be
obligated to pay brokerage fees or commissions or, except as set forth in
Instruction 6 of the Letter of Transmittal, stock transfer taxes on the
purchase of Shares by Purchaser pursuant to the Offer. Stockholders who hold
their Shares through a bank or broker should check with such institution as to
whether they charge any service fees. Purchaser will pay all fees and expenses
of Citibank N.A., which is acting as the Depositary (in such capacity, the
"Depositary"), and MacKenzie Partners, Inc., which is acting as Information
Agent (in such capacity, the "Information Agent"), incurred in connection with
the Offer and in accordance with the terms of the agreements entered into
between Purchaser and each such person. See Section 16.
The Board of Directors of the Company (the "Company Board") has unanimously
approved the Merger Agreement (as defined below) and the transactions
contemplated thereby, including the Offer and the Merger, and has unanimously
determined that the Offer and the Merger are fair to, and in the best
interests of, the Company's stockholders and unanimously recommends that the
stockholders accept the Offer and tender their Shares pursuant to the Offer.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), financial
advisor to the Company, has delivered to the Company Board its written
opinion, dated July 11, 1999 (the "Financial Advisor Opinion"), to the effect
that, as of such date and based upon and subject to certain assumptions,
matters and limitations stated therein, the consideration to be received by
the holders of Shares (other than Purchaser and its affiliates) in the Offer
and the Merger is fair, from a financial point of view, to such holders. A
copy of the Financial Advisor Opinion is attached as an exhibit to the
Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9"), which has been filed by the Company with the Securities and
Exchange Commission (the "SEC") in connection with the Offer and which is
being mailed to holders of Shares herewith. Holders of Shares are urged to,
and should, read the Financial Advisor Opinion carefully and in its entirety.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer that number of
Shares which represents at least a majority of all outstanding Shares on the
date of purchase (excluding for all purposes in calculating such majority any
outstanding Shares owned by Royal US or Purchaser pursuant to the exercise of
Royal US's rights under the Stock Option Agreement (as defined below)) (the
"Minimum Condition"). The Offer also is subject to the other conditions set
forth in this Offer to Purchase including the consent of certain state
insurance regulatory authorities which are not expected to be received until
the fourth quarter of 1999. The parties currently expect that the expiration
date of the Offer will be extended in order to permit the parties to obtain
such consents. See Sections 11, 14 and 15.
<PAGE>
The Company has represented and warranted to Purchaser and Royal US that, as
of July 9, 1999, there were 27,355,263 Shares issued and outstanding and
1,408,066 Shares were issuable pursuant to the exercise of options pursuant to
the Company's stock option plans ("Options"). The Merger Agreement provides,
among other things, that the Company will not, without the prior written
consent of Royal US, issue any additional Shares (except upon the exercise of
outstanding Options). See Section 11. Based on the foregoing and assuming the
issuance of 1,408,066 Shares issuable upon the exercise of outstanding
Options, Purchaser believes that the Minimum Condition will be satisfied if
14,381,665 Shares are validly tendered and not withdrawn prior to the
Expiration Date.
As a condition and inducement to Purchaser and Royal US entering into the
Merger Agreement, concurrently with the execution and delivery of the Merger
Agreement, Royal US and the Company have entered into a Stock Option
Agreement, dated as of July 12, 1999 (the "Stock Option Agreement"), pursuant
to which, among other things, the Company has granted Royal US an irrevocable
option to purchase up to 5,443,697 newly issued Shares at $50.00 per share
(the "Company Option"). The Company Option only can be exercised under certain
circumstances described herein. See Section 11.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of July 12, 1999 (the "Merger Agreement"), by and among Purchaser, Royal US
and the Company. Pursuant to the Merger Agreement and the Delaware General
Corporation Law ("Delaware Law"), on the second business day after the
satisfaction or waiver, if permissible, of all conditions, including the
purchase of Shares pursuant to the Offer (sometimes referred to herein as the
"consummation" of the Offer) and the approval and adoption of the Merger
Agreement by the stockholders of the Company (if required by applicable law),
Purchaser shall be merged with and into the Company (the "Merger") and the
Company will be the surviving corporation in the Merger (the "Surviving
Corporation"). At the effective time of the Merger (the "Effective Time"),
each Share then outstanding, other than Shares held by (i) the Company or any
of its subsidiaries, (ii) Purchaser or any of its subsidiaries and (iii)
stockholders who properly perfect their dissenters' rights under Delaware Law,
will be converted into the right to receive the Offer Price in cash payable to
the holder, without interest, upon the surrender of the certificate
representing such Share. The Merger Agreement is more fully described in
Section 11.
The Merger Agreement provides that, promptly upon the purchase by Purchaser
of Shares pursuant to the Offer which represent at least a majority of all
outstanding shares of Common Stock, Purchaser or Royal US shall be entitled to
designate up to such number of directors, but in no event less than a
majority, rounded up to the next whole number, on the Company Board so that
the percentage of Purchaser's nominees on the Company Board equals the
percentage of outstanding Shares beneficially owned by Royal US, Purchaser and
any other subsidiary of Royal US. The Company shall, at such time, upon the
request of Purchaser, promptly use its reasonable best efforts to take all
action necessary to cause such persons designated by Purchaser to be elected
to the Company Board, if necessary, by increasing the size of the Company
Board or securing resignations of incumbent directors or both. See Section 11.
Consummation of the Merger is conditioned upon, among other things, the
approval and adoption by the requisite vote of stockholders of the Company of
the Merger Agreement and the Merger, if required by applicable law. See
Section 11. Under Delaware Law and pursuant to the Certificate of
Incorporation and the Bylaws of the Company, the affirmative vote of the
holders of a majority of the outstanding Shares at a meeting of the Company's
stockholders is the only vote of any class or series of the Company's capital
stock that would be necessary to approve the Merger Agreement and the Merger.
If the Minimum Condition is satisfied and Purchaser purchases at least a
majority of the outstanding Shares in the Offer, Purchaser will be able to
effect the Merger without the affirmative vote of any other stockholder.
Pursuant to the Merger Agreement, Purchaser has agreed to vote the Shares
acquired by it pursuant to the Offer in favor of the Merger. See Section 12.
Under Section 253 of Delaware Law, if a corporation owns at least 90% of the
outstanding shares of each class of a subsidiary corporation, the corporation
holding such stock may merge such subsidiary into itself, or itself into such
subsidiary, without any action or vote on the part of the board of directors
or the stockholders of
2
<PAGE>
such other corporation (a "short-form merger"). In the event that Purchaser
acquires in the aggregate at least 90% of the outstanding Shares pursuant to
the Offer or otherwise, a short-form merger could be effected without any
further approval of the Company Board or the stockholders of the Company. In
the Merger Agreement, Purchaser and the Company have agreed that,
notwithstanding that all conditions to the Offer are satisfied or waived as of
the scheduled Expiration Date, Purchaser may extend the Offer for a period not
to exceed ten (10) business days if the Shares tendered pursuant to the Offer
are less than 90% of the outstanding Shares. Even if Purchaser does not own
90% of the outstanding Shares following consummation of the Offer, Purchaser
could seek to purchase additional shares in the open market or otherwise in
order to reach the 90% threshold and employ a short-form merger. The per share
consideration paid for any Shares so acquired in open market purchases may be
greater or less than the Offer Price. Purchaser presently intends to effect a
short-form merger, if permitted to do so under Delaware Law, pursuant to which
Purchaser will be merged with and into the Company. See Section 12.
The Company has distributed one Right for each outstanding Share pursuant to
the Rights Agreement, dated as of September 11, 1996, as amended, by and
between the Company and First Chicago Trust Company of New York, as Rights
Agent (the "Rights Agreement"). The Company has represented in the Merger
Agreement that it has taken all action necessary under the Rights Agreement
such that (i) Royal US will not be deemed an Acquiring Person (as defined in
the Rights Agreement), the Distribution Date (as defined in the Rights
Agreement) will not be deemed to occur, and the rights issuable pursuant to
the Rights Agreement will not separate from the Shares, as a result of Royal
US's entering into the Merger Agreement or the Stock Option Agreement, or
consummating the Offer, the Merger and/or the other transactions contemplated
thereby and (ii) the Rights shall expire upon the acceptance of the Shares for
payment pursuant to the Offer.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
THE OFFER
1. Terms of the Offer. Upon the terms and subject to the conditions of the
Offer (including, if the Offer is extended or amended, the terms and
conditions of such extension or amendment), Purchaser will accept for payment
and pay for all Shares validly tendered prior to the Expiration Date, and not
withdrawn in accordance with Section 4. The term "Expiration Date" shall mean
12:00 Midnight, New York City time, on Thursday, August 12, 1999, unless and
until Purchaser, in accordance with the terms of the Merger Agreement, shall
have extended the period of time during which the Offer is open, in which
event the term "Expiration Date" shall mean the latest time and date at which
the Offer, as so extended by Purchaser, shall expire. In the Merger Agreement,
Purchaser has agreed that if all conditions to Purchaser's obligation to
accept for payment and pay for Shares pursuant to the Offer are not satisfied
on the scheduled Expiration Date, Purchaser may, in its sole discretion,
extend the Offer for additional periods of time as Purchase determines in its
sole discretion, provided that following the 90th day after the date of the
Merger Agreement, such extensions will be in increments of not more than ten
(10) business days, and, further provided that the Expiration Date may not be
extended beyond December 31, 1999. In addition, Purchaser is required under
certain circumstances to extend the Offer at the request of the Company. See
Section 11.
The Offer is conditioned upon the satisfaction of the Minimum Condition, the
expiration or termination of all waiting periods imposed by the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the
consent of certain state insurance regulatory authorities (which are not
expected to be received until the fourth quarter of 1999), and the other
conditions set forth in Section 14. The parties currently expect that the
Expiration Date will be extended in order to permit the parties to obtain such
consents. If such conditions are not satisfied prior to the Expiration Date,
Purchaser reserves the right, subject to the terms of the Merger Agreement and
subject to complying with applicable rules and regulations of the SEC, to (i)
decline to purchase any Shares tendered in the Offer and terminate the Offer
and return all tendered Shares to the tendering stockholders, (ii) waive any
or all conditions to the Offer and, to the extent permitted by applicable law,
purchase
3
<PAGE>
all Shares validly tendered, (iii) extend the Offer and, subject to the right
of stockholders to withdraw Shares until the Expiration Date, retain all
Shares which have been tendered during the period or periods for which the
Offer is extended or (iv) subject to the next sentence, amend the Offer. The
Merger Agreement provides that Purchaser will not decrease the Offer Price,
change the form of consideration to be paid in the Offer, decrease the number
of Shares sought in the Offer, impose additional conditions to the Offer or
make any other change to the terms and conditions of the Offer in any manner
materially adverse to the holders of the Shares, without the prior written
consent of the Company.
The Merger Agreement requires Purchaser to accept for payment and pay for
all Shares validly tendered and not withdrawn pursuant to the Offer if all
conditions to the Offer are satisfied on the Expiration Date. However, if
immediately prior to the scheduled Expiration Date, all conditions to the
Offer are satisfied but the number of Shares tendered and not withdrawn
pursuant to the Offer constitutes less than 90% of the Shares outstanding,
Purchaser may extend the Offer for a period not to exceed ten (10) business
days, notwithstanding that all conditions to the Offer are satisfied as of
such Expiration Date, provided that the Expiration Date may not be extended
beyond December 31, 1999. As used in this Offer to Purchase, "business day"
has the meaning set forth in Rule 14d-1 under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
Any extension, amendment or termination of the Offer will be followed as
promptly as practicable by public announcement thereof, the announcement in
the case of an extension to be issued no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date
in accordance with Rules 14d-4(c), 14d-6(d) and 14e-l(d) under the Exchange
Act. Without limiting the obligation of Purchaser under such Rules or the
manner in which Purchaser may choose to make any public announcement,
Purchaser currently intends to make announcements by issuing a press release
to the Dow Jones News Service. Under no circumstances will interest be paid on
the Offer Price to be paid by Purchaser for the Shares, regardless of any
extension of the Offer or any delay in making such payment.
If Purchaser extends the Offer, or if Purchaser (whether before or after its
acceptance for payment of Shares) is delayed in its purchase of, or payment
for, Shares or is unable to pay for Shares pursuant to the Offer for any
reason, then, without prejudice to Purchaser's rights under the Offer, the
Depositary may retain tendered Shares on behalf of Purchaser, and such Shares
may not be withdrawn except to the extent tendering stockholders are entitled
to withdrawal rights as described in Section 4. However, the ability of
Purchaser to delay the payment for Shares which Purchaser has accepted for
payment is limited by Rule 14e-1(c) under the Exchange Act, which requires
that a bidder pay the consideration offered or return the securities deposited
by, or on behalf of, holders of securities promptly after the termination or
withdrawal of the Offer.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which the Offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances then existing,
including the relative materiality of the changed terms or information. In a
public release, the SEC has stated its view that an offer must remain open for
a minimum period of time following a material change in the terms of the Offer
and that waiver of a material condition, such as the Minimum Condition, is a
material change in the terms of the Offer. The release states that an offer
should remain open for a minimum of five (5) business days from the date a
material change is first published, or sent or given to security holders and
that, if material changes are made with respect to information not materially
less significant than the offer price and the number of shares being sought, a
minimum of ten (10) business days may be required to allow adequate
dissemination and investor response. The requirement to extend the Offer will
not apply to the extent that the number of business days remaining between the
occurrence of the change and the then-scheduled Expiration Date equals or
exceeds the minimum extension period that would be required because of such
amendment. If, prior to the Expiration Date, Purchaser increases the
consideration offered to holders of Shares pursuant to the Offer, such
increased consideration will be paid to all holders whose Shares are purchased
in the Offer whether or not such Shares were tendered prior to such increase.
4
<PAGE>
The Company has provided Purchaser with the Company's stockholder lists and
security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of Shares and will be furnished
to brokers, dealers, banks and similar persons whose names, or the names of
whose nominees, appear on the stockholder lists or, if applicable, who are
listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of Shares.
2. Acceptance for Payment and Payment. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), Purchaser will
accept for payment and will pay for, as soon as practicable after the
Expiration Date, all Shares validly tendered prior to the Expiration Date and
not properly withdrawn in accordance with Section 4.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to Purchaser and not
withdrawn, if, as and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance for payment of such Shares. Payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from Purchaser and
transmitting payment to tendering stockholders. In all cases, payment for
Shares accepted for payment pursuant to the Offer will be made only after
timely receipt by the Depositary of (i) certificates for such Shares (or a
timely Book Entry confirmation (as defined below) with respect thereto), (ii)
a Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or, in the case of a book-
entry transfer, an Agent's Message (as defined below) and (iii) any other
documents required by the Letter of Transmittal. Accordingly, payment may be
made to tendering stockholders at different times if delivery of the Shares
and other required documents occur at different times. The per share
consideration paid to any holder of Shares pursuant to the Offer will be the
highest per share consideration paid to any other holder of such Shares
pursuant to the Offer. Under no circumstances will interest be paid on the
purchase price to be paid by Purchaser for the Shares, regardless of any
extension of the Offer or any delay in making such payment.
Purchaser expressly reserves the right, in its sole discretion, to delay
acceptance for payment of, or payment for, Shares in order to comply in whole
or in part with any applicable law. If Purchaser is delayed in its acceptance
for payment of, or payment for, Shares or is unable to accept for payment or
pay for Shares pursuant to the Offer for any reason, then, without prejudice
to Purchaser's rights under the Offer (including such rights as are set forth
in Sections 1 and 14) (but subject to compliance with Rule 14e-l(c) under the
Exchange Act), the Depositary may, nevertheless, on behalf of Purchaser,
retain tendered Shares, and such Shares may not be withdrawn except to the
extent tendering stockholders are entitled to exercise, and duly exercise,
withdrawal rights as described in Section 4.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates are submitted representing more Shares than are
tendered, certificates evidencing Shares not tendered or not accepted for
purchase will be returned to the tendering stockholder, or such other person
as the tendering stockholder shall specify in the Letter of Transmittal, as
promptly as practicable following the expiration, termination or withdrawal of
the Offer. In the case of Shares delivered by book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedures set forth in Section 3, such Shares will be credited to such
account maintained at the Book-Entry Transfer Facility as the tendering
stockholder shall specify in the Letter of Transmittal, as promptly as
practicable following the expiration, termination or withdrawal of the Offer.
If no such instructions are given with respect to Shares delivered by book-
entry transfer, any such Shares not tendered or not purchased will be returned
by crediting the account at the Book-Entry Transfer Facility designated in the
Letter of Transmittal as the account from which such Shares were delivered.
Purchaser reserves the right to transfer or assign, in whole or, from time
to time, in part, to one or more of its affiliates, the right to purchase
Shares tendered pursuant to the Offer, but any such transfer or assignment
will not relieve Purchaser of its obligations under the Offer and will in no
way prejudice the rights of tendering stockholders to receive payment for
Shares validly tendered and accepted for payment pursuant to the Offer.
5
<PAGE>
3. Procedures for Tendering Shares.
Valid Tender. For Shares to be validly tendered pursuant to the Offer,
either (i) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), together with any required signature guarantees, or in the
case of a book-entry transfer, an Agent's Message (as defined below), and any
other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date and either certificates evidencing tendered Shares must be
received by the Depositary at one of such addresses or such Shares must be
delivered to the Depositary pursuant to the procedures for book-entry transfer
set forth below and a Book-Entry Confirmation must be received by the
Depositary, in each case prior to the Expiration Date, or (ii) the tendering
stockholder must comply with the guaranteed delivery procedures described
below.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Offer within two (2) business days after the
date of this Offer to Purchase. Any financial institution that is a
participant in the Book-Entry Transfer Facility's system may make book-entry
delivery of Shares by causing the Book-Entry Transfer Facility to transfer
such Shares into the Depositary's account in accordance with such Book-Entry
Transfer Facility's procedures for such transfer. However, although delivery
of Shares may be effected through book-entry transfer into the Depositary's
account at the Book-Entry Transfer Facility, the Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message, and any other required documents
must, in any case, be transmitted to, and received by, the Depositary at one
of its addresses set forth on the back cover of this Offer to Purchase prior
to the Expiration Date, or the tendering stockholder must comply with the
guaranteed delivery procedures described below. The confirmation of a book-
entry transfer of Shares into the Depositary's account at the Book-Entry
Transfer Facility as described above is referred to herein as a "Book-Entry
Confirmation." Delivery of the Letter of Transmittal and any other required
documents to the Book-Entry Transfer Facility will not constitute delivery to
the Depositary.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that
Purchaser may enforce such agreement against such participant.
The method of delivery of Shares, the Letter of Transmittal and all other
required documents, including delivery through the Book-Entry Transfer
Facility, is at the election and risk of the tendering stockholder. Shares
will be deemed delivered only when actually received by the Depositary
(including, in the case of a Book-Entry Transfer, by book-entry confirmation).
If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. In all cases, sufficient time should be
allowed to ensure timely delivery.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal if (i) the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant
in the Book-Entry Transfer Facility's systems whose name appears on a security
position listing as the owner of the Shares) of Shares tendered therewith and
such registered holder has not completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on
the Letter of Transmittal or (ii) such Shares are tendered for the account of
a financial institution (including most commercial banks, savings and loan
associations and brokerage houses) that is a participant in the Security
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program (each, an
"Eligible Institution" and, collectively, "Eligible Institutions"). In all
other cases, all signatures on Letters of Transmittal must be guaranteed by an
Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal.
If the certificates for Shares are registered in the name of a person other
than the signer of the Letter of Transmittal, or if payment is to be made, or
certificates
6
<PAGE>
for Shares not tendered or not accepted for payment are to be returned, to a
person other than the registered holder of the certificates surrendered, then
the tendered certificates for such Shares must be endorsed or accompanied by
appropriate stock powers, in either case, signed exactly as the name or names
of the registered holders or owners appear on the certificates, with the
signatures on the certificates or stock powers guaranteed as aforesaid. See
Instruction 5 to the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or the procedures for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such stockholder's tender may be
effected if all the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser, is
received by the Depositary, as provided below, prior to the
Expiration Date; and
(iii) the certificates for (or a Book-Entry Confirmation with respect
to) such Shares, together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, or, in the case of a book-entry
transfer, an Agent's Message, and any other required documents,
are received by the Depositary within three (3) trading days
after the date of execution of such Notice of Guaranteed
Delivery. A "trading day" is any day on which the New York Stock
Exchange (the "NYSE") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mailed to the Depositary
and must include a guarantee by an Eligible Institution in the form set forth
in such Notice of Guaranteed Delivery.
The valid tender of Shares pursuant to one of the procedures described above
will constitute a binding agreement between the tendering stockholder and
Purchaser upon the terms and subject to the conditions of the Offer.
Appointment. By executing the Letter of Transmittal as set forth above
(including delivery through an Agent's Message), the tendering stockholder
will irrevocably appoint designees of Purchaser as such stockholder's
attorneys-in-fact and proxies in the manner set forth in the Letter of
Transmittal, each with full power of substitution, to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder
and accepted for payment by Purchaser and with respect to any and all non-cash
dividends, distributions, rights, other Shares or other securities issued or
issuable in respect of such Shares on or after July 12, 1999 (collectively,
"Distributions"). All such proxies will be considered coupled with an interest
in the tendered Shares. Such appointment will be effective if, as and when,
and only to the extent that, Purchaser accepts for payment Shares tendered by
such stockholder as provided herein. All such powers of attorney and proxies
will be irrevocable and will be deemed granted in consideration of the
acceptance for payment by Purchaser of Shares tendered in accordance with the
terms of the Offer. Upon such appointment, all prior powers of attorney,
proxies and consents given by such stockholder with respect to such Shares
(and any and all Distributions) will, without further action, be revoked and
no subsequent powers of attorney, proxies, consents or revocations may be
given by such stockholder (and, if given, will not be deemed effective). The
designees of Purchaser will thereby be empowered to exercise all voting and
other rights with respect to such Shares (and any and all Distributions),
including, without limitation, in respect of any annual or special meeting of
the Company's stockholders (and any adjournment or postponement thereof),
actions by written consent in lieu of any such meeting or otherwise, as each
such attorney-in-fact and proxy or his substitute shall in his sole discretion
deem proper. Purchaser reserves the right to require that, in order for Shares
to be deemed validly tendered, immediately upon Purchaser's acceptance for
payment of such Shares, Purchaser must be able to exercise full voting,
consent and other rights with respect to such Shares (and any and all
Distributions), including voting at any meeting of stockholders.
7
<PAGE>
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Shares will be determined by Purchaser, in its sole discretion,
which determination will be final and binding. Purchaser reserves the absolute
right to reject any or all tenders of any Shares determined by it not to be in
proper form or the acceptance for payment of which, or payment for which, may,
in the opinion of Purchaser's counsel, be unlawful. Purchaser also reserves
the absolute right, in its sole discretion, subject to the provisions of the
Merger Agreement, to waive any defect or irregularity in any tender of Shares
of any particular stockholder, whether or not similar defects or
irregularities are waived in the case of other stockholders. No tender of
Shares will be deemed to have been validly made until all defects or
irregularities relating thereto have been cured or waived. None of Purchaser,
the Depositary, the Information Agent or any other person will be under any
duty to give notification of any defects or irregularities in tenders or incur
any liability for failure to give any such notification. Subject to the terms
of the Merger Agreement, Purchaser's interpretation of the terms and
conditions of the Offer in this regard (including the Letter of Transmittal
and the instructions thereto) will be final and binding.
Backup Withholding. Under the "backup withholding" provisions of federal
income tax law, unless a tendering registered holder, or its assignee (in
either case, the "Payee"), satisfies the conditions described in Instruction
10 of the Letter of Transmittal or is otherwise exempt, the cash payable as a
result of the Offer may be subject to backup withholding tax at a rate of 31%
of the gross proceeds. To prevent backup withholding, each Payee should
complete and sign the Substitute Form W-9 provided in the Letter of
Transmittal. See Instruction 10 to the Letter of Transmittal.
4. Withdrawal Rights. Except as otherwise provided in this Section 4 or as
provided by applicable law, tenders of Shares are irrevocable. Shares tendered
pursuant to the Offer may be withdrawn pursuant to the procedures set forth
below at any time prior to the Expiration Date and, unless theretofore
accepted for payment and paid for by Purchaser pursuant to the Offer, may also
be withdrawn at any time after September 13, 1999.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase.
Any such notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the name
of the registered holder of the Shares to be withdrawn, if different from the
name of the person who tendered the Shares. If certificates evidencing Shares
to be withdrawn have been delivered or otherwise identified to the Depositary,
then, prior to the physical release of such certificates, the serial numbers
shown on such certificates must be submitted to the Depositary and, unless
such Shares have been tendered by an Eligible Institution, the signatures on
the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been delivered pursuant to the procedures for book-entry transfer
as set forth in Section 3, any notice of withdrawal must also specify the name
and number of the account at the Book-Entry Transfer Facility to be credited
with the withdrawn Shares and otherwise comply with such Book-Entry Transfer
Facility's procedures.
Withdrawals of tendered Shares may not be rescinded, and any Shares
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by again following one of
the procedures described in Section 3 at any time prior to the Expiration
Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
which determination will be final and binding. None of Purchaser, the
Depositary, the Dealer Manager, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
5. Certain U.S. Federal Income Tax Consequences. The following is a general
summary of certain U.S. federal income tax consequences of the Offer and the
Merger relevant to a beneficial holder of Shares whose Shares are tendered and
accepted for payment pursuant to the Offer or whose Shares are converted to
cash in the Merger (a "Holder"). The discussion is based on the Internal
Revenue Code of 1986, as amended (the "Code"),
8
<PAGE>
regulations issued thereunder, judicial decisions and administrative rulings,
all of which are subject to change, possibly with retroactive effect. The
following does not address the U.S. federal income tax consequences to all
categories of Holders that may be subject to special rules (e.g., Holders who
acquired their Shares pursuant to the exercise of employee stock options or
other compensation arrangements with the Company, Holders who perfect their
appraisal rights under Delaware Law, foreign Holders, insurance companies,
tax-exempt organizations, dealers in securities and persons who have held the
Shares as part of a straddle, hedge, conversion transaction or other
integrated investment), nor does it address the federal income tax
consequences to persons who do not hold the Shares as "capital assets" within
the meaning of Section 1221 of the Code (generally, property held for
investment). Holders should consult their own tax advisors regarding the U.S.
federal, state, local and foreign income and other tax consequences of the
Offer and the Merger.
The receipt of cash for Shares pursuant to the Offer or the Merger will be a
taxable transaction for U.S. federal income tax purposes and may also be a
taxable transaction under applicable state, local and foreign income and other
tax laws. In general, a Holder who sells Shares pursuant to the Offer or
receives cash in exchange for Shares pursuant to the Merger will recognize
gain or loss for federal income tax purposes equal to the difference, if any,
between the amount of cash received and the Holder's adjusted tax basis in the
Shares sold pursuant to the Offer or surrendered for cash pursuant to the
Merger. Gain or loss will be determined separately for each block of Shares
(i.e., Shares acquired at the same cost in a single transaction) tendered
pursuant to the Offer or surrendered for cash pursuant to the Merger. Such
gain or loss will be long-term capital gain or loss if the Holder has held the
Shares for more than one (1) year at the time of the consummation of the Offer
or the Merger. Under the Code, capital gains recognized by an individual
investor (or an estate or certain trusts) upon a disposition of a Share that
has been held for more than one year generally will be subject to a maximum
tax rate of 20% or, in the case of a Share that has been held for one year or
less, will be subject to tax at ordinary income rates. Certain limitations
apply to the use of capital losses.
6. Price Range of the Shares; Dividends. The Shares are traded on the NYSE
under the symbol "OC". The following table sets forth, for each of the fiscal
quarters indicated, the high and low reported closing sales price per Share on
the NYSE and the per Share cash dividends paid for such periods.
<TABLE>
<CAPTION>
Common Stock
-------------------------
High Low Dividends
------- ------- ---------
<S> <C> <C> <C>
Fiscal Year Ended December 31, 1997
First Quarter....................................... $33.875 $30.000 $.14
Second Quarter...................................... 37.625 30.813 .16
Third Quarter....................................... 45.750 36.720 .16
Fourth Quarter...................................... 51.000 42.375 .16
Fiscal Year Ended December 31, 1998
First Quarter....................................... $55.688 $43.063 $.16
Second Quarter...................................... 57.750 52.000 .18
Third Quarter....................................... 59.250 34.563 .18
Fourth Quarter...................................... 39.813 28.000 .18
Fiscal Year Ending December 31, 1999
First Quarter....................................... $39.625 $29.625 $.18
Second Quarter...................................... 35.875 27.750 .18
Third Quarter (through July 15, 1999)............... 47.750 34.500 --
</TABLE>
On July 9, 1999, the last full trading day prior to the public announcement
of the execution of the Merger Agreement by the Company, Purchaser and Royal
US, the closing price for the Shares, as reported on the NYSE, was $40.750 per
Share. On July 15, 1999, the last full trading day prior to the commencement
of the Offer, the closing price of the Shares, as reported on the NYSE, was
$47.438 per Share. Stockholders are urged to obtain a current market quotation
for the Shares.
9
<PAGE>
7. Effect of the Offer on the Market for the Shares; Stock Listing;
Exchange Act Registration; Margin Regulations.
Market for the Shares. The purchase of Shares by Purchaser pursuant to the
Offer will reduce the number of holders of Shares and the number of Shares
that might otherwise trade publicly and, depending upon the number of Shares
so purchased, could adversely affect the liquidity and market value of the
remaining Shares held by the public.
Stock Listing. The Shares are listed on the NYSE. After consummation of the
Offer and depending upon the aggregate market value and the per Share price of
any Shares not purchased pursuant to the Offer, the Shares may no longer meet
the requirements for continued listing on the NYSE. According to the NYSE's
published guidelines, the NYSE may delist the Shares if, among other things:
(i) the number of total stockholders falls below 400; (ii) the number of total
stockholders falls below 1,200 and the average monthly trading volume is less
than 100,000 shares (for the most recent 12 months); (iii) the number of
publicly held Shares (exclusive of holdings of officers and directors of the
Company and their immediate families and other concentrated holdings of 10% or
more ("Excluded Holdings")) should fall below 600,000; or (iv) the aggregate
market value of such publicly held Shares (exclusive of Excluded Holdings)
should fall below $8 million. If as a result of the purchase of Shares
pursuant to the Offer, Shares no longer meet the requirements of the NYSE for
continued listing and the listing of the Shares is discontinued, the market
for the Shares could be adversely affected. According to the Company, as of
July 9, 1999, there were approximately 1,925 holders of record of the Shares
and as of July 9, 1999, there were 27,355,263 Shares outstanding.
If the NYSE were to delist the Shares, it is possible that the Shares would
continue to trade on other securities exchanges or in the over-the-counter
market and that price quotations would be reported by such exchanges or
through the Nasdaq Stock Market or other sources. The extent of the public
market for the Shares and the availability of such quotations would depend,
however, upon such factors as the number of stockholders and/or the aggregate
market value of the publicly traded Shares remaining at such time, the
interest in maintaining a market in the Shares on the part of securities
firms, the possible termination of registration under the Exchange Act as
described below, and other factors. The Purchaser cannot predict whether the
reduction in the number of Shares that might otherwise trade publicly would
have an adverse or beneficial effect on the market price for, or marketability
of, the Shares or whether it would cause future market prices to be greater or
lesser than the Offer Price.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the SEC if the Shares are
neither listed on a national securities exchange nor held by 300 or more
holders of record. Termination of registration of the Shares under the
Exchange Act would substantially reduce the information required to be
furnished by the Company to its stockholders and to the SEC and would make
certain provisions of the Exchange Act no longer applicable to the Company,
such as the short swing profit recovery provisions of Section 16(b), the
requirement of furnishing a proxy statement pursuant to Section 14(a) in
connection with stockholders' meetings and the related requirement of
furnishing an annual report to stockholders and the requirements of Rule 13e-3
under the Exchange Act with respect to "going private" transactions.
Furthermore, the ability of "affiliates" of the Company and persons holding
"restricted securities" of the Company to dispose of such securities pursuant
to Rule 144 or Rule 144A promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), may be impaired or eliminated.
Purchaser currently intends to seek termination of the listing of the Shares
on the NYSE and of the registration of the Shares under the Exchange Act as
soon after the completion of the Offer as the requirements for such
termination are met. If the NYSE listing and the Exchange Act registration of
the Shares are not terminated prior to the Merger, then the listing of the
Shares on the NYSE and the registration of the Shares under the Exchange Act
will be terminated following the consummation of the Merger.
Margin Regulations. The Shares presently are "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which status has the effect, among
10
<PAGE>
other things, of allowing brokers to extend credit on the collateral of such
securities. Depending upon factors similar to those described above regarding
listing and market quotations, it is possible that, following the Offer, the
Shares would no longer constitute "margin securities" for the purposes of the
margin regulations of the Federal Reserve Board and therefore could no longer
be used as collateral for loans made by brokers.
8. Certain Information Concerning the Company.
General. The information concerning the Company contained in this Offer to
Purchase, including that set forth below under the caption "Selected Financial
Information," has been furnished by the Company or has been taken from or
based upon publicly available documents and records on file with the SEC and
other public sources. Neither Purchaser, Royal US nor the Information Agent
assumes responsibility for the accuracy or completeness of the information
concerning the Company contained in such documents and records or for any
failure by the Company to disclose events which may have occurred or may
affect the significance or accuracy of any such information but which are
unknown to Purchaser, Royal US or the Information Agent.
The Company is an insurance holding company. The Company is a Delaware
corporation with its principal executive offices at 9 Farm Springs Road,
Farmington, Connecticut 06032. The telephone number of the Company at such
offices is (860) 674-6600.
Selected Financial Information. Set forth below is certain consolidated
financial information with respect to the Company, excerpted or derived from
the Company's Annual Reports on Form 10-K for the fiscal years ended December
31, 1998 and December 31, 1997 and its Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999, each as filed with the SEC pursuant to the
Exchange Act.
More comprehensive financial information is included in such reports and in
other documents filed by the Company with the SEC. The following summary is
qualified in its entirety by reference to such reports and other documents and
all of the financial information (including any related notes) contained
therein. Such reports, documents and financial information may be inspected
and copies may be obtained from the SEC in the manner set forth below.
11
<PAGE>
ORION CAPITAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in millions, except for per share data and ratios)
<TABLE>
<CAPTION>
Three Months ended
March 31,
(Unaudited) Year ended December 31,
-------------------- ----------------------------
1999 1998 1998 1997 1996
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total revenues............. $ 336.3 $ 424.8 $1,716.7 $1,590.6 $1,493.5
Operating earnings (loss).. $ (89.1) $ 23.4 $ 68.6 $ 85.7 $ 72.9
After-tax investment
gains..................... 1.1 18.8 34.2 30.1 13.7
Cumulative effect of
adoption of new accounting
principle................. (4.6) -- -- -- --
--------- --------- -------- -------- --------
Net earnings (loss)........ $ (92.6) $ 42.2 $ 102.8 $ 115.8 $ 86.6
========= ========= ======== ======== ========
Combined ratios (GAAP)..... 154.1% 99.3% 100.5% 99.7% 99.8%
Per basic common share:
Operating earnings
(loss).................. $ (3.30) $ 0.85 $ 2.52 $ 3.14 $ 2.66
After-tax investment
gains................... 0.04 0.69 1.26 1.10 0.50
Cumulative effect of
adoption of new
accounting principle.... (0.17) -- -- -- --
--------- --------- -------- -------- --------
Net earnings (loss).... $ (3.43) $ 1.54 $ 3.78 $ 4.24 $ 3.16
========= ========= ======== ======== ========
Per diluted common share:
Operating earnings
(loss).................. $ (3.30) $ .83 $ 2.46 $ 3.07 $ 2.63
After-tax investment
gains................... 0.04 0.67 1.23 1.08 0.49
Cumulative effect of
adoption of new
accounting principle.... (0.17) -- -- -- --
--------- --------- -------- -------- --------
Net earnings (loss).... $ (3.43) $ 1.50 $ 3.69 $ 4.15 $ 3.12
========= ========= ======== ======== ========
Dividends declared per com-
mon share................. $ 0.18 $ 0.16 $ 0.70 $ 0.62 $ 0.51
========= ========= ======== ======== ========
Weighted average shares
outstanding:
Basic.................... 27.0 27.4 27.2 27.3 27.4
Diluted.................. 27.0 28.1 27.8 27.9 27.8
<CAPTION>
March 31,
(Unaudited) December 31,
-------------------- ----------------------------
1999 1998 1998 1997 1996
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total cash and invest-
ments..................... $ 2,454.9 $ 2,624.6 $2,504.3 $2,553.0 $2,321.4
Total assets............... 4,205.9 4,031.1 4,164.4 3,884.1 3,464.4
Total policy liabilities... 2,730.9 2,463.1 2,599.6 2,443.8 2,304.4
Notes payable.............. 209.4 210.1 217.4 310.2 310.9
Minority interest.......... -- -- -- -- 45.2
Trust preferred securi-
ties...................... 250.0 250.0 250.0 125.0 --
Stockholders' equity....... 615.6 760.8 727.3 723.1 576.7
Common shares outstanding.. 27.3 27.5 27.2 27.6 27.5
Book value per common
share..................... $ 22.57 $ 27.64 $ 26.77 $ 26.19 $ 20.94
Statutory policyholders'
surplus................... 637.7 835.6 732.1 789.0 670.6
</TABLE>
Certain Company Projections. In the course of discussions giving rise to the
Merger Agreement, representatives of the Company furnished representatives of
Royal US with certain business and financial information that was not publicly
available, including certain financial projections for fiscal years 1999 and
2000
12
<PAGE>
(the "Company Projections"). The Company Projections were prepared solely for
the Company's internal purposes and were not prepared for publication or with
a view to complying with the published guidelines of the SEC regarding
projections or with the American Institute of Certified Public Accountants
Guide for Prospective Financial Statements, and such information is being
included in this Offer to Purchase solely because it was furnished to Royal US
in connection with the discussions giving rise to the Merger Agreement. The
independent accountants of the Company have neither examined nor compiled the
prospective financial information set forth below and, accordingly, do not
express an opinion or any other form of assurance with respect thereto.
The Company Projections set forth below reflect numerous assumptions,
including general business and economic conditions, moderate growth in premium
and underwriting profit reflecting current conditions in the property/casualty
marketplace, and certain other matters, many of which are inherently uncertain
or beyond the Company's, Purchaser's, Royal US's or Royal plc's control, and
do not take into account any changes in the Company's operations or capital
structure which may result from the Offer and the Merger. It is not possible
to predict whether the assumptions made in preparing the projected financial
information will be valid, and actual results may prove to be materially
higher or lower than those contained in the projections. The inclusion of this
information should not be regarded as an indication that the Company,
Purchaser, Royal US, Royal plc or anyone else who received this information
considered it a reliable predictor of future events, and this information
should not be relied on as such. None of Purchaser, Royal US, Royal plc, the
Company or any of their respective representatives assumes any responsibility
for the validity, reasonableness, or completeness of the projected financial
information, and the Company has made no representation to Purchaser, Royal US
or Royal plc regarding such information.
<TABLE>
<CAPTION>
1999 2000
----- -----
(in
millions)
<S> <C> <C>
After-tax operating earnings....................................... $63.4 $88.8
</TABLE>
The after-tax operating earnings for 1999 do not reflect the impact of the
$164.5 million pre-tax reserve charge incurred by the Company in the first
quarter of 1999 and the gain on the sale of Wm. H. McGee & Co., Inc.
Available Information. The Company is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file reports, proxy statements and other information with the SEC relating to
its business, financial condition and other matters. Information as of
particular dates concerning the Company's directors and officers, their
remuneration, options granted to them, the principal holders of the Company's
securities and any material interests of such persons in transactions with the
Company is required to be disclosed in proxy statements distributed to the
Company's stockholders and filed with the SEC. Such reports, proxy statements
and other information should be available for inspection at the public
reference facilities of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the SEC located at Seven World Trade
Center, Suite 1300, New York, NY 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, IL 60661. Copies of such information should be
obtainable by mail, upon payment of the SEC's customary charges, by writing to
the SEC's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
The SEC also maintains a website on the Internet at http://www.sec.gov that
contains reports, proxy statements and other information relating to the
Company which have been filed via the SEC's EDGAR System.
9. Certain Information Concerning Purchaser, Royal US and Royal plc.
General. Purchaser is a newly formed Delaware corporation organized solely
to effect the Offer and the Merger. Purchaser has not carried on any
significant activities other than in connection with the Offer and the Merger.
Until immediately prior to the time Purchaser purchases Shares pursuant to the
Offer, it is not anticipated that Purchaser will have any significant assets
or liabilities or engage in any significant activities other than those
incident to its formation and capitalization and the transactions contemplated
by the Offer and the Merger.
13
<PAGE>
Royal US is an insurance holding company. The principal offices of Purchaser
and Royal US are located at 9300 Arrowpoint Blvd., Charlotte, North Carolina
28273-8135. The telephone number of Purchaser and Royal US at such location is
(704) 522-2000.
Royal plc is one of the world's leading global insurers. The principal
offices of Royal plc are located at 30 Berkeley Square, London W1X 5HA,
England. The telephone number of Royal plc at such location is 011-44-171-636-
3450.
For certain information concerning the executive officers and directors of
Purchaser, Royal US and Royal plc, see Schedule I.
Selected Financial Information. Royal plc's net premiums written and policy
fees for the years ending December 1997 and December 1998 were 9,225 millions
Pounds Sterling and 9,723 millions Pounds Sterling, respectively. Using an
exchange rate for Pounds Sterling into U.S. Dollars based upon the noon buying
rate on December 31, 1998 for cable transfers in foreign securities as
certified for customs purposes by the Federal Reserve Bank in New York City
(the "Noon Buying Rate"), the net premiums and policy fees for the same period
were $5,545 million and $5,844 million, respectively. The net investment
income of Royal plc for the years ending December 1997 and December 1998 was
3,759 millions Pounds Sterling and 5,275 millions Pounds Sterling,
respectively, and $2,259 million and $3,170 million, respectively, for the
same period. The net income of Royal plc for the years ending December 1997
and December 1998 was 1,416 millions Pounds Sterling and 457 millions Pounds
Sterling, respectively, and $851 million and $275 million, respectively, for
the same period. The Noon Buying Rate on December 31, 1998, expressed in U.S.
dollars per (Pounds)1.00 was approximately $1.66.
The financial information set forth herein was prepared in accordance with
uniform accounting policies using the standards of United Kingdom ("UK")
accounting, which differ in certain respects from the United States generally
accepted accounting principles ("US GAAP"). Such differences between the
standards of UK accounting and US GAAP relate to, among other things,
translation, recognition and measurement criteria. However, Royal US believes
that such differences are not material to a decision by a stockholder of the
Company whether to sell, transfer or hold any Shares, since such differences
would not affect the ability of Royal plc to provide the necessary funds to
pay for the Shares to be acquired pursuant to the Offer and the Merger.
Except as set forth in the following two paragraphs and as otherwise set
forth in this Offer to Purchase, neither Purchaser, Royal US, Royal plc, nor,
to the best knowledge of Purchaser, Royal US or Royal plc, any of the persons
listed on Schedule I, nor any associate or majority owned subsidiary of any of
the foregoing, beneficially owns or has a right to acquire any Shares. Neither
Purchaser, Royal US, Royal plc, nor, to the best knowledge of Purchaser, Royal
US or Royal plc, any of the persons or entities referred to above, nor any of
the respective executive officers, directors or subsidiaries of any of the
foregoing, has effected any transaction in the Shares during the past sixty
(60) days.
As of the date hereof, an aggregate of 668,900 Shares were owned by the
following insurance companies, each of which is a direct wholly-owned
subsidiary of Royal US and an indirect wholly-owned subsidiary of Royal plc:
Safeguard Insurance Company owns 64,200 Shares; Royal Insurance Company of
America owns 271,200 Shares; Royal Indemnity Company owns 108,800 Shares;
Globe Indemnity Company owns 166,500 Shares; and American and Foreign
Insurance Company owns 58,200 Shares. The principal offices of each such
entity are located at 9300 Arrowpoint Blvd, Charlotte, North Carolina 28273-
8135.
Pursuant to the Stock Option Agreement, Royal plc, Royal US and Purchaser
may be deemed to beneficially own 5,443,697 Shares constituting approximately
19.9% of the total currently outstanding Shares. Each of Royal US and
Purchaser disclaims beneficial ownership of such shares.
Except as set forth in this Offer to Purchase, none of Purchaser, Royal US,
Royal plc or any of their affiliates, nor, to the best knowledge of Purchaser,
Royal US or any of their respective affiliates, any of the persons listed on
Schedule I, has any contract, arrangement, understanding or relationship with
any other person
14
<PAGE>
with respect to any securities of the Company, including, but not limited to,
any transfer or voting of any securities of the Company, finder's fees, joint
ventures, loan or option arrangements, puts or calls, guarantees of loans or
guarantees against loss, division of profits or loss, or the giving or
withholding of proxies. Except as set forth in the following paragraph, none
of Purchaser, Royal US, Royal plc or any of their respective affiliates, nor,
to the best knowledge of Purchaser, Royal US, any of their respective
affiliates, or any of the persons listed on Schedule I, has had, since January
1, 1996, any business relationships or transactions with the Company or any of
its executive officers, directors or affiliates that would require reporting
under the rules or regulations of the SEC applicable to the Offer.
In June 1995, Sun Alliance USA Inc. (SunAlliance Group plc merged with Royal
plc in July 1996) sold Wm. H. McGee & Co., Inc. ("McGee"), an insurance
agency, to the Company but continued to hold an approximate 40% participation
interest in an insurance pool managed by McGee. This participation interest
was reduced over time and was finally eliminated in January 1998. Royal US's
only remaining obligations under such pool are through two of its subsidiaries
and relate to the runoff for prior underwritten years.
Except as set forth in this Offer to Purchase, since January 1, 1996, there
have been no contacts, negotiations or transactions between Purchaser, Royal
US, Royal plc or any of their respective affiliates, or, to the best knowledge
of Purchaser, Royal US, Royal plc or any of their respective affiliates, any
of the persons listed on Schedule I, on the one hand, and the Company or its
affiliates, on the other hand, concerning a merger, consolidation or
acquisition, tender offer or other acquisition of securities, election of
directors or a sale or other transfer of a material amount of assets.
Available Information. None of Purchaser, Royal US or Royal plc is subject
to the information requirements of the Exchange Act and, accordingly, do not
file reports or other information with the SEC under the Exchange Act relating
to its business, financial position, results of operations or other matters.
However, Purchaser and Royal US have filed a Schedule 14D-1 and exhibits
thereto with the SEC in connection with the Offer and the Merger.
10. Sources and Amount of Funds. The Offer is not conditioned upon any
financing arrangements. The total amount of funds required by Purchaser to
consummate the Offer and the Merger, including the fees and expenses of the
Offer and the Merger, is estimated to be approximately $1.4 billion. Purchaser
will obtain all such funds through capital contributions from Royal US. Royal
US will provide such funds from working capital or such alternative financing
sources as it deems appropriate.
11. Background of the Offer; Purpose of the Offer and the Merger; the Merger
Agreement and Certain Other Agreements.
Contacts with the Company; Background of the Offer.
Commencing in December 1998 and continuing until mid-May 1999, W. Marston
Becker, Chairman and Chief Executive Officer of the Company, had several
telephone conversations and meetings with representatives of Royal US. During
this period, Mr. Becker stated that the Company was interested in selling
certain businesses and expressed an interest in Royal US making a preferred
equity investment in the Company, combined with a strategic marketing alliance
for the cross-selling of each other's products. Royal US expressed a
preference for a business combination between the two companies and elaborated
on the synergies which it believed existed between the two companies.
On May 26, 1999, Terry Broderick, President of Royal US, advised Mr. Becker
that he believed the synergies between the two companies could only be fully
realized if Royal US acquired the Company. Mr. Becker indicated that, as a
result of the information he had obtained during the previous months'
discussions, he thought Mr. Broderick's conclusion might well be correct, and
was willing to discuss this alternative with the senior management of Royal
plc in order to determine whether, in fact, a business combination transaction
was in the best interests of the Company and its stockholders.
15
<PAGE>
Accordingly, on June 4, 1999, Mr. Becker and Robert V. Mendelsohn, Royal
plc's Group Chief Executive, met and agreed that Royal US would submit a
proposal to acquire the Company. On June 11, 1999, Mr. Broderick telephoned
Mr. Becker and communicated the broad outlines of a proposal for the
acquisition by Royal US of the Company which he confirmed in a letter to Mr.
Becker on June 14, 1999. The proposal contemplated a share-for-share stock
exchange, using Royal plc's American Depositary Receipts, and valued the
shares at $45-$50.
On June 18, 1999, the Board of Directors of the Company held a meeting at
which it considered the proposal of Royal US and authorized the Company's
senior management to continue its discussions with Royal US. Also on June 18,
the Confidentiality Agreement was executed and Royal US began its preliminary
due diligence review. To that end, beginning on June 22, 1999, senior
management of Royal US and the Company and their advisors met for several
days.
On July 1, 1999, Mr. Broderick sent Mr. Becker a letter and related term
sheet setting forth the terms and conditions upon which Royal US would be
willing to acquire the Company at a price of $50 per Share in cash, subject to
the completion of due diligence and the negotiation of a mutually satisfactory
definitive acquisition agreement.
On July 2, 1999, the Board of Directors of the Company held a meeting to
review and discuss the July 1 proposal and authorized the Company's senior
management to negotiate a definitive merger agreement with Royal US by July 9,
1999, if possible.
Beginning on July 3, 1999 and continuing through the preparation of final
agreements on July 11, Royal US conducted more extensive business and legal
due diligence. During the week of July 5, the parties and their respective
legal and financial advisors negotiated the Merger Agreement and the Option
Agreement.
On July 7, 1999, the Company entered into an Exclusivity Agreement pursuant
to which it agreed, subject to certain conditions, to enter into exclusive
negotiations with Royal & SunAlliance USA, Inc. ("Royal USA, Inc."), the
parent of Royal US and an indirect wholly-owned subsidiary of Royal plc, and
its affiliates for a period of time so as to enable both parties to negotiate
and conclude a definitive agreement. This agreement terminated according to
its terms upon the execution of the Merger Agreement.
On July 11, 1999, the Board of Directors of the Company met to consider the
terms upon which Royal US would acquire the Company. After hearing
presentations by the Company's senior management, legal advisors and DLJ,
including DLJ's opinion that the consideration to be received by the
stockholders of the Company was fair to them from a financial point of view,
the Company's Board unanimously resolved that the Offer and the Merger were
advisable, fair to and in the best interests of the stockholders of the
Company. The Board also approved the Merger Agreement, the Option Agreement
and the transactions contemplated thereby and recommended that the
stockholders of the Company tender their Shares in the Offer and approve and
adopt the Merger Agreement and the transactions contemplated thereby.
Thereafter, Royal US, Purchaser, and the Company executed the Merger
Agreement and Royal US and the Company executed the Stock Option Agreement.
On July 16, 1999, Purchaser commenced the Offer.
Purpose of the Offer and the Merger.
The purpose of the Offer and the Merger is to enable Purchaser to acquire
control of, and the entire equity interest in, the Company. The Offer is being
made pursuant to the Merger Agreement and is intended to increase the
likelihood that the Merger will be effected. The purpose of the Merger is to
acquire all of the outstanding Shares not purchased pursuant to the Offer.
Stockholders of the Company who sell their Shares in the Offer will cease to
have any equity interest in the Company and any right to participate in its
earnings and future growth. If the Merger is consummated, non-
16
<PAGE>
tendering stockholders will no longer have an equity interest in the Company
and instead will have only the right to receive cash consideration pursuant to
the Merger Agreement or to exercise statutory appraisal rights under Section
262 of Delaware Law. See Section 12. Similarly, after selling their Shares in
the Offer or the subsequent Merger, stockholders of the Company will not bear
the risk of any decrease in the value of the Company.
Merger Agreement.
The following is a summary of certain portions of the Merger Agreement and is
qualified in its entirety by reference to the Merger Agreement, a copy of which
has been filed with the SEC as an exhibit to the Schedule 14D-1. The Merger
Agreement may be examined and copies may be obtained at the places and in the
manner set forth in Section 9 of this Offer to Purchase.
The Offer. The Merger Agreement provides that, without the written consent of
the Company, Purchaser will not (i) decrease the Offer Price, (ii) change the
form of consideration to be paid in the Offer, (iii) decrease the number of
Shares sought in the Offer, (iv) impose additional conditions to the Offer or
(v) make any other change to the terms and conditions of the Offer in any
manner materially adverse to the holders of the Shares. Upon the terms and
subject to the conditions of the Offer, Purchaser will accept for payment and
will purchase, as soon as permitted under the terms of the Offer, all Shares
validly tendered and not withdrawn prior to the expiration of the Offer. Royal
US and Purchaser agree that, unless the Merger Agreement is terminated,
Purchaser will not terminate or withdraw the Offer prior to the expiration date
thereof. If at the expiration date of the Offer the conditions to the Offer
shall not have been satisfied or earlier waived, Purchaser may extend the
expiration date on one or more occasions for such additional period or periods
of time as Purchaser determines in its sole discretion (provided that following
the 90th day after the date of the Merger Agreement, such extensions shall be
in increments of not more than ten (10) business days each) and, unless the
Merger Agreement has been terminated in accordance with its terms, will extend
it until a date that is not later than December 31, 1999, if requested to do so
by the Company, and Royal US is otherwise going to let the Offer expire without
the purchase of Shares thereunder, but shall not be required to so extend if
any of the conditions not satisfied or earlier waived on the then-scheduled
expiration date are one or more of the Minimum Condition or the conditions
described in paragraphs (b)(ii), (b)(iii) or (b)(iv) of Section 14 of this
Offer to Purchase, provided that (x) if the only condition not satisfied is the
Minimum Condition, the satisfaction or waiver of all other conditions shall
have been publicly disclosed at least five (5) business days before termination
of the Offer and (y) if any condition described in paragraph (b)(ii), (b)(iii)
or (b)(iv) of Section 14 of this Offer to Purchase has not been satisfied and
the failure to so satisfy can be remedied, the Offer shall not be terminated
unless the failure is not remedied within 20 days after Royal US has furnished
the Company with written notice of such failure. In addition, Purchaser, at its
sole option, may extend the expiration date of the Offer for an aggregate
period of not more than ten (10) business days beyond the latest expiration
date that would otherwise be permitted (but in no event later than the
Termination Date (as defined below)) if there shall not have been tendered
sufficient Shares so that the Merger could be effected without a meeting of the
Company's stockholders in accordance with Section 253 of Delaware Law.
The Merger. Following the consummation of the Offer, the Merger Agreement
provides that at the Effective Time and subject to and upon the terms and
conditions of the Merger Agreement and the Delaware Law, Purchaser shall be
merged with and into the Company and, as a result of the Merger, the separate
corporate existence of Purchaser shall cease and the Company shall continue as
the surviving corporation (sometimes referred to as the "Surviving
Corporation").
The respective obligations of Purchaser, on the one hand, and the Company, on
the other hand, to effect the Merger are subject to the satisfaction on or
prior to the Effective Time of each of the following conditions: (i) Purchaser
shall have made, or caused to be made, the Offer and shall have purchased, or
caused to be purchased, Shares pursuant to the Offer (provided that the
purchase of Shares pursuant to the Offer shall not be a condition to the
obligations of Purchaser or Royal US pursuant to the Merger Agreement if
Purchaser fails to accept for payment and pay for the Shares in violation of
the terms of the Offer or the Merger Agreement), (ii) the Merger and the Merger
Agreement shall have been approved and adopted by the requisite vote of the
stockholders of the
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Company, if required by Delaware Law, (iii) no court or governmental entity of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any law, statute, ordinance, rule, regulation, judgment, decree,
injunction or other order (whether temporary, preliminary or permanent) that is
in effect and restrains, enjoins or otherwise prohibits consummation of the
Merger and (iv) the waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated and, other than the
filing of a Certificate of Merger, all notices, reports and other filings
required to be made prior to the Effective Time by the Company or Royal US or
any of their respective subsidiaries with, and all consents, registrations,
approvals, permits and authorizations required to be obtained prior to the
Effective Time by the Company or Royal US or any of their respective
subsidiaries from, any governmental entity, including, but not limited to, the
consent of certain insurance commissioners, directors or superintendents of the
state insurance departments, in connection with the execution and delivery of
the Merger Agreement and the consummation of the Merger and the other
transactions contemplated hereby shall have been made or obtained (as the case
may be) and shall be in full force and effect.
At the Effective Time of the Merger (i) each issued and outstanding Share
(other than Shares that are owned by the Company or any of its subsidiaries,
any Shares owned by Royal plc or any of its subsidiaries or any Shares which
are held by stockholders who properly perfect their dissenters rights under
Delaware Law) will be canceled and converted into the right to receive the
Offer Price paid pursuant to the Offer, without interest, upon the surrender of
the certificate formerly representing such Share in accordance with the Merger
Agreement and (ii) each share of the common stock, par value $.01 per share, of
Purchaser issued and outstanding immediately prior to the Effective Time will
be converted into that number of fully paid and nonassessable shares of common
stock of the Surviving Corporation equal to (x) the number of shares of Common
Stock issued and outstanding immediately prior to the Effective Time less (y)
the number of those shares of Common Stock held by (A) any subsidiary of the
Company or (B) Royal plc or any subsidiary thereof.
The Company's Board of Directors. The Merger Agreement provides that promptly
upon the purchase by Purchaser of Shares pursuant to the Offer which represent
at least a majority of the outstanding shares of Common Stock, Purchaser or
Royal US shall be entitled to designate up to such number of directors but in
no event less than a majority, rounded up to the next whole number, on the
board of directors of the Company as shall give Purchaser representation on
such board of directors equal to the product of the total number of directors
on such board (giving effect to the directors elected pursuant to this
sentence) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Royal US, Purchaser and any other subsidiary of Royal US
bears to the total number of Shares then outstanding. At such time, the Company
will promptly use its reasonable best efforts to cause Purchaser's or Royal
US's designees, as the case may be, to be so elected, including either
increasing the size of the board of directors or securing the resignations of
incumbent directors or both. The Company will use its reasonable best efforts
to cause directors designated by Purchaser to constitute the same percentage as
is on the board of (i) each committee of the board of directors, (ii) each
board of directors of each subsidiary of the Company and (iii) each committee
of each such subsidiary board, in each case only to the extent permitted by
applicable law. The Company's obligation to appoint Purchaser's designees to
the Company Board is subject to compliance with Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder. From and after the time, if any,
that Royal US's designees constitute a majority of the Company's board of
directors, any amendment of the Merger Agreement, any termination of the Merger
Agreement by the Company, any extension of time for performance of any of the
obligations of Royal US or Purchaser thereunder, any waiver of any condition or
any of the Company's rights thereunder or other action by the Company
thereunder may be effected only by unanimous vote of the entire board of
directors of the Company.
Stockholders' Meeting. Pursuant to the Merger Agreement, if the approval by
the holders of Shares is required under Delaware Law to consummate the Merger
and is required to be given at a duly held meeting of stockholders, the Company
will take, in accordance with its certificate of incorporation and bylaws, all
action necessary to convene a meeting of holders of Shares as promptly as
practicable upon the written request of Royal US to consider and vote upon the
approval of the Merger. The Company's board of directors will recommend
approval of the Merger, will not withdraw or modify such recommendation and
will take all lawful action to
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solicit such approval unless, in the good faith judgment of the board of
directors of the Company, after consultation with and receipt of advice of
outside legal counsel, the failure to take such actions is required under
applicable law. The Merger Agreement provides that in connection with such
stockholders meeting referred to above, the Company will promptly prepare and
deliver to Royal US a draft of a proxy statement (the "Proxy Statement").
Thereafter, the Company and Royal US shall use their reasonable best efforts to
cooperate fully to make such changes to the Proxy Statement as may be
reasonably requested by Royal US or otherwise may be appropriate, file the
Proxy Statement with the SEC as soon as practicable and respond promptly to any
SEC comments. Upon filing the final, definitive Proxy Statement with the SEC,
the Company will mail such Proxy Statement to its stockholders. If Purchaser
acquires at least a majority of the outstanding Shares in the Offer, Purchaser
will have sufficient voting power to approve the Merger, even if no other
stockholder votes in favor of the Merger. The Company has agreed to include in
the Proxy Statement the recommendation of the Company Board that stockholders
of the Company vote in favor of the approval of the Merger and the adoption of
the Merger Agreement unless the Company Board, after consultation with outside
legal counsel to the Company, determines that to do so would likely breach the
fiduciary duties of the Company Board under applicable law.
Notwithstanding the foregoing, if Purchaser obtains 90 percent or more of the
Shares through the Offer, Purchaser will use the short form merger provisions
of Section 253 of Delaware Law.
Stock Options; Restricted Stock and Performance Units. The Merger Agreement
provides that at the Effective Time each outstanding option to purchase Shares
issued by the Company, whether issued pursuant to any stock plan of the Company
or otherwise, whether or not exercisable (a "Company Option") will be canceled
and, in consideration of such cancellation, Royal US shall (or shall cause the
Company to), pay to each holder of a Company Option an amount in cash equal to
(x) the difference (if positive) between the Offer Price and the price per
Share (the "Option Exercise Price") pursuant to which the holder of such
Company Option may purchase the Shares to which such Company Option relates,
multiplied by (y) the number of Shares subject to such Company Option, less (z)
any withholding of taxes as may be required by applicable law with respect to
any Company Option. With respect to any Company Option as to which the Option
Exercise Price exceeds the Offer Price, such Company Option shall also be
canceled and in consideration of such cancellation, Royal US shall (or cause
the Company to) pay to each holder thereof an amount in cash equal to (x) $5,
multiplied by (y) the number of Common Shares subject to such Company Option,
less (z) any withholding taxes as may be required by applicable law.
The Merger Agreement also provides that at the Effective Time each Share
which is subject to vesting or other similar restrictions, whether issued
pursuant to any stock plan of the Company or otherwise ("Restricted Stock")
will become fully vested and free of such restrictions in accordance with the
Company Stock Plans (as defined in the Merger Agreement), and otherwise will be
treated in the same manner as the Shares, provided that amounts payable in
respect of Restricted Stock shall be reduced by any withholding of taxes as may
be required by applicable law and the amount of any loans or other indebtedness
owing to the Company in respect of the Restricted Stock from holders thereof.
The Merger Agreement also provides that at the Effective Time each outstanding
performance unit (each, a "Performance Unit"), whether issued pursuant to any
stock plans of the Company or otherwise shall become immediately vested and
immediately thereafter shall be canceled. In exchange for such cancellation,
Royal US shall (or shall cause the Company to) pay each holder of a Performance
Unit an amount in cash equal to (x) the book value per Common Share, determined
as of the end of the fiscal quarter immediately preceding the Effective Time,
in accordance with US GAAP, multiplied by (y) the number of Performance Units
then held by such holder, less (z) any withholding Taxes as may be required by
applicable Law.
Interim Operations; Covenants. The Company has covenanted and agreed as to
itself and its subsidiaries that after the date of the Merger Agreement and
prior to the Effective Time (unless Royal US shall otherwise approve in
writing, and except as otherwise expressly contemplated by the Merger
Agreement, the Stock Option Agreement or as disclosed pursuant to the Merger
Agreement):
(a) its and its subsidiaries' businesses shall be conducted only in the
ordinary and usual course (it being understood and agreed that nothing
contained in the Merger Agreement shall permit the Company to
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enter into or engage in (through acquisition, product extension or
otherwise) the business of selling any products or services materially
different from existing products or services of the Company and its
subsidiaries or to enter into or engage in new lines of business (as such
term is defined in the National Association of Insurance Commissioner's
instructions for the preparation of the annual statement form) without
Royal US's prior written approval);
(b) it and each of its subsidiaries shall use its respective reasonable
best efforts to preserve its business organization intact and maintain its
existing relations and goodwill with customers, suppliers, reinsurers,
distributors, creditors, lessors, employees and business associates;
(c) it shall not (i) amend its certificate of incorporation or bylaws or
amend, modify or terminate the Rights Agreement; (ii) split, combine or
reclassify its outstanding shares of capital stock; (iii) authorize,
declare, set aside or pay any dividend payable in cash, stock or property
in respect of any capital stock other than dividends from its wholly-owned
subsidiaries and other than regular quarterly dividends paid by the Company
on its Shares not in excess of $0.18 per share, with usual record and
payment dates and in accordance with the Company's past dividend policy; or
(iv) repurchase, redeem or otherwise acquire, or permit any of its
subsidiaries to purchase or otherwise acquire, any shares of its stock or
any securities convertible into or exchangeable or exercisable for any
shares of its stock;
(d) neither it nor any of its subsidiaries shall (i) issue, sell, pledge,
dispose of or encumber any shares of, or securities convertible into or
exchangeable or exercisable for, or options, warrants, calls, commitments
or rights of any kind to acquire any shares, of its or any subsidiary's
capital stock of any class or any other property or assets (other than
Shares issuable pursuant to options outstanding on the date hereof under
any stock plan of the Company); (ii) other than in the ordinary and usual
course of business, transfer, lease, license, guarantee, sell, mortgage,
pledge, dispose of or encumber any other property or assets (including
capital stock of any of its subsidiaries) or incur or modify any material
indebtedness or other liability; or (iii) make or authorize or commit for
any capital expenditures, including entering into capital lease
obligations, other than in amounts not exceeding $1,000,000 in the
aggregate or, by any means, make any acquisition of, or investment in,
assets or stock of any other person or entity, including by way of
assumption reinsurance, in excess of $1,000,000 individually or $5,000,000
in the aggregate (other than in connection with ordinary course investment
activities);
(e) neither it nor any of its subsidiaries shall terminate, establish,
adopt, enter into, make any new grants or awards under, amend or otherwise
modify, any Compensation and Benefit Plans (as defined in the Merger
Agreement) including the Stay Bonus Plan (as defined in the Merger
Agreement), or increase the salary, wage, bonus or other compensation of
any employees except increases occurring in the ordinary and usual course
of business (which shall include normal periodic performance reviews and
related compensation and benefit increases) or promote any employee into
any of bands 1, 2, 3 or 4, or from one of such bands into another of such
bands;
(f) neither it nor any of its subsidiaries shall pay, discharge, settle
or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
settlement, discharge or satisfaction of claims, liabilities or obligations
legally due and payable and arising in the ordinary and usual course of
business, claims arising under the terms of products, contracts or policies
issued by the Company Insurance subsidiaries in the ordinary and usual
course of business and such other claims, liabilities or obligations as
shall not exceed $2,000,000 in the aggregate;
(g) neither it nor any of its subsidiaries shall make, change or revoke
any material tax election, settle or compromise any material tax liability
arising in any audit, change its method of accounting if such change would
have a material impact on taxes, enter into any closing or other agreement
with respect to a material amount of taxes, file a request for refund of a
material amount of taxes (but not including the prosecution of any refund
claim pending on the date hereof), or file an amended tax return if such
tax return is materially
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different from the original return to which it relates, except, in each
case, (i) in the ordinary course of
business and consistent with the Company's past practice in respect of the
tax at issue in the jurisdiction in question or (ii) with the consent of
Royal US, such consent not to be unreasonably withheld;
(h) neither it nor any of its subsidiaries shall enter into any agreement
containing any provision or covenant limiting in any material respect the
ability of the Company or any subsidiary or affiliate to (i) sell any
products or services of or to any other person, (ii) engage in any line of
business or (iii) compete with or to obtain products or services from any
person or limiting the ability of any person to provide products or
services to the Company or any of its subsidiaries or affiliates;
(i) neither it nor any of its subsidiaries shall enter into any (A)
commutations or (B) new quota share or other reinsurance transaction, in
the case of clause (B), (i) which does not contain cancellation and
termination provisions reasonably customary in the industry for that type
of transaction, (ii) which, except in the ordinary course of business,
materially increases or reduces the Company's insurance subsidiaries'
consolidated ratio of net written premiums to gross written premiums or
(iii) pursuant to which $5,000,000 or more in gross written premiums are
ceded by the Company's insurance subsidiaries to any person other than the
Company or any of its subsidiaries;
(j) neither it nor any of the Company's insurance subsidiaries will alter
or amend in any material respect their existing investment guidelines or
policies;
(k) neither it nor any of its subsidiaries shall take any action or omit
to take any action that would cause any of its representations and
warranties in the Merger Agreement to become untrue in any material
respect;
(l) neither it nor its subsidiaries shall permit a material change in any
of its underwriting, investment, actuarial, financial reporting or
accounting practices or policies or in any material assumption underlying
an actuarial practice or policy, except as may be required by any change in
generally accepted accounting principles, statutory accounting principles
or applicable law; and
(m) neither it nor any of its subsidiaries will authorize or enter into
an agreement to do any of the foregoing.
No Solicitation. Pursuant to the Merger Agreement, the Company has agreed
that it will not, and will not permit or cause any of its subsidiaries or any
of its or its subsidiaries' directors and officers to, and shall direct its and
its subsidiaries directors, officers, employees, counsel, accountants,
financial advisors and other authorized agents and representatives
(collectively, "Representatives") not to, directly or indirectly, initiate,
solicit, encourage or otherwise facilitate any inquiries or the making of any
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation, business combination, recapitalization or similar transaction
involving, or any purchase of 15% or more of the assets or any equity
securities of, the Company or any of its subsidiaries (any such proposal or
offer being hereinafter referred to as an "Acquisition Proposal"). The Company
will not, and will not permit or cause any of its subsidiaries or any of its or
its subsidiaries officers or directors to, and shall direct its and its
subsidiaries' Representatives (including any investment banker, attorney or
accountant retained by it or any of its subsidiaries) not to, directly or
indirectly, engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to an
Acquisition Proposal, whether made before or after the date of the Merger
Agreement, or otherwise facilitate any effort or attempt to make or implement
an Acquisition Proposal (including, without limitation, by means of an
amendment to the Rights Agreement); provided, however, that nothing contained
in the Merger Agreement shall prevent the Company or its board of directors
from: (i) complying with Rule 14e-2 promulgated under the Exchange Act with
regard to an Acquisition Proposal or (ii) at any time prior to the approval of
the Merger by the Company's stockholders (A) providing information in response
to a request therefor by a person who has made an unsolicited bona fide written
Acquisition Proposal if the board of directors receives from the person so
requesting such information an executed confidentiality agreement on terms
substantially equivalent to
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those contained in the Confidentiality Agreement, (B) engaging in any
negotiations or discussions with any person who has made an unsolicited bona
fide written Acquisition Proposal or (C) recommending such an Acquisition
Proposal to the stockholders of the Company, if and only to the extent that, in
the case of clauses (A), (B) and (C) above, (i) the board of directors of the
Company determines in good faith, after consultation with and receipt of advice
of outside legal counsel, that such action is required in order for its
directors to comply with their respective fiduciary duties under applicable law
and (ii) the board of directors of the Company determines in good faith (after
consultation with its financial advisor) that such Acquisition Proposal, if
accepted, is reasonably likely to be consummated, taking into account all
legal, financial and regulatory aspects of the proposal and the Person making
the proposal, and would, if consummated, result in a more favorable transaction
than the transaction contemplated by the Merger Agreement (any such Acquisition
Proposal being referred to in the Merger Agreement as a "Superior Proposal").
The Company also has agreed to cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted prior to the
execution of the Merger Agreement with respect to any of the foregoing. The
Company has further agreed that it will take the necessary steps to promptly
inform its officers, directors, subsidiaries and Representatives of the
foregoing obligations and the obligations in the Confidentiality Agreement.
The Company will also notify Royal US promptly, but in any event not later
than one day following receipt, if any such inquiries, proposals or offers are
received by, any such information is requested from, or any such discussions or
negotiations are sought to be initiated or continued with, any of its
Representatives indicating, in connection with such notice, the name of such
person and the material terms and conditions of any proposals or offers and
thereafter shall keep Royal US informed, on a current basis, of the status and
terms of any such proposals or offers and the status of any such negotiations
or discussions. The Company also will promptly request each person that has
executed a confidentiality agreement in connection with its consideration of an
Acquisition Proposal to return or dispose of all confidential information that
had been furnished to such person by or on behalf of the Company or any of its
subsidiaries.
Indemnification and Insurance. Royal US has agreed that from and after the
Effective Time it will indemnify and hold harmless each present and former
director and officer of the Company (when acting in such capacity) against any
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring
at or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time to the fullest extent that the Company was permitted
under Delaware Law and its certificate of incorporation and bylaws to indemnify
such person (and Royal US has also agreed to advance expenses as incurred to
the fullest extent permitted under applicable law provided the person to whom
expenses are advanced provides a written affirmation of his or her good faith
belief that the standard of conduct necessary for indemnification has been met
and an undertaking to repay such advances if it is ultimately determined that
such person is not entitled to indemnification).
Royal US has also agreed that the Surviving Corporation shall continue to
maintain the Company's existing officers' and directors' liability insurance
("D&O Insurance") or D&O Insurance that is substantially comparable to the
Company's existing D&O Insurance for a period of six years after the Effective
Time, subject to certain maximum required premium amounts.
Representations and Warranties. Pursuant to the Merger Agreement, the Company
has made customary representations and warranties to Purchaser and Royal US
with respect to, among other things, its organization, capitalization,
authority relative to the Merger Agreement and the Stock Option Agreement,
financial statements, public filings, the absence of certain material adverse
events, changes or effects, conduct of business, compliance with insurance laws
and regulations and related insurance matters, liabilities and reserves,
litigation, employee benefit plans, brokers' fees, compliance with laws, tax
matters, intellectual property, employment matters, environmental matters, real
property, material contracts, potential conflicts of interest, insurance, vote
required to approve the Merger Agreement, information in the Proxy Statement,
the Rights Agreement and Year 2000 compliance.
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Termination; Fees.
The Merger Agreement may be terminated:
(i) at any time prior to the Effective Time, whether before or after the
approval of the Merger by stockholders of the Company, by mutual written
consent of the Company and Royal US;
(ii) by Royal US or the Company if (x) the Offer shall have expired or been
terminated in accordance with its terms without any Shares being purchased
pursuant thereto or (y) Purchaser shall not have accepted for payment any
Shares pursuant to the Offer by December 31, 1999 (the "Termination Date"),
provided, that (A) the foregoing rights to terminate the Merger Agreement shall
not be available to any party that has breached in any material respect its
obligations under the Merger Agreement in any manner that shall have
proximately contributed to the occurrence of the failure of the Offer to be
consummated and (B) the Company shall not receive a termination fee it would
otherwise have been entitled to receive pursuant to the Merger Agreement, if it
exercises the right to terminate the Merger Agreement pursuant to clause (y) on
or prior to February 29, 2000;
(iii) by either Royal US or the Company if any Order permanently restraining,
enjoining or otherwise prohibiting consummation of the Offer or the Merger
shall become final and non-appealable (whether before or after the approval of
the Merger by the stockholders of the Company);
(iv) by the Company if prior to the consummation of the Offer (i) the board
of directors of the Company authorizes the Company, subject to complying with
the terms of the Merger Agreement, to enter into a binding written agreement
concerning a transaction that constitutes a Superior Proposal and the Company
notifies Royal US in writing that it intends to enter into such an agreement,
(ii) Royal US does not make, prior to five business days after receipt of the
Company's written notification of its intention to enter into a binding
agreement for a Superior Proposal (the "Alternative Transaction Notice") an
offer that the board of directors of the Company determines, in good faith
after consultation with its financial advisor, is at least as favorable as the
Superior Proposal, and (iii) the Company pays all termination fees required to
be paid pursuant to the Merger Agreement;
(v) by the Company if prior to the consummation of the Offer there has been a
material breach by Royal US or Purchaser of any representation, warranty,
covenant or agreement contained in the Merger Agreement that is not curable or,
if curable, is not cured within 20 days after written notice of such breach is
given by the Company to the party committing such breach; or
(vi) by Royal US if (a) the Company enters into a binding agreement for, or
recommends, a Superior Proposal or the board of directors of the Company shall
have withdrawn or adversely modified its approval or recommendation of the
Merger Agreement or, after the mailing of the proxy statement relating to the
approval of the Merger or this Offer to Purchase, failed to reconfirm its
recommendation of the Merger Agreement within ten business days after a
reasonable written request by Royal US to do so or redeems any rights under, or
modifies or agrees to modify, the Rights Agreement (or any replacement thereof)
to facilitate, any Acquisition Proposal with any Person (other than Royal plc
or any subsidiary of Royal plc), or (b) prior to consummation of the Offer
there has been a material breach by the Company of any representation,
warranty, covenant or agreement contained in the Merger Agreement that is not
curable or, if curable, is not cured within 20 days after written notice of
such breach is given by Royal US to the party committing such breach.
The Merger Agreement provides that if the Merger Agreement is terminated:
(a) by the Company in the manner described in clause (iv) above or by Royal
US in the manner described in clause (vi)(a) above, then the Company shall, not
later than immediately prior to the time of such termination or not later than
immediately prior to the time of entering into an agreement concerning a
transaction that constitutes an Acquisition Proposal, pay Royal US a
termination fee of $45,000,000 plus an amount equal to Royal US's out-of-pocket
charges and expenses incurred in connection with the transactions contemplated
by the Merger Agreement up to a maximum of $5,000,000 ("Expenses");
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(b) by the Company or Royal US in the manner described in clause (ii)(x)
above (provided that (1) on the date of expiration or termination of the Offer
the Minimum Condition has not been satisfied and (2) (x) at least 5 business
days prior to such date, it shall have been publicly disclosed that the
conditions to the Offer described in paragraphs (a)(ii), (a)(iii), (a)(iv) and
(b)(i) of Section 14 have been satisfied or on such date any of such
conditions shall not have been satisfied as a result of a material breach of
the Merger Agreement by the Company or (y) on such date the condition to the
Offer set forth in paragraph (b)(iii) of Section 14 has not been satisfied),
in circumstances where within 9 months after the termination of the Merger
Agreement the Company enters into a definitive agreement in respect of, or
approves or recommends an Acquisition Proposal or redeems any rights under, or
modifies or agrees to modify, the Rights Agreement (or any replacement
thereof) to facilitate, any Acquisition Proposal with any person (other than
Royal plc or any subsidiary of Royal plc), then the Company shall make payment
to Royal US by wire transfer of immediately available funds a fee in the
amount of $45,000,000 plus the Expenses of Royal US, payable upon the earlier
of the time of entering into such agreement or consummation of an Acquisition
Proposal;
(c) by the Company or Royal US in the manner described in clause (ii)(y)
above (provided that (1) on the date of expiration or termination there is no
condition to the Offer which has failed to be satisfied as a result of a
material breach of the Merger Agreement by Royal US or Purchaser and (2) prior
to such termination an Acquisition Proposal with respect to the Company shall
have been publicly announced or otherwise became public) in circumstances
where within 9 months after the termination of the Merger Agreement the
Company enters into a definitive agreement in respect of, or approves or
recommends an Acquisition Proposal or redeems any rights under, or modifies or
agrees to modify, the Rights Agreement (or any replacement thereof) in order
to facilitate, any Acquisition Proposal with any person (other than Royal US
or any subsidiary of Royal US), then the Company shall make payment to Royal
US by wire transfer of immediately available funds a fee in the amount of
$45,000,000 plus the Expenses of Royal US, payable upon the earlier of the
time of entering into such agreement or consummation of an Acquisition
Proposal.
In the event that (a) the Merger Agreement is terminated (1) by the Company
and Royal US in the manner described in clause (i) above or (2) by the Company
or Royal US in the manner described in clause (ii)(y) above (other than a
termination resulting from a breach of the Merger Agreement by the Company) or
in the manner described in clause (iii) above or (3) by the Company in the
manner described in clause (v) above) and (b) as of the date of termination, a
Change in Control of Royal plc shall have occurred, then Royal US shall
promptly pay the Company a termination fee of $45,000,000. "Change in Control
of Royal plc" shall mean, (i) offers for the entire issued ordinary share
capital of Royal plc under the terms of the United Kingdom Code on Takeovers
and Mergers which (x) have been recommended by the board of directors of Royal
plc, (y) have been publicly announced by the offeror to have become
unconditional as to acceptances or (z) when the offeror has publicly announced
that acceptances have been received and not withdrawn by Shareholders
representing 50 percent of the issued ordinary share capital of Royal plc;
(ii) the conveyance, transfer or lease by Royal US of all or substantially all
of its assets to any Person or (iii) Royal plc has entered into a binding
written agreement providing for any of the foregoing.
Stock Option Agreement.
The following is a summary of certain portions of the Stock Option Agreement
and is qualified in its entirety by reference to the Stock Option Agreement, a
copy of which has been filed with the SEC as an exhibit to the Schedule 14D-1.
The Stock Option Agreement may be examined and copies may be obtained at the
places and in the manner set forth in Section 9 of this Offer to Purchase.
As a condition and inducement to Purchaser and Royal US's entering into the
Merger Agreement, concurrently with the execution and delivery of the Merger
Agreement, Royal US and the Company have entered into the Stock Option
Agreement, pursuant to which, among another things, the Company has granted
Royal US an irrevocable option to purchase up to 5,443,697 newly issued Shares
(the "Company Option") at a purchase price per Share of $50.00 (the "Exercise
Price"). The Stock Option Agreement will terminate, and the Company Option
will expire, on the earlier of (i) the Effective Time; (ii) 90 days after the
date full payment of the
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termination fee is made by the Company to Royal US as described in paragraphs
(a), (b) and (c) under the heading Merger Agreement--Termination; Fees of this
Section 11 (the date referred to in clause (ii) being hereinafter referred to
as the "Option Termination Date"), or (iii) one day following the date on
which it is certain that no termination fee will become payable to Royal US
under the Merger Agreement; provided that, if the Option cannot be exercised
or the Shares cannot be delivered to Grantee upon such exercise because (a) a
preliminary or permanent injunction or other order issued by any federal or
state court of competent jurisdiction in the United States prohibiting the
delivery of the Shares shall be in effect; (b) any applicable waiting periods
under the HSR Act shall not have expired or been terminated; or (c) any
approval required to be obtained prior to the delivery of the Shares under the
insurance laws of any state or foreign jurisdiction shall not have been
obtained and be in full force and effect, the Option Termination Date shall be
extended until thirty days after such impediment to exercise or delivery has
been removed but not past December 31, 2001.
Royal US may exercise the Company Option, in whole or in part, if on or
after the date hereof any of the events described in paragraphs (a), (b) and
(c) under the heading Merger Agreement--Termination; Fees of this Section 11
shall have occured.
In the event of any change in the number of issued and outstanding Shares by
reason of any stock dividend, stock split, split-up, recapitalization, merger
or other change in the corporate or capital structure of the Company, the
number of Shares subject to the Company Option and the purchase price per
Share shall be appropriately adjusted to restore Royal US to its rights under
the Stock Option Agreement, including its right to purchase Shares
representing 19.9% of the capital stock of the Company entitled to vote
generally for the election of the directors of the Company which is issued and
outstanding immediately prior to the exercise of the Company Option at an
aggregate purchase price equal to the Exercise Price multiplied by 5,443,697.
If at any time the Company Option is then exercisable, Royal US may elect,
in lieu of exercising the option to purchase Shares, to have the Company pay
to Royal US an amount in cash equal to the Spread (as defined below)
multiplied by all or such portion of the Shares subject to the Company Option
as Royal US shall specify, net of any taxes required to be withheld under
applicable law. "Spread" shall mean the excess, if any, over the Exercise
Price of the higher of (x) if applicable, the highest price per Share
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid or proposed to be paid by any person pursuant to one of the
transactions described in paragraphs (a), (b) and (c) under the heading Merger
Agreement--Termination; Fees of this Section 11 (the "Alternative Purchase
Price") or (y) the closing price of the Shares on the NYSE on the last trading
day immediately prior to the date of such election (the "Closing Price"). If,
in the case of clause (x) above, the Alternative Purchase Price can be
calculated by reference to an all cash amount paid or proposed to be paid for
any Shares outstanding, such cash amount shall be deemed to be the Alternative
Purchase Price; if, in the case of clause (x) above, no Shares will be
purchased for all cash, the Alternative Purchase Price shall be the sum of (i)
the fixed cash amount, if any, included in the Alternative Purchase Price plus
(ii) the fair market value of such property other than cash included in the
Alternative Purchase Price. If such other property consists of securities with
an existing public trading market, the average of the closing prices (or the
average of the closing bid and asked prices if closing prices are unavailable)
for such securities in their principal public trading market on the five
trading days ending five days prior to the date of the election shall be used
to calculate the fair market value of such property. If such other property
consists of something other than cash or securities with an existing public
trading market and, as of the payment date for the Spread, agreement on the
value of such other property has not been reached, the Alternative Purchase
Price shall be deemed to equal the Closing Price.
If by the first anniversary of the date the Merger Agreement was terminated
(the "Merger Termination Date") pursuant to the terms thereof, neither Royal
US nor any other person has acquired more than fifty percent (excluding the
Shares subject to the Company Option) of the shares of outstanding Common
Stock, then the Company has the right to purchase (the "Repurchase Right")
all, but not less than all, of the Shares subject to the Company Option at the
greater of (i) $50.00 per Share or (ii) the average of the last sales prices
for shares of Common Stock on the five trading days ending five days prior to
the date the Company gives written notice of
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its intention to exercise the Repurchase Right. If the Company does not
exercise the Repurchase Right within thirty days following the end of the one
year period after the Merger Termination Date, the Repurchase Right lapses.
At any time prior to the first anniversary of the Merger Termination Date,
Royal US shall have the right to sell (the "Sale Right") to the Company all,
but not less than all, of the Shares subject to the Company Option at the
greater of (i) $50.00 per Share or (ii) the average of the last sales prices
for shares of Common Stock on the five trading days ending five days prior to
the date Royal US gives written notice of its intention to exercise the Sale
Right. If Royal US does not exercise the Sale Right prior to the first
anniversary of the Merger Termination Date, the Sale Right terminates.
The Company has also granted Royal US customary registration rights with
respect to the Shares issued upon exercise of the Company Option.
Notwithstanding any other provision of the Stock Option Agreement, in no
event shall Royal US's Total Profit (as defined below) exceed $55 million and,
if it otherwise would exceed such amount, Royal US, at its sole election,
shall either (a) reduce the number of Shares subject to the Company Option,
(b) deliver to the Company for cancellation Shares previously purchased by
Royal US, (c) reduce the cash payable to Royal US upon a cash election by
Royal US, (d) pay cash to the Company, or (d) any combination thereof, so that
Royal US's Total Profit shall not exceed $55 million after taking into account
the foregoing actions.
Notwithstanding any other provision of the Stock Option Agreement, the
Company Option may not be exercised for a number of Shares as would result in
a Notional Total Profit (as defined below) of more than $55 million and, if
exercise of the Company Option otherwise would exceed such amount, Royal US,
at its discretion, may increase the Exercise Price for that number of Shares
so that the Notional Total Profit shall not exceed $55 million.
As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the amount of cash received by Royal US
pursuant to (x) the section of the Merger Agreement which provides for the
payment of certain fees and expenses following the termination of the Merger
Agreement under certain conditions and (y) the exercise of the Company Option,
(ii) the amount of (x) cash received by Royal US pursuant to the Grantor's
repurchase of Shares pursuant to the Stock Option Agreement, less (y) Royal
US's purchase price for such Shares, and (iii) (x) the net cash amounts
received by Royal US pursuant to the sale of Shares (or any other securities
into which such Shares are converted or exchanged) to any unaffiliated party
prior to the first anniversary of the date on which the Merger Agreement is
terminated, less (y) Royal US's purchase price for such Shares.
As used herein, the term "Notional Total Profit" with respect to any number
of Shares as to which Royal US may propose to exercise the Company Option
shall be the Total Profit assuming that the Company Option were exercised for
such number of Shares and assuming that such Shares, together with all other
Shares held by Royal US and its affiliates, were sold for cash at the closing
market price for the Shares as of the close of business on the preceding
trading day (less customary brokerage commissions).
Confidentiality Agreement.
The following is a summary of certain portions of the Confidentiality
Agreement, dated June 18, 1999, between Royal USA, Inc. and the Company (the
"Confidentiality Agreement") and is qualified in its entirety by reference to
the Confidentiality Agreement, a copy of which has been filed with the SEC as
an exhibit to the Schedule 14D-1. The Confidentiality Agreement may be
examined and copies may be obtained at the places and in the manner set forth
in Section 9 of this Offer to Purchase.
As a condition to the furnishing by Royal USA, Inc. or the Company (the
"Provider") of information ("Evaluation Material") to the other (the
"Recipient"), each of Royal USA, Inc. and the Company, has agreed, among other
things, that it will keep such Evaluation Material confidential and will use
it solely for evaluating
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the Offer and the Merger. "Evaluation Material" does not include information
which (i) is already in the possession of the Recipient, provided that such
information is not known by it to be subject to another confidentiality
agreement with or other obligation of secrecy to the Provider or another
party, (ii) becomes generally available to the public other than as a result
of a disclosure by the Recipient or its directors, officers, employees, agents
or advisors, or (iii) becomes available to the Recipient on a non-confidential
basis from a source other than the Provider or its advisers, provided that
such source is not known to be bound by a confidentiality agreement with or
other obligation of secrecy to the Provider or another party.
12. Plans for the Company; Other Matters.
Plans for the Company. If, as and to the extent that Purchaser acquires
control of the Company, Purchaser intends to conduct a detailed review of the
Company and its assets, corporate structure, capitalization, operations,
properties, policies, management and personnel and to consider and determine
what, if any, changes would be desirable in light of the circumstances which
then exist. Such changes could include, among other things, changes in the
Company's business, corporate structure, Certificate of Incorporation, By-
laws, capitalization, management or dividend policy.
Assuming the Minimum Condition is satisfied and Purchaser purchases Shares
pursuant to the Offer, Purchaser intends promptly to exercise its rights under
the Merger Agreement to obtain majority representation on, and control of, the
Company Board. The Merger Agreement provides that, upon the purchase of and
payment for Shares by Purchaser pursuant to the Offer which represent at least
a majority of all outstanding shares of Common Stock, Purchaser or Royal US
shall be entitled to designate up to such number of directors but in no event
less than a majority, rounded up to the next whole number, on the board of
directors of the Company as shall give Purchaser representation on such board
of directors equal to the product of the total number of directors on such
board (giving effect to the directors elected pursuant to this sentence)
multiplied by the percentage that the aggregate number of Shares beneficially
owned by Royal US, Purchaser and any other subsidiary of Royal US bears to the
total number of Shares then outstanding. See Section 11. The Merger Agreement
provides that from and after the Effective Time the directors of Purchaser
will be the initial directors of the Surviving Corporation and that Terry
Broderick, W. Marston Becker, Joseph Fisher, Joyce Wheeler and Michael Pautler
will be the initial officers of the Surviving Corporation.
Purchaser or an affiliate of Purchaser may, following the consummation or
termination of the Offer, seek to acquire additional Shares through open
market purchases, privately negotiated transactions, a tender offer or
exchange offer or otherwise, upon such terms and at such prices as it shall
determine, which may be more or less than the price to be paid pursuant to the
Offer. Purchaser and its affiliates also reserve the right to dispose of any
or all Shares acquired by them, subject to the terms of the Merger Agreement.
Except as disclosed in this Offer to Purchase, and except as may be effected
in connection with the integration of operations referred to above, Purchaser
has no present plans or proposals that would result in an extraordinary
corporate transaction, such as a merger, reorganization, liquidation,
relocation of operations, or sale or transfer of a material amount of assets,
involving the Company or any of its subsidiaries, or any material changes in
the Company's capitalization, corporate structure, business or composition of
its management or the Company Board.
Stockholder Approval. Under Delaware Law, the approval of the Company Board
and the affirmative vote of the holders of a majority of the outstanding
Shares are required to adopt and approve the Merger Agreement and the
transactions contemplated thereby. The Company has represented in the Merger
Agreement that the execution and delivery of the Merger Agreement and the
Stock Option Agreement by the Company and the consummation by the Company of
the transactions contemplated by the Merger Agreement and the Stock Option
Agreement have been duly authorized by all necessary corporate action on the
part of the Company, subject to the approval of the Merger by the Company's
stockholders in accordance with Delaware Law. In addition, the Company has
represented that the affirmative vote of the holders of a majority of the
outstanding Shares is the
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only vote of the holders of any class or series of the Company's capital stock
which is necessary to approve the Merger Agreement and the transactions
contemplated thereby, including the Merger. Therefore, unless the Merger is
consummated pursuant to the short-form merger provisions under Delaware Law
described below (in which case no further corporate action by the stockholders
of the Company will be required to complete the Merger), the only remaining
required corporate action of the Company will be the approval of the Merger
Agreement and the transactions contemplated thereby by the affirmative vote of
the holders of a majority of the Shares. The Merger Agreement provides that
Purchaser will vote, or cause to be voted, all of the Shares then owned by
Purchaser or any of its subsidiaries and affiliates in favor of the approval
of the Merger and the adoption of the Merger Agreement. In the event that
Purchaser and its subsidiaries acquire in the aggregate at least a majority of
the Shares entitled to vote on the approval of the Merger and the Merger
Agreement, they would have the ability to effect the Merger without the
affirmative vote of any other stockholders.
Short-Form Merger. Section 253 of Delaware Law provides that, if a
corporation owns at least 90% of the outstanding shares of each class of
another corporation, the corporation holding such stock may merge itself into
such corporation without any action or vote on the part of the board of
directors or the stockholders of such other corporation (a "short-form
merger"). In the event that Purchaser and its subsidiaries acquire in the
aggregate at least 90% of the outstanding Shares, pursuant to the Offer or
otherwise, then a short-form merger could be effected without any approval of
the Company Board or the stockholders of the Company, subject to compliance
with the provisions of Section 253 of Delaware Law. In the Merger Agreement,
Purchaser and the Company have agreed that, notwithstanding that all
conditions to the Offer are satisfied or waived as of the scheduled Expiration
Date, Purchaser may extend the Offer for a period not to exceed ten (10)
business days, subject to certain conditions, if the Shares tendered pursuant
to the Offer are less than 90% of the outstanding Shares, provided that the
Expiration Date may not be extended beyond December 31, 1999. Even if
Purchaser does not own 90% of the outstanding Shares following consummation of
the Offer, Purchaser could seek to purchase additional Shares in the open
market or otherwise in order to reach the 90% threshold and employ a short-
form merger. The per share consideration paid for any Shares so acquired may
be greater or less than that paid in the Offer. Purchaser presently intends to
effect a short-form merger if permitted to do so under Delaware Law.
Appraisal Rights. Holders of Shares do not have appraisal rights in
connection with the Offer. However, if the Merger is consummated, holders of
Shares at the Effective Time will have certain rights pursuant to the
provisions of Section 262 of Delaware Law including the right to dissent and
demand appraisal of, and to receive payment in cash of the fair value of,
their Shares. Under Section 262 of Delaware Law, dissenting stockholders of
the Company who comply with the applicable statutory procedures will be
entitled to receive a judicial determination of the fair value of their Shares
(exclusive of any element of value arising from the accomplishment or
expectation of the Merger) and to receive payment of such fair value in cash,
together with a fair rate of interest thereon, if any. Any such judicial
determination of the fair value of the Shares could be based upon factors
other than, or in addition to, the price per Share to be paid in the Merger or
the market value of the Shares. The value so determined could be more or less
than the price per Share to be paid in the Merger.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS UNDER
DELAWARE LAW DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO
BE FOLLOWED BY STOCKHOLDERS DESIRING TO EXERCISE ANY APPRAISAL RIGHTS
AVAILABLE UNDER DELAWARE LAW. THE PRESERVATION AND EXERCISE OF APPRAISAL
RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF DELAWARE LAW.
Rule 13e-3. The SEC has adopted Rule 13e-3 under the Exchange Act which is
applicable to certain "going private" transactions and which may under certain
circumstances be applicable to the Merger or another business combination
following the purchase of Shares pursuant to the Offer in which Purchaser
seeks to acquire the remaining Shares not held by it. Purchaser believes,
however, that Rule 13e-3 will not be applicable to the
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Merger because it is anticipated that the Merger would be effected within one
(1) year following consummation of the Offer and in the Merger stockholders
would receive the same price per Share as paid in the Offer. If Rule 13e-3
were applicable to the Merger, it would require, among other things, that
certain financial information concerning the Company, and certain information
relating to the fairness of the proposed transaction and the consideration
offered to minority stockholders in such a transaction, be filed with the SEC
and disclosed to minority stockholders prior to consummation of the
transaction.
13. Dividends and Distributions.
As described above, the Merger Agreement provides that until the Effective
Time, except as expressly set forth in or contemplated by the Merger
Agreement, neither the Company nor any of its subsidiaries shall: (i)
authorize, declare, set aside or pay any dividend payable in cash, stock or
property in respect of any capital stock other than dividends from its wholly-
owned subsidiaries and other than regular quarterly dividends paid by the
Company on its Shares not in excess of $0.18 per share, with usual record and
payment dates and in accordance with the Company's past dividend policy; (ii)
repurchase, redeem or otherwise acquire, or permit any of its subsidiaries to
purchase or otherwise acquire, any shares of its stock or any securities
convertible into or exchangeable or exercisable for any shares of its stock;
or (iii) issue, sell, pledge, dispose of or encumber any shares of, or
securities convertible into or exchangeable or exercisable for, or options,
warrants, calls, commitments or rights of any kind to acquire any shares, of
its or any subsidiary's capital stock of any class or any other property or
assets (other than Shares issuable pursuant to options outstanding on the date
hereof under any stock plan of the Company).
14. Conditions to the Offer.
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-l(c) under the Exchange Act
(relating to Purchaser's obligation to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer), pay for, or may delay
the acceptance for payment of or, subject to the above restriction, payment
for, any tendered Shares, or may, in its sole discretion, terminate or amend
the Offer as to any Shares not then paid for if
(a) prior to the Expiration Date (i) the Minimum Condition shall not have
been satisfied, (ii) any waiting period applicable to the consummation of the
Offer and the Merger under the HSR Act shall not have expired or been
terminated, (iii) other than the filing of a certificate of merger, any
notices, reports and other filings required to be made prior to the Effective
Time by the Company or Royal plc or any of their respective subsidiaries with,
and any consents, registrations, approvals, permits and authorizations
required to be obtained prior to the Effective Time by the Company or Royal US
or any of their respective subsidiaries from, any governmental entity,
including but not limited to the consent of those insurance commissioners,
directors or superintendents of the state insurance departments disclosed in
the Merger Agreement, in connection with the execution and delivery of the
Merger Agreement and the consummation of the Offer and the Merger and the
other transactions contemplated by the Merger Agreement shall not have been
made or obtained (as the case may be) and shall not be in full force and
effect, or (iv) the Company shall not have obtained the consent or approval of
the Commissioner of Insurance or similar regulatory authority in Connecticut,
Colorado, Wisconsin, Oklahoma, California, North Carolina, South Carolina,
Oregon and Texas or which shall be required under any contract to which the
Company or any of its subsidiaries is a party, except those for which the
failure to obtain such consents or approvals would not, individually or in the
aggregate, have a Company Material Adverse Effect (as defined in the Merger
Agreement) or is not, individually or in the aggregate, reasonably likely to
prevent or materially burden or materially impair the ability of the Company
to consummate the transactions contemplated by the Merger Agreement; or any
such consent or approval, or any governmental consent, imposes any condition
or conditions relating to, or requires changes or restrictions in, the
operations of any asset or businesses of the Company, Royal plc or their
respective subsidiaries which could, in the reasonable judgment of the board
of directors of Royal US, individually or in the aggregate, materially and
adversely impact the economic or business benefits to Royal plc and its
subsidiaries of the transactions contemplated by the Merger Agreement or
materially
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impair the ability of any Royal US company (including the Company following the
Effective Time) to conduct its business in the manner as such business is now
being conducted; or
(b) at or before the time of payment for any of such Shares (whether or not
any Shares have theretofore been accepted for payment), any of the following
events shall occur:
(i) any court or governmental entity of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any law, statute,
ordinance, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the Offer or the
Merger, or which makes the acceptance for payment of, or payment for, any
Shares in the Offer illegal;
(ii) the representations and warranties of the Company set forth in the
Merger Agreement shall not be true and correct both when made and at and as
of the Expiration Date as though made on and as of the Expiration Date
(except to the extent any such representation or warranty expressly speaks
as of an earlier date) except where the failure of such representations and
warranties to be so true and correct (without giving effect to any
qualifications in the representations and warranties as to "Company
Material Adverse Effect," "material" or similar qualifications set forth in
the Merger Agreement) would not have, individually or in the aggregate, a
Company Material Adverse Effect, or Royal US shall not have received a
certificate on the Expiration Date signed on behalf of the Company by an
executive officer of the Company to such effect;
(iii) the Company shall not have performed in all material respects all
obligations required to be performed by it under the Merger Agreement at or
prior to the Expiration Date; or
(iv) there shall have occurred a change, event or circumstance that has
had, or would reasonably be expected to have, a Company Material Adverse
Effect; or
(v) the Merger Agreement shall have been terminated in accordance with
its terms prior to the Expiration Date; or Royal US, Purchaser and the
Company shall have otherwise agreed that Purchaser may amend, terminate or
withdraw the Offer;
The foregoing conditions are for the sole benefit of Royal US and Purchaser
and may be asserted by Royal US or Purchaser regardless of the circumstances
(including any action or inaction by Royal US or Purchaser) giving rise to such
condition or may be waived by Royal US or Purchaser, by express and specific
action to that effect, in whole or in part at any time and from time to time in
their sole discretion. Any determination by Royal US and Purchaser concerning
any event described in this Annex I shall be final and binding upon all holders
of Shares. The failure by Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
15. Certain Legal Matters.
General. Except as described in this Section 15, based on information
provided by the Company, none of the Company, Purchaser or Royal US is aware of
any license or regulatory permit that appears to be material to the business of
the Company and its subsidiaries, taken as a whole, that might be adversely
affected by the acquisition of Shares by Purchaser pursuant to the Offer, the
Merger or otherwise, or, except as set forth above, of any approval or other
action by any governmental, administrative or regulatory agency or authority,
domestic or foreign, that would be required prior to the acquisition of Shares
by Purchaser pursuant to the Offer, the Merger or otherwise. Should any such
approval or other action be required, Purchaser presently contemplates that
such approval or other action will be sought, except as described below under
"State Antitakeover Statutes." Except as otherwise described in this Offer to
Purchase, Purchaser does not presently intend to delay the acceptance for
payment of, or payment for, Shares tendered pursuant to the Offer pending the
outcome of any such matter. There can be no assurance that any such approval or
other action, if needed, would be obtained or would be obtained without
substantial conditions or that failure to obtain any such approval or other
action might not result in consequences adverse to the Company's business or
that certain parts of the Company's business
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might not have to be disposed of, or other substantial conditions complied
with, in the event that such approvals were not obtained or such other actions
were not taken or in order to obtain any such approval or other action. If
certain types of adverse action are taken with respect to the matters discussed
below, Purchaser could decline to accept for payment, or pay for, any Shares
tendered. See Section 14 for certain conditions to the Offer, including
conditions with respect to governmental actions.
State Antitakeover Statutes. Section 203 of Delaware Law, in general,
prohibits a Delaware corporation, such as the Company, from engaging in a
"Business Combination" (defined as a variety of transactions, including
mergers) with an "Interested Stockholder" (defined generally as a person that
is the beneficial owner of 15% or more of the outstanding voting stock of the
subject corporation) for a period of three years following the date that such
person became an Interested Stockholder unless, prior to the date such person
became an Interested Stockholder, the board of directors of the corporation
approved either the Business Combination or the transaction that resulted in
the stockholder becoming an Interested Stockholder. The provisions of Section
203 of Delaware Law are not applicable to any of the transactions contemplated
by the Merger Agreement, because the Merger Agreement and the transactions
contemplated thereby were approved by the Company Board prior to the execution
thereof.
A number of states have adopted laws and regulations that purport to apply to
attempts to acquire corporations that are incorporated in such states, or whose
business operations have substantial economic effects in such states, or which
have substantial assets, security holders, employees, principal executive
offices or principal places of business in such states. In Edgar v. MITE Corp.,
the Supreme Court of the United States (the "Supreme Court") invalidated on
constitutional grounds the Illinois Business Takeover statute, which, as a
matter of state securities law, made certain corporate acquisitions more
difficult. However, in 1987, in CTS Corp. v. Dynamics Corp. of America, the
Supreme Court held that the State of Indiana may, as a matter of corporate law
and, in particular, with respect to those aspects of corporate law concerning
corporate governance, constitutionally disqualify a potential acquiror from
voting on the affairs of a target corporation without the prior approval of the
remaining stockholders. The state law before the Supreme Court was by its terms
applicable only to corporations that had a substantial number of stockholders
in the state and were incorporated there.
Purchaser does not believe that the antitakeover laws and regulations of any
state other than the State of Delaware will by their terms apply to the Offer,
and, except as set forth above with respect to Section 203 of Delaware Law,
Purchaser has not attempted to comply with any state antitakeover statute or
regulation. Purchaser reserves the right to challenge the applicability or
validity of any state law purportedly applicable to the Offer and nothing in
this Offer to Purchase or any action taken in connection with the Offer is
intended as a waiver of such right. If it is asserted that any state
antitakeover statute is applicable to the Offer and an appropriate court does
not determine that it is inapplicable or invalid as applied to the Offer,
Purchaser might be required to file certain information with, or to receive
approvals from, the relevant state authorities, and Purchaser might be unable
to accept for payment or pay for Shares tendered pursuant to the Offer or may
be delayed in consummating the Offer. In such case, Purchaser may not be
obligated to accept for payment, or pay for, any Shares tendered pursuant to
the Offer. See Section 14.
Antitrust. The Offer and the Merger are subject to the HSR Act, which
provides that certain acquisition transactions may not be consummated unless
certain information has been furnished to the Antitrust Division of the
Department of Justice (the "DOJ") and the Federal Trade Commission (the "FTC")
and certain waiting period requirements have been satisfied.
Pursuant to the requirements of the HSR Act, Royal plc, Royal US and
Purchaser expect to file their Notification and Report Forms with respect to
the Offer and Merger with the DOJ and the FTC on or about July 30, 1999. As a
result, assuming such filings are made on July 30, 1999, the waiting period
under the HSR Act with respect to the Offer is scheduled to expire at 11:59
p.m., New York City time, on August 14, 1999, (the fifteenth day after such
filings are made), unless early termination of the waiting period is granted.
However, the DOJ or the FTC may extend the waiting period by requesting
additional information or documentary material from Royal plc or the Company.
If such a request is made, such waiting period will expire at 11:59 p.m., New
York City time, on the tenth day after substantial compliance by Royal plc and
the Company with such request.
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Only one extension of the waiting period pursuant to a request for additional
information is authorized by the HSR Act. Thereafter, such waiting period may
be extended only by court order or with the consent of Royal plc. In practice,
complying with a request for additional information or material can take a
significant amount of time. In addition, if the DOJ or the FTC raises
substantive issues in connection with a proposed transaction, the parties
frequently engage in negotiations with the relevant governmental agency
concerning possible means of addressing those issues and may agree to delay
consummation of the transaction while such negotiations continue. Purchaser
will not accept for payment Shares tendered pursuant to the Offer unless and
until the waiting period requirements imposed by the HSR Act with respect to
the Offer have been satisfied. See Section 14.
The FTC and the DOJ frequently scrutinize the legality under the Antitrust
Laws (as defined below) of transactions such as Purchaser's acquisition of
Shares pursuant to the Offer and the Merger. At any time before or after
Purchaser's acquisition of Shares, the DOJ or the FTC could take such action
under the Antitrust Laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the acquisition of Shares pursuant to the
Offer or otherwise seeking divestiture of Shares acquired by Purchaser or
divestiture of substantial assets of Purchaser or its subsidiaries. Private
parties, as well as state governments, may also bring legal action under the
Antitrust Laws under certain circumstances. Based upon an examination of
information provided by the Company relating to the businesses in which Royal
US and the Company are engaged, Purchaser and Royal US believe that the
acquisition of Shares by Purchaser will not violate the Antitrust Laws.
Nevertheless, there can be no assurance that a challenge to the Offer or other
acquisition of Shares by Purchaser on antitrust grounds will not be made or, if
such a challenge is made, of the result. See Section 14 for certain conditions
to the Offer, including conditions with respect to litigation and certain
government actions.
As used in this Offer to Purchase, "Antitrust Laws" shall mean and include
the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the
Federal Trade Commission Act, as amended, and all other Federal and state
statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines, and other laws that are designed or intended to prohibit, restrict
or regulate actions having the purpose or effect of monopolization or restraint
of trade.
Insurance. The Offer is also subject to the receipt of necessary approvals
from various state insurance regulatory authorities. Pursuant to the Merger
Agreement, Royal US and Purchaser agreed to use their reasonable best efforts
to file by August 1, 1999. Applications for Approval of Acquisition of Control
of or Merger with a Domestic Insurer (Form A) or a comparable application
(each, a "Form A") in a total of nine states where such filings are required.
The insurance laws and regulations of certain of the states where such Form A
filings will be made require hearings by the state insurance departments before
deciding whether to grant approval of an acquisition described in a Form A
filing. In certain states that do not require a hearing prior to approval,
Royal plc will be entitled to a hearing in the event that the state insurance
department proposed not to grant the approval.
The Company and Royal US currently expect to receive all such regulatory
approvals during the fourth quarter of 1999. However, there can be no assurance
that the required regulatory approvals described above will be received or, if
received, the timing and the terms and conditions thereof. The parties
currently expect that the expiration date of the Offer will be extended in
order to permit the parties to obtain all such regulatory approvals.
Federal Reserve Board Regulations. Regulations U and X (the "Margin
Regulations") of the Federal Reserve Board restrict the extension or
maintenance of credit for the purpose of buying or carrying margin stock,
including the Shares, if the credit is secured directly or indirectly by margin
stock. Such secured credit may not be extended or maintained in an amount that
exceeds the maximum loan value of all the direct and indirect collateral
securing the credit, including margin stock and other collateral. The Offer
will be funded by an unsecured loan. Accordingly, the Margin Regulations will
not apply to the funding of the Offer.
Stockholder Litigation Relating to the Offer.
Ellis Investments Ltd. v. Becker et al. On July 12, 1999, Ellis Investments
Ltd., individually and on behalf of all other stockholders of the Company
similarly situated, filed a purported class action complaint in the Court
32
<PAGE>
of Chancery of the State of Delaware in and for New Castle County against the
Company, each of the Company's directors, Royal plc and Royal USA, Inc. The
complaint alleges, among other things, that the defendants breached their
fiduciary duties to the Company and its stockholders by (i) not conducting an
auction or active market check designed to maximize stockholder value and (ii)
agreeing to the Stock Option Agreement. The complaint further alleges that
Royal plc and Royal USA, Inc. knowingly aided and abetted the alleged breaches
of fiduciary duties. The plaintiff seeks as relief, among other things, (i) an
order from the court (A) enjoining the Merger or (B) rescinding the Merger if
it is consummated and (ii) the awarding of unspecified monetary damages and
attorneys' fees and expenses. The defendants believe that the lawsuit is
without merit and intend to defend themselves vigorously.
William Steiner v. Becker et al. On July 13, 1999, William Steiner,
individually and on behalf of all other stockholders of the Company similarly
situated, filed a purported class action complaint in the Court of Chancery of
the State of Delaware in and for New Castle County against the Company, each of
the Company's directors, Royal plc and Royal USA, Inc. The complaint alleges,
among other things, that the defendants breached their fiduciary duties to the
Company and its stockholders by (i) not conducting an auction or other market
check designed to maximize stockholder value, (ii) agreeing to a $45 million
termination fee under certain circumstances in connection with the Merger
Agreement and (iii) agreeing to the Stock Option Agreement. The complaint
further alleges that Royal plc and Royal USA, Inc. knowingly aided and abetted
the alleged breaches of fiduciary duties. The plaintiff seeks as relief, among
other things, (i) an order from the court (A) enjoining the Merger, (B)
requiring the individual defendants to place the Company up for auction and/or
to conduct a market-check, and (C) rescinding the Merger if it is consummated
and (ii) the awarding of unspecified monetary damages and attorneys' fees and
expenses. The defendants believe that the lawsuit is without merit and intend
to defend themselves vigorously.
Paul Green v. Becker et al. On July 13, 1999, Paul Green, individually and on
behalf of all other stockholders of the Company similarly situated, filed a
purported class action complaint in the Court of Chancery of the State of
Delaware in and for New Castle County against the Company, each of the
Company's directors, Royal plc and Royal USA, Inc. The complaint alleges, among
other things, that the defendants breached their fiduciary duties to the
Company and its stockholders by (i) not conducting an auction or active market
check designed to maximize stockholder value for the change of control of the
Company and (ii) agreeing to the Stock Option Agreement. The complaint further
alleges that Royal plc and Royal USA, Inc. knowingly aided and abetted the
alleged breaches of fiduciary duties. The plaintiff seeks as relief, among
other things, (i) an order from the court requiring the individual defendants
to evaluate the Company's value and cooperate fully with any entity or person
having a bona fide interest in proposing any transaction which would maximize
stockholder value and (ii) the awarding of unspecified monetary damages and
attorneys' fees and expenses. The defendants believe that the lawsuit is
without merit and intend to defend themselves vigorously.
Linda Walker v. Becker et al. On July 14, 1999, Linda Walker, individually
and on behalf of all other stockholders of the Company similarly situated,
filed a purported class action complaint in the Court of Chancery of the State
of Delaware in and for New Castle County against the Company, each of the
Company's directors, Royal plc and Royal USA, Inc. The complaint alleges, among
other things, that the defendants breached their fiduciary duties to the
Company and its stockholders by (i) not conducting an auction or active market
check designed to maximize stockholder value for the change of control of the
Company and (ii) agreeing to the Stock Option Agreement. The complaint further
alleges that Royal plc and Royal USA, Inc. knowingly aided and abetted the
alleged breaches of fiduciary duties. The plaintiff seeks as relief, among
other things, (i) an order from the court (A) enjoining the Merger, and (B)
rescinding the Merger if it is consummated and (ii) the awarding of unspecified
monetary damages and attorneys' fees and expenses. The defendants believe that
the lawsuit is without merit and intend to defend themselves vigorously.
Rochelle Fishman v. Becker et al. On July 14, 1999, Rochelle Fishman,
individually and on behalf of all other stockholders of the Company similarly
situated, filed a purported class action complaint in the Court of Chancery of
the State of Delaware in and for New Castle County against the Company, each of
the Company's directors, Royal plc and Royal USA, Inc. The complaint alleges,
among other things, that the defendants
33
<PAGE>
breached their fiduciary duties to the Company and its stockholders by (i) not
conducting an auction or active market check designed to maximize stockholder
value for the change of control of the Company and (ii) agreeing to the Stock
Option Agreement. The complaint further alleges that Royal plc and Royal USA,
Inc. knowingly aided and abetted the alleged breaches of fiduciary duties. The
plaintiff seeks as relief, among other things, (i) an order from the court (A)
enjoining the Merger, and (B) rescinding the Merger if it is consummated and
(ii) the awarding of unspecified monetary damages and attorneys' fees and
expenses. The defendants believe that the lawsuit is without merit and intend
to defend themselves vigorously.
16. Fees and Expenses. Salomon Smith Barney Inc. ("Salomon Smith Barney") is
acting as Dealer Manager for the Offer and as exclusive financial advisor to
Royal USA, Inc. and its affiliates in connection with the proposed acquisition
of the Company, for which services Salomon Smith Barney will receive customary
compensation. Salomon Smith Barney and certain related parties will be
indemnified against certain liabilities, including liabilities under the
federal securities laws, arising out of Salomon Smith Barney's engagement. In
the ordinary course of business, Salomon Smith Barney and its affiliates may
actively trade or hold the securities of Royal plc and the Company for their
own account or for the account of customers and, accordingly, may at any time
hold long or short position in such securities.
Purchaser has retained Mackenzie Partners, Inc. to serve as the Information
Agent and Citibank N.A. to serve as the Depositary in connection with the
Offer. The Information Agent may contact holders of Shares by personal
interview, mail, telephone, telex, telegraph and other methods of electronic
communication and may request brokers, dealers, commercial banks, trust
companies and other nominees to forward the Offer materials to beneficial
holders. The Information Agent and the Depositary will each receive reasonable
and customary compensation for their services, be reimbursed for certain
reasonable out-of-pocket expenses and be indemnified against certain
liabilities in connection with their services, including certain liabilities
and expenses under the federal securities laws.
Except as set forth above, neither Purchaser nor Royal US will pay any fees
or commissions to any broker or dealer or other person or entity in connection
with the solicitation of tenders of Shares pursuant to the Offer. Brokers,
dealers, banks and trust companies will be reimbursed by Purchaser for
customary mailing and handling expenses incurred by them in forwarding the
Offer materials to their customers.
17. Miscellaneous. Purchaser is not aware of any state where the making of
the Offer is prohibited by administrative or judicial action pursuant to any
valid state statute. If Purchaser becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of the Shares pursuant
thereto, Purchaser shall make a good faith effort to comply with such statute
or seek to have such statute declared inapplicable to the Offer. If, after
such good faith effort, Purchaser cannot comply with such state statute, the
Offer will not be made to (nor will tenders be accepted from or on behalf of)
holders of Shares in such state.
No person has been authorized to give any information or to make any
representation on behalf of Purchaser or Royal US not contained herein or in
the Letter of Transmittal and, if given or made, such information or
representation must not be relied upon as having been authorized.
Purchaser and Royal US have filed with the SEC the Schedule 14D-1 pursuant
to Rule 14d-3 under the Exchange Act, together with exhibits, furnishing
certain additional information with respect to the Offer. In addition, the
Company has filed with the SEC the Schedule 14D-9 pursuant to Rule 14d-9 under
the Exchange Act, setting forth its recommendation with respect to the Offer
and the reasons for its recommendation and furnishing certain additional
related information. Such Schedules and any amendments thereto, including
exhibits, should be available for inspection and copies should be obtainable
in the same manner set forth in Section 9 of this Offer to Purchase (except
that such material will not be available at the regional offices of the SEC).
NTG Acquisition Corp.
July 16, 1999
34
<PAGE>
SCHEDULE I
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
OF PURCHASER, ROYAL US AND ROYAL PLC
1. NTG Acquisition Corp. The following table sets forth the name and present
principal occupation or employment, and material occupations, positions,
offices or employments for the past five years, of each director and executive
officer of Purchaser. Each such person is a citizen of the United States and
the business address of each such person is c/o Royal Group, Inc., 9300
Arrowpoint Boulevard, Charlotte, NC 28273. Unless otherwise indicated, each
occupation set forth opposite an individual's name refers to positions held
with Purchaser.
<TABLE>
<CAPTION>
Present Principal Occupation or Employment;
Name (Age) Material Positions Held During the Past Five Years
---------- ----------------------------------------------------
<S> <C>
Terry Broderick (54)...... Director and President 1999 to present. Director of
Royal USA, Inc. February 1997 to present. President
and Chief Operating Officer of Royal USA, Inc.
February 1998 to present, President of Royal US,
December 1997 to present. Director, Royal US, 1994
to present. Officer and Director of Royal US
insurance company subsidiaries 1993 to present.
Joseph Fisher (44)........ Director and Chief Financial Officer 1999 to
present. Director and Chief Financial Officer of
Royal USA, Inc. 1996 to present. Director and Chief
Financial Officer of Royal US 1996 to present.
Officer and Director of Royal US insurance and non-
insurance subsidiaries 1996 to present. Partner in
Coopers & Lybrand 1990 to 1995.
Ernest Frohboese (58)..... Director 1999 to present. Director Royal USA, Inc.
1994 to present. Director, Senior Vice President and
Chief Investment Officer of Royal US and affiliated
insurance and non-insurance subsidiaries 1999 to
present. 1990 to 1998 Senior Vice President, General
Reinsurance Corp.
Joyce Wheeler (47)........ Director 1999 to present. Director, Vice President
and Secretary of Royal USA, Inc. 1998 to present.
Director of Royal US from 1997 to present. General
Counsel, Vice President and Secretary of Royal US
1997 to present. Director and Officer of Royal
Group, Inc. insurance and non-insurance subsidiaries
1993 to present.
</TABLE>
2. Royal Group, Inc. The following table sets forth the name and present
principal occupation or employment, and material occupations, positions,
offices or employments for the past five years, of each director and executive
officer of Royal Group, Inc. Each such person is a citizen of the United
States. Unless otherwise indicated, the business address of each such person is
c/o Royal Group, Inc. 9300 Arrowpoint Boulevard, Charlotte, NC 28273. Unless
otherwise indicated, each occupation set forth opposite an individual's name
refers to positions held with Royal Group, Inc.
<TABLE>
<CAPTION>
Present Principal Occupation or Employment;
Name (Age) Material Positions Held During the Past Five Years
---------- ----------------------------------------------------
<S> <C>
Robert Mendelsohn (52)... Chairman of the Board and Chief Executive Officer of
Royal US 1994 to present. Chairman of the Board and
Chief Executive Officer of Royal USA, Inc. 1996 to
present. President and Chief Operating Officer of WR
Berkley Corporation 1990 to 1994.
Terry Broderick (54)..... Director 1994 to present. President of Royal US
December 1997 to present. Director Royal USA, Inc.
1997 to present and President 1998 to present.
Officer and Director of Royal Group, Inc. insurance
company subsidiaries 1993 to present.
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Present Principal Occupation or Employment;
Name (Age) Material Positions Held During the Past Five Years
---------- ----------------------------------------------------
<S> <C>
Joseph Fisher (44)....... Director and Chief Financial Officer of Royal US
1996 to present and of affiliated insurance and non-
insurance subsidiaries. Director and Chief Financial
Officer of Royal USA, Inc. 1996 to present. Partner
in Coopers & Lybrand 1990 to 1995.
Ernest Frohboese (58).... Director, Senior Vice President and Chief Investment
Officer of Royal US and affiliated insurance and
non-insurance subsidiaries January 1999 to present.
Director of Royal USA, Inc. January 1999 to present.
1990 to 1998 Senior Vice President, General
Reinsurance Corp.
Larry Simmons (50)....... Director of Royal US 1995 to present. Director of
Royal USA, Inc. 1997 to present. Director and Senior
Vice President of Royal US insurance and non-
insurance company subsidiaries 1993 to present.
Paul Stewman (57)........ Director of Royal US 1995 to present. Director of
Royal USA, Inc. 1997 to present. Senior Vice
President and Director of Royal US insurance and
non-insurance subsidiaries 1995 to present. Chairman
Personal Lines Insurance Brokerage (Chubb Corp.)
1994 to 1995.
Joyce Wheeler (47)....... Director of Royal US 1997 to present. Director, Vice
President and Secretary of Royal USA, Inc. 1997 to
present. General Counsel, Vice President and
Secretary of Royal US 1997 to present. Director and
Officer of Royal US insurance and non-insurance
subsidiaries 1993 to present.
</TABLE>
3. Royal & Sun Alliance Insurance Group plc The following table sets forth the
name and present principal occupation or employment, and material occupations,
positions, offices or employments for the past five years, of each director and
executive officer of Royal & Sun Alliance Insurance Group plc. Unless otherwise
indicated, each such person is a citizen of the United Kingdom and the business
address of each such person is c/o Royal & Sun Alliance Insurance Group plc 30
Berkeley Square, London, W1X 5HA, England. Unless otherwise indicated, each
occupation set forth opposite an individual's name refers to employment with
Royal & Sun Alliance Insurance Group plc.
<TABLE>
<CAPTION>
Present Principal Occupation or Employment;
Name (Age) Material Positions Held During the Past Five Years
---------- ----------------------------------------------------
<S> <C>
Sir Patrick Gillam (66)... Chairman. Director of Royal plc March 1997 to
present. Chairman of Standard Chartered plc 1993 to
present. Chairman of Asda Group 1991-96.
Anthony Forbes (61)....... Deputy Chairman. Director of Royal plc July 1996 to
present. Director of Royal Insurance 1994 to 1997.
Joint Senior Partner of Cazenove & Co. until March
1994. Director of Carlton Communications 1994 to
present. Director of The Merchants Trust 1994 to
present.
Robert Ayling (52)........ Director Royal plc 1996 to present. Director of Sun
Alliance Group plc from 1993 to 1996. Director
British Airways 1991 to present. Chief Executive of
British Airways 1996 to present. Group Managing
Director of British Airways 1993 to 1996. Chairman
of New Millennium Experience Company 1997 to
present.
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Present Principal Occupation or Employment;
Name (Age) Material Positions Held During the Past Five Years
---------- ----------------------------------------------------
<S> <C>
Carole St. Mark (56)..... Director of Royal plc September 1998 to present.
President and Chief Executive Officer of Growth
Management LLC from 1997 to present. President and
Chief Executive Officer of Pitney Bowes Business
Services 1994 to 1997. Director of Polaroid Corp.
SuperValu Inc. and Gerber Scientific Inc. Ms. St.
Mark is a citizen of the United States.
Jens-Erik Christensen Managing Director, Europe, Middle East & Africa 1998
(49).................... to present. Managing Director Codan 1999 to present.
General Manager of Codan 1993 to 1998. Mr.
Christensen is a Danish citizen.
Roderick P. Hoover, Jr. Royal plc Group Treasurer September 1998 to present.
(44).................... Vice President and Finance Officer of various US
insurance subsidiaries of Royal US 1990 to September
1998. Mr. Hoover is a citizen of the United States.
Richard Owen Hudson Group Director, Worldwide Commercial Practices,
(47).................... Royal plc February 1998 to present. Deputy Managing
Director, Global Risks Division, Royal plc, July
1996 to February 1998. Operations Director, Royal
Global October 1994 to 1996.
Ewoud Kulk (53).......... Group Director, Asia Pacific 1998 to present.
Managing Director Royal plc Australia 1994 to 1998.
Deputy Managing Director 1992 to 1994. Mr. Kulk is a
citizen of the Netherlands.
David Miller (47)........ Director, Legal & Secretarial of Royal plc February
1998 to present. Group Secretary Royal plc July 1996
to February 1998. Group Secretary of Sun Alliance
Group plc from July 1991 to July 1996.
Jan Miller (48).......... Director Financial Control 1998 to present; Group
Financial Controller of Royal plc and Royal
Insurance 1993 to present.
Syd Pennington (53)...... Group Director, Customers and People 1998 to
present. Managing Director 1996 to 1998. Managing
Director of The Insurance Service, the direct arm of
Royal Insurance 1994 to 1996.
John Baker (61).......... Director of Royal plc July 1996 to present. Director
of Royal Insurance from 1995 to 1997. Chairman of
Medeva 1998 to present. Chairman of National Power
until 1997.
Nicholas Barber (58)..... Director of Royal plc July 1996 to present. Director
of Royal Insurance 1991 to 1997. Director of
Albright & Wilson 1995 to present. Chief Executive
of Ocean Group 1980 to July 1994. Governor of the
London Business School 1992 to present.
Robert Gunn (54)......... Director of Royal plc June 1999 to present. Chief
Executive Officer and Group Director Americas, Royal
& Sun Alliance Insurance Company of Canada 1998 to
present. President and Chief Executive Officer of
Royal Insurance Company of Canada 1990 to 1998. Mr.
Gunn is a citizen of Canada.
Julian Hance (43)........ Director Royal plc 1998 to present. Group Finance
Director October 1998 to present. Finance Director
Life and Investments and Group Chief Accountant of
Sun Alliance Group plc.
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Present Principal Occupation or Employment;
Name (Age) Material Positions Held During the Past Five Years
---------- ----------------------------------------------------
<S> <C>
Thomas Arthur Hayes Director Royal plc 1996 to present. Director of Sun
(56)................... Alliance Group plc 1992 to 1996. Group Executive
Director 1994 to February 1998. Group Director,
Investment & Financial Services of Royal plc
February 1998 to present. Director of Thistle
Hotels.
Henry Keswick (60)...... Director Royal plc July 1996 to present. Director of
Sun Alliance Group plc 1975 to July 1996. Chairman
of Jardine Matheson Holdings Limited 1984 to
present. Director of Robert Fleming Holdings Limited
1975 to present. Director of Telegraph Group 1997 to
present.
Robert Mendelsohn (52).. Group Chief Executive and Director December 1997 to
present. Chairman of the Board and Chief Executive
Officer of Royal USA, Inc. 1996 to present. Chairman
of the Board and Chief Executive Officer of Royal US
1994 to present. President and Chief Operating
Officer of WR Berkley Corporation 1990 to 1994. Mr.
Mendelsohn is a citizen of the United States.
John Rowson (69)........ Director Royal plc July 1996 to present. Director of
Royal Insurance 1994 to 1997. Senior Partner of
Herbert Smith 1988 to 1993.
Paul Spencer (49)....... Director Royal plc 1996 to present. Chief Executive
UK October 1998 to present. Group Finance Director
of Royal Insurance and Royal plc 1996 to 1998.
Associate Director-Treasurer of Hanson 1986 to 1996.
</TABLE>
38
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each
stockholder of the Company or his broker, dealer, commercial bank, trust
company or other nominee to the Depositary, at the applicable address set forth
below:
The Depositary for the Offer is:
Citibank N.A.
By Overnight Courier Delivery:
Citibank N.A.
915 Broadway
5th Floor
New York, New York 10010
By Mail: Facsimile for Eligible By Hand:
Citibank N.A. Institutions: Citibank N.A.
P.O. Box 685 (212) 505-2248 Corporate Trust Window
Old Chelsea Station Facsimile Confirmation Only: 111 Wall Street 5th
New York, New York (800) 270-0808 Floor
10113 New York, New York
10043
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and
the other tender offer materials may be directed to the Information Agent at
the address and telephone number set forth below. Stockholders may also contact
their broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Offer.
The Information Agent for the Offer is:
MACKENZIE
PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
Call Toll-free: (800) 322-2885
------------
The Dealer Manager for the Offer is:
Salomon Smith Barney
388 Greenwich Street
New York, New York 10013
(212) 816-1057
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Exhibit (a)(2)
Letter of Transmittal
To Tender Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
of
Orion Capital Corporation
Pursuant to the Offer to Purchase
dated July 16, 1999
by
NTG Acquisition Corp.
an indirect wholly-owned subsidiary
of
Royal & Sun Alliance Insurance Group plc
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, AUGUST 12, 1999, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
Citibank N.A.
By Overnight Courier Delivery:
Citibank N.A.
915 Broadway
5th Floor
New York, New York 10010
By Mail: Facsimile for Eligible Institutions: By Hand:
Citibank N.A. (212) 505-2248 Citibank N.A.
P.O. Box 685 Facsimile Confirmation Only: Corporate Trust
Old Chelsea Station (800) 270-0808 Window
New York, New York 111 Wall Street 5th
10113 Floor
New York, New York
10043
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER
THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY TO THE
DEPOSITARY.
THE INSTRUCTIONS CONTAINED WITHIN THIS LETTER OF TRANSMITTAL SHOULD
BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used by stockholders of Orion Capital
Corporation if certificates for Shares (as such term is defined below) are to
be forwarded herewith or, unless an Agent's Message (as defined in Instruction
2 below) is utilized, if delivery of Shares is to be made by book-entry
transfer to an account maintained by the Depositary at the Book-Entry Transfer
Facility (as defined in and pursuant to the procedures set forth in Section 3
of the Offer to Purchase). Stockholders who deliver Shares by book-entry
transfer are referred to herein as "Book-Entry Stockholders" and other
stockholders who deliver Shares are referred to herein as "Certificate
Stockholders."
Stockholders whose certificates for Shares are not immediately available or who
cannot deliver either the certificates for, or a Book-Entry Confirmation (as
defined in Section 3 of the Offer to Purchase) with respect to, their Shares
and all other documents required hereby to the Depositary prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase) must tender
their Shares pursuant to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO
THE BOOK-ENTRY TRANSFER FACILITY WILL NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
<PAGE>
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
TO THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE
THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER FACILITY MAY
DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution _______________________________________________
Account Number _____________ Transaction Code Number _______________________
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s) ______________________________________________
Window Ticket Number (if any) _______________________________________________
Date of Execution of Notice of Guaranteed Delivery __________________________
Name of Institution that Guaranteed Delivery ________________________________
If delivered by Book-Entry Transfer, check box: [_]
Account Number ______________________________________________________________
Transaction Code Number _____________________________________________________
DESCRIPTION OF SHARES TENDERED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name(s) and Address(es) of Registered Holder(s) Shares Tendered
(Please fill in, if blank, as name(s) appear(s) on Share Certificate(s)) (Attach additional list if necessary)
- ------------------------------------------------------------------------------------------------------------------------------
Total Number
of Shares
Represented by
Certificate Certificate(s) Number of Shares
Number(s) (1) (1) Tendered (2)
---------------------------------------------
<S> <C> <C> <C>
--------------------------------
--------------------------------
--------------------------------
--------------------------------
- --------------------------------------------------
--------------------------------
Total Shares:
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Need not be completed by Book-Entry Stockholders.
(2) Unless otherwise indicated, it will be assumed that all Shares
represented by Share Certificates delivered to the Depositary are being
tendered hereby. See Instruction 4.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
<PAGE>
PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL
CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to NTG Acquisition Corp., a Delaware
corporation ("Purchaser") and an indirect wholly-owned subsidiary of Royal &
Sun Alliance Insurance Group plc, a public limited company organized under the
laws of England and Wales, the above described shares of common stock, par
value $1.00 per share (the "Common Stock"), including the associated preferred
stock purchase rights (the "Rights" and, together with the Common Stock, the
"Shares"), of Orion Capital Corporation, a Delaware corporation (the
"Company"), pursuant to Purchaser's offer to purchase all of the outstanding
Shares at a price of $50.00 per Share, net to the seller in cash, without
interest thereon (the "Offer Price"), upon the terms and subject to the
conditions set forth in the Offer to Purchase dated July 16, 1999 and in this
Letter of Transmittal (which, together with any amendments or supplements
thereto or hereto, collectively constitute the "Offer"). The Offer is being
made pursuant to an Agreement and Plan of Merger, dated as of July 12, 1999
(the "Merger Agreement"), by and between Purchaser and the Company. The
undersigned understands that Purchaser reserves the right to transfer or
assign, in whole at any time, or in part from time to time, to one or more of
its affiliates, the right to purchase all or any portion of the Shares
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve Purchaser of its obligations under the Offer and will in no way
prejudice the rights of tendering stockholders to receive payment for Shares
validly tendered and accepted for payment pursuant to the Offer. Receipt of
the Offer is hereby acknowledged.
The Company has distributed one Right for each outstanding Share pursuant to
the Rights Agreement (as defined in the Offer to Purchase). The Rights are
currently evidenced by and trade with certificates evidencing the Common
Stock. The Company has taken such action so as to make the Rights Agreement
inapplicable to Purchaser and its affiliates and associates in connection with
the transactions contemplated by the Merger Agreement.
Upon the terms and subject to the conditions of the Offer (and if the Offer
is extended or amended, the terms of any such extension or amendment), subject
to, and effective upon, acceptance for payment of, and payment for, the Shares
tendered herewith in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, Purchaser all
right, title and interest in and to all the Shares that are being tendered
hereby (and any and all non-cash dividends, distributions, rights, other
Shares or other securities issued or issuable in respect thereof on or after
July 12, 1999 (collectively, "Distributions")) and irrevocably constitutes and
appoints the Depositary the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Shares (and all Distributions), with full
power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to (i) deliver certificates for
such Shares (and any and all Distributions), or transfer ownership of such
Shares (and any and all Distributions) on the account books maintained by the
Book-Entry Transfer Facility, together, in any such case, with all
accompanying evidences of transfer and authenticity, to or upon the order of
Purchaser, (ii) present such Shares (and any and all Distributions) for
transfer on the books of the Company, and (iii) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Shares (and any
and all Distributions), all in accordance with the terms of the Offer.
By executing this Letter of Transmittal, the undersigned hereby irrevocably
appoints Terry Broderick and Joyce W. Wheeler in their respective capacities
as officers of Purchaser, and any individual who shall thereafter succeed to
any such office of Purchaser, and each of them, the attorneys-in-fact and
proxies of the undersigned, each with full power of substitution, to vote at
any annual or special meeting of the Company's stockholders or any adjournment
or postponement thereof or otherwise in such manner as each such attorney-in-
fact and proxy or his substitute shall in his sole discretion deem proper with
respect to, to execute any written consent concerning any matter as each such
attorney-in-fact and proxy or his substitute shall in his sole discretion deem
proper with respect to, and otherwise to act as each such attorney-in-fact and
proxy or his substitute shall in his sole discretion deem proper with respect
to, all of the Shares (and any and all Distributions) tendered hereby and
accepted for payment by Purchaser. This appointment will be effective if and
when, and only to the extent that, Purchaser accepts such Shares for payment
pursuant to the Offer. This power of attorney and proxy are irrevocable and
are granted in consideration of the acceptance for payment of such Shares in
accordance with the terms of the Offer. Such acceptance for payment shall,
without further action, revoke any prior powers of attorney and proxies
granted by the undersigned at any time with respect to such Shares (and any
and all Distributions), and no subsequent powers of attorney, proxies,
consents or revocations may be given by the undersigned with respect thereto
(and, if given, will not be deemed effective). Purchaser reserves the right to
require that, in order for Shares or other securities to be deemed validly
<PAGE>
tendered, immediately upon Purchaser's acceptance for payment of such Shares,
Purchaser must be able to exercise full voting, consent and other rights with
respect to such Shares (and any and all Distributions), including voting at
any meeting of the Company's stockholders.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby and all Distributions, that the undersigned owns the Shares tendered
hereby within the meaning of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), that the tender of the
tendered Shares complies with Rule 14e-4 under the Exchange Act, and that when
the same are accepted for payment by Purchaser, Purchaser will acquire good,
marketable and unencumbered title thereto and to all Distributions, free and
clear of all liens, restrictions, charges and encumbrances, and the same will
not be subject to any adverse claims. The undersigned will, upon request,
execute and deliver any additional documents deemed by the Depositary or
Purchaser to be necessary or desirable to complete the sale, assignment and
transfer of the Shares tendered hereby and all Distributions. In addition, the
undersigned shall remit and transfer promptly to the Depositary for the
account of Purchaser all Distributions in respect of the Shares tendered
hereby, accompanied by appropriate documentation of transfer, and, pending
such remittance and transfer or appropriate assurance thereof, Purchaser shall
be entitled to all rights and privileges as owner of each such Distribution
and may withhold the entire purchase price of the Shares tendered hereby or
deduct from such purchase price the amount or value of such Distribution as
determined by Purchaser in its sole discretion.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, executors, administrators, personal
representatives, trustees in bankruptcy, successors and assigns of the
undersigned. Except as stated in the Offer, this tender is irrevocable.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and in
the Instructions hereto will constitute a binding agreement between the
undersigned and Purchaser upon the terms and subject to the conditions of the
Offer (and if the Offer is extended or amended, the terms or conditions of any
such extension or amendment). Without limiting the foregoing, if the price to
be paid in the Offer is amended in accordance with the terms of the Merger
Agreement, the price to be paid to the undersigned will be the amended price
notwithstanding the fact that a different price is stated in this Letter of
Transmittal. The undersigned recognizes that, under certain circumstances set
forth in the Offer to Purchase, Purchaser may not be required to accept for
payment any of the Shares tendered hereby.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the purchase price of all Shares purchased and/or return
any certificates for Shares not tendered or accepted for payment in the
name(s) of the registered holder(s) appearing above under "Description of
Shares Tendered." Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail the check for the purchase price of all
Shares purchased and/or return any certificates for Shares not tendered or not
accepted for payment (and any accompanying documents, as appropriate) to the
address(es) of the registered holder(s) appearing above under "Description of
Shares Tendered." In the event that the boxes entitled "Special Payment
Instructions" and "Special Delivery Instructions" are both completed, please
issue the check for the purchase price of all Shares purchased and/or return
any certificates evidencing Shares not tendered or not accepted for payment
(and any accompanying documents, as appropriate) in the name(s) of, and
deliver such check and/or return any such certificates (and any accompanying
documents, as appropriate) to, the person(s) so indicated. Unless otherwise
indicated herein in the box entitled "Special Payment Instructions," please
credit any Shares tendered herewith by book-entry transfer that are not
accepted for payment by crediting the account at the Book-Entry Transfer
Facility designated above. The undersigned recognizes that Purchaser has no
obligation, pursuant to the "Special Payment Instructions," to transfer any
Shares from the name of the registered holder thereof if Purchaser does not
accept for payment any of the Shares so tendered.
[_] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN
HAVE BEEN LOST, DESTROYED OR STOLEN AND SEE INSTRUCTION 11.
Number of Shares represented by lost, destroyed or stolen certificates:
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the To be completed ONLY if
check for the purchase price of certificates for Shares not
Shares accepted for payment is to tendered or not accepted for
be issued in the name of someone payment and/or the check for the
other than the undersigned, if purchase price of Shares accepted
certificates for Shares not for payment is to be sent to
tendered or not accepted for someone other than the
payment are to be issued in the undersigned or to the undersigned
name of someone other than the at an address other than that
undersigned or if Shares tendered shown under "Description of
hereby and delivered by book- Shares Tendered."
entry transfer that are not
accepted for payment are to be Mail check and/or Share certifi-
returned by credit to an account cates to:
maintained at a Book-Entry
Transfer Facility other than the Name _____________________________
account indicated above. (Please Print)
Issue check and/or Share certifi- Address __________________________
cate(s) to:
__________________________________
Name _____________________________ (Include Zip Code)
(Please Print)
__________________________________
Address __________________________ (Taxpayer Identification or
Social Security Number)
__________________________________ (See Substitute Form W-9)
(Include Zip Code)
__________________________________
(Taxpayer Identification or
Social Security Number)
(See Substitute Form W-9)
[_] Credit Shares delivered by
book-entry transfer and not
purchased to the Book-Entry
Transfer Facility account.
__________________________________
(Account Number)
<PAGE>
SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
.......................................................
.......................................................
(Signature(s) of Stockholder(s))
Dated: ........................................... 1999
(Must be signed by registered holder(s) exactly as
name(s) appear(s) on the Share certificate(s) or on a
security position listing or by person(s) authorized
to become registered holder(s) by certificates and
documents transmitted herewith. If signature is by
trustee, executor, administrator, guardian, attorney-
in-fact, officer of a corporation or other person
acting in a fiduciary or representative capacity,
please provide the following information and see
Instruction 5.)
Name(s)................................................
................................................
(Please Print)
Name of Firm...........................................
Capacity (full title)..................................
(See Instruction 5)
Address................................................
................................................
(Include Zip Code)
Area Code and Telephone Number.........................
Taxpayer Identification or
Social Security Number.................................
(See Substitute Form W-9)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature...................................
Name(s)................................................
................................................
(Please Print)
Title..................................................
Name of Firm...........................................
Address................................................
................................................
(Include Zip Code)
Area Code and Telephone Number.........................
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this Section, includes any
participant in any of the Book-Entry Transfer Facility's systems whose name
appears on a security position listing as the owner of the Shares) of Shares
tendered herewith, unless such registered holder(s) has completed either the
box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on this Letter of Transmittal or (b) if such Shares are
tendered for the account of a financial institution (including most commercial
banks, savings and loan associations and brokerage houses) that is a
participant in the Security Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program (each, an "Eligible Institution"). In all other cases, all
signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Shares; Guaranteed Delivery
Procedures. This Letter of Transmittal is to be completed by stockholders of
the Company either if Share certificates are to be forwarded herewith or,
unless an Agent's Message is utilized, if delivery of Shares is to be made by
book-entry transfer pursuant to the procedures set forth herein and in Section
3 of the Offer to Purchase. For a stockholder validly to tender Shares
pursuant to the Offer, either (a) a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), together with any required
signature guarantees or an Agent's Message (in connection with book-entry
transfer) and any other required documents, must be received by the Depositary
at one of its addresses set forth herein prior to the Expiration Date and
either (i) certificates for tendered Shares must be received by the Depositary
at one of such addresses prior to the Expiration Date or (ii) Shares must be
delivered pursuant to the procedures for book-entry transfer set forth herein
and in Section 3 of the Offer to Purchase and a Book-Entry Confirmation must
be received by the Depositary prior to the Expiration Date or (b) the
tendering stockholder must comply with the guaranteed delivery procedures set
forth herein and in Section 3 of the Offer to Purchase.
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver their certificates and all other required documents to the
Depositary prior to the Expiration Date or who cannot comply with the book-
entry transfer procedures on a timely basis may tender their Shares by
properly completing and duly executing the Notice of Guaranteed Delivery
pursuant to the guaranteed delivery procedure set forth herein and in Section
3 of the Offer to Purchase.
Pursuant to such guaranteed delivery procedures, (i) such tender must be
made by or through an Eligible Institution, (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form provided by
Purchaser, must be received by the Depositary prior to the Expiration Date and
(iii) the certificates for all tendered Shares, in proper form for transfer
(or a Book-Entry Confirmation with respect to all tendered Shares), together
with a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof), with any required signature guarantees, or, in the case of
a book-entry transfer, an Agent's Message, and any other required documents
must be received by the Depositary within three trading days after the date of
execution of such Notice of Guaranteed Delivery. A "trading day" is any day on
which the New York Stock Exchange is open for business.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that
Purchaser may enforce such agreement against the participant.
The signatures on this Letter of Transmittal cover the Shares tendered
hereby.
THE METHOD OF DELIVERY OF THE SHARES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. THE SHARES
WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION).
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE TIMELY DELIVERY.
<PAGE>
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. All tendering stockholders, by executing
this Letter of Transmittal (or facsimile thereof), waive any right to receive
any notice of acceptance of their Shares for payment.
3. Inadequate Space. If the space provided herein under "Description of
Shares Tendered" is inadequate, the number of Shares tendered and the Share
certificate numbers with respect to such Shares should be listed on a separate
signed schedule attached hereto.
4. Partial Tenders. (Not applicable to stockholders who tender by book-entry
transfer). If fewer than all the Shares evidenced by any Share certificate
delivered to the Depositary herewith are to be tendered hereby, fill in the
number of Shares that are to be tendered in the box entitled "Number of Shares
Tendered." In any such case, new certificate(s) for the remainder of the
Shares that were evidenced by the old certificates will be sent to the
registered holder, unless otherwise provided in the appropriate box on this
Letter of Transmittal, as soon as practicable after the Expiration Date or the
termination of the Offer. All Shares represented by certificates delivered to
the Depositary will be deemed to have been tendered unless otherwise
indicated.
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written
on the face of the certificate(s) without alteration, enlargement or any
change whatsoever.
If any of the Shares tendered hereby are held of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any Share certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, such person should so indicate when signing, and
proper evidence satisfactory to Purchaser of the authority of such person so
to act must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of Share certificates or
separate stock powers are required unless payment or certificates for Shares
not tendered or not accepted for payment are to be issued in the name of a
person other than the registered holder(s). Signatures on any such Share
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares evidenced by certificates listed and
transmitted hereby, the Share certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on the Share certificates. Signature(s) on any
such Share certificates or stock powers must be guaranteed by an Eligible
Institution.
6. Stock Transfer Taxes. Except as otherwise provided in this Instruction 6,
Purchaser will pay all stock transfer taxes with respect to the transfer and
sale of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or if
certificates for Shares not tendered or not accepted for payment are to be
registered in the name of, any person other than the registered holder(s), or
if tendered certificates are registered in the name of any person other than
the person(s) signing this Letter of Transmittal, the amount of any stock
transfer taxes (whether imposed on the registered holder(s) or such other
person) payable on account of the transfer to such other person will be
deducted from the purchase price of such Shares purchased unless evidence
satisfactory to Purchaser of the payment of such taxes, or exemption
therefrom, is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Share certificates evidencing the
Shares tendered hereby.
<PAGE>
7. Special Payment and Delivery Instructions. If a check for the purchase
price of any Shares accepted for payment is to be issued in the name of,
and/or Share certificates for Shares not accepted for payment or not tendered
are to be issued in the name of and/or returned to, a person other than the
signer of this Letter of Transmittal or if a check is to be sent, and/or such
certificates are to be returned, to a person other than the signer of this
Letter of Transmittal, or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed. Any
stockholder(s) delivering Shares by book-entry transfer may request that
Shares not purchased be credited to such account maintained at the Book-Entry
Transfer Facility as such stockholder(s) may designate in the box entitled
"Special Payment Instructions." If no such instructions are given, any such
Shares not purchased will be returned by crediting the account at the Book-
Entry Transfer Facility designated above as the account from which such Shares
were delivered.
8. Requests for Assistance or Additional Copies. Questions and requests for
assistance or additional copies of the Offer to Purchase, this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the Information Agent at its address and phone number set forth
below, or from brokers, dealers, commercial banks or trust companies.
9. Waiver of Conditions. Subject to the Merger Agreement, Purchaser reserves
the absolute right in its sole discretion to waive, at any time or from time
to time, any of the specified conditions of the Offer, in whole or in part, in
the case of any Shares tendered.
10. Backup Withholding. In order to avoid "backup withholding" of federal
income tax on payments of cash pursuant to the Offer, a stockholder
surrendering Shares in the Offer must, unless an exemption applies, provide
the Depositary with such stockholder's correct taxpayer identification number
("TIN") on Substitute Form W-9 in this Letter of Transmittal and certify,
under penalties of perjury, that such TIN is correct and that such stockholder
is not subject to backup withholding.
Backup withholding is not an additional income tax. Rather, the amount of
the backup withholding can be credited against the federal income tax
liability of the person subject to the backup withholding, provided that the
required information is given to the Internal Revenue Service. If backup
withholding results in an overpayment of tax, a refund can be obtained by the
stockholder upon filing an income tax return.
The stockholder is required to give the Depositary the TIN (i.e., social
security number or employer identification number) of the record owner of the
Shares. If the Shares are held in more than one name or are not in the name of
the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
Certain stockholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign stockholders should complete and sign the main signature
form and a Form W-8, Certificate of Foreign Status, a copy of which may be
obtained from the Depositary, in order to avoid backup withholding. See the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for more instructions.
11. Lost, Destroyed or Stolen Share Certificates. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary by checking the box immediately preceding the
special payment/special delivery instructions and indicating the number of
Shares lost. The stockholder will then be instructed as to the steps that must
be taken in order to replace the Share certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Share certificates have been followed.
<PAGE>
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF) TOGETHER WITH
ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER,
AN AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE AND EITHER CERTIFICATES FOR TENDERED
SHARES MUST BE RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED PURSUANT
TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE PRIOR TO THE
EXPIRATION DATE, OR THE TENDERING STOCKHOLDER MUST COMPLY WITH THE PROCEDURES
FOR GUARANTEED DELIVERY.
IMPORTANT TAX INFORMATION
Under Federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary (as payer) with
such stockholder's correct taxpayer identification number on Substitute Form
W-9 below. If such stockholder is an individual, the taxpayer identification
number is his social security number. If a tendering stockholder is subject to
backup withholding, such stockholder must cross out item (2) of the
Certification box on the Substitute Form W-9. If the Depositary is not
provided with the correct taxpayer identification number, the stockholder may
be subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, payments that are made to such stockholder with respect to Shares
purchased pursuant to the Offer may be subject to backup withholding.
Certain stockholders (including, among others, all corporations, and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Such statements can be
obtained from the Depositary. Exempt stockholders, other than foreign
individuals, should furnish their TIN, write "Exempt" on the face of the
Substitute Form W-9 below, and sign, date and return the Substitute Form W-9
to the Depositary. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will
be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained from the Internal Revenue
Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct taxpayer
identification number by completing the form contained herein certifying that
the taxpayer identification number provided on Substitute Form W-9 is correct
(or that such stockholder is awaiting a taxpayer identification number).
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares. If
the Shares are in more than one name or are not in the name of the actual
owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidance on which
number to report. If the tendering stockholder has not been issued a TIN and
has applied for a number or intends to apply for a number in the near future,
such stockholder should write "Applied For" in the space provided for in the
TIN in Part 1, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within sixty
(60) days, the Depositary will withhold 31% on all payments of the purchase
price until a TIN is provided to the Depositary.
<PAGE>
PAYER'S NAME: CITIBANK N.A.
PART 1--PLEASE PROVIDE Social Security Number
SUBSTITUTE YOUR TIN IN THE BOX AT (If awaiting TIN write
Form W-9 RIGHT AND CERTIFY BY "Applied For")
SIGNING AND DATING BELOW ---------------------
Employer Identification
Number
(If awaiting TIN write
"Applied For")
---------------------
---------------------------------------------------------
PART 2--CERTIFICATE--Under penalties of perjury,
Department of I certify that: (1) The number shown on this form
Treasury is my correct Taxpayer Identification Number (or
Internal I am waiting for a number to be issued for me),
Revenue and (2) I am not subject to backup withholding
Service because: (a) I am exempt from backup withholding,
or (b) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to
backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to
backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out
item (2) above if you have been notified by the
IRS that you are currently subject to backup
withholding because of under-reporting interest
or dividends on your tax returns. However, if
after being notified by the IRS that you are
subject to backup withholding, you receive
another notification from the IRS that you are no
Payers Request for longer subject to backup withholding, do not
Tax Identification cross out such item (2). (Also see instructions
Number (TIN) in the enclosed Guidelines).
Signature: __________________________ Date: ______
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY CASH PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF THE SUBSTITUTE FORM W-9.
<PAGE>
Questions and requests for assistance or additional copies of the Offer to
Purchase, this Letter of Transmittal and other tender offer materials may be
directed to the Information Agent at its address and telephone number set forth
below:
The Information Agent for the Offer is:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
Call Toll-Free (800) 322-2885
---------------
The Dealer Manager for the Offer is:
Salomon Smith Barney
388 Greenwich Street
New York, New York 10013
(212) 816-1057
<PAGE>
Exhibit (a)(3)
Notice of Guaranteed Delivery
for
Tender of Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
of
Orion Capital Corporation
to
NTG Acquisition Corp.
an indirect wholly-owned subsidiary
of
Royal & Sun Alliance Insurance Group plc
(Not to be used for Signature Guarantees)
This Notice of Guaranteed Delivery, or a form substantially equivalent
hereto, must be used to accept the Offer (as defined below) if certificates
representing shares of Common Stock, par value $1.00 per share (the "Common
Stock"), including the associated preferred stock purchase rights (the
"Rights" and, together with the Common Stock, the "Shares"), of Orion Capital
Corporation, a Delaware corporation, are not immediately available, if the
procedure for book-entry transfer cannot be completed prior to the Expiration
Date (as defined in Section 1 of the Offer to Purchase), or if time will not
permit all required documents to reach the Depositary prior to the Expiration
Date. Such form may be delivered by hand, transmitted by facsimile
transmission or mailed to the Depositary. See Section 3 of the Offer to
Purchase.
The Depositary for the Offer is:
Citibank N.A.
By Overnight Courier Delivery:
Citibank N.A.
915 Broadway
5th Floor
New York, New York 10010
By Mail: Facsimile for Eligible By Hand:
Citibank N.A. Institutions: Citibank N.A.
P.O. Box 685 (212) 505-2248 Corporate Trust Window
Old Chelsea Station Facsimile Confirmation Only: 111 Wall Street 5th
New York, New York 10113 (800) 270-0808 Floor
New York, New York 10043
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE NUMBER OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE
INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST
APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF
TRANSMITTAL.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to NTG Acquisition Corp., a Delaware
corporation ("Purchaser") and an indirect wholly-owned subsidiary of Royal &
Sun Alliance Insurance Group plc, a public limited company organized under the
laws of England and Wales ("Royal plc"), upon the terms and subject to the
conditions set forth in the Offer to Purchase dated July 16, 1999 and the
related Letter of Transmittal, receipt of which is hereby acknowledged, the
number of shares set forth below of the common stock, par value $1.00 per
share (the "Common Stock"), including the associated preferred stock purchase
rights (the "Rights" and, together with the Common Stock, the "Shares"), of
Orion Capital Corporation, a Delaware corporation, pursuant to the guaranteed
delivery procedures set forth in Section 3 of the Offer to Purchase.
Number of Shares: Name(s) of Record Holder(s):
_____________________________________ _____________________________________
_____________________________________ _____________________________________
(Please Print)
Certificate Nos. (if available):
_____________________________________ Address(es): ________________________
Check box if Shares will be tendered _____________________________________
by book-entry transfer: [_] (Zip Code)
Area Code and Tel. No.: _____________
Account Number: _____________________
Dated: ____________, 1999 Signature(s): _______________________
_____________________________________
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
The undersigned, a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program, guarantees to deliver to the Depositary
either certificates representing the Shares tendered hereby, in proper form
for transfer, or confirmation of book-entry transfer of such Shares into the
Depositary's accounts maintained at one of the Book-Entry Transfer Facilities
(as defined in the Offer to Purchase), in each case with delivery of a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, or an Agent's Message, and
any other documents required by the Letter of Transmittal, within three (3)
trading days (as defined in the Offer to Purchase) after the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible
Institution.
_____________________________________ _____________________________________
Name of Firm Authorized Signature
_____________________________________ Name: _______________________________
Address Please Print
_____________________________________ _____________________________________
Zip Code Title
Area Code and Tel. No.: _____________ Dated: ____________, 1999
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES
SHOULD BE SENT ONLY WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
Exhibit (a)(4)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
of
Orion Capital Corporation
by
NTG Acquisition Corp.
an indirect wholly-owned subsidiary
of
Royal & Sun Alliance Insurance Group plc
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, AUGUST 12, 1999, UNLESS THE OFFER IS EXTENDED.
July 16, 1999
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by NTG Acquisition Sub, Inc. ("Purchaser"), a
Delaware corporation and an indirect wholly-owned subsidiary of Royal & Sun
Alliance Insurance Group plc, a public limited company organized under the
laws of England and Wales, to act as Dealer Manager in connection with
Purchaser's offer to purchase all outstanding shares of common stock, par
value $1.00 per share (the "Common Stock"), including the associated preferred
stock purchase rights (the "Rights" and, together with the Common Stock, the
"Shares"), of Orion Capital Corporation, a Delaware corporation (the
"Company"), at $50.00 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated July 16,
1999 (the "Offer to Purchase") and in the related Letter of Transmittal
(which, together with any amendments or supplements thereto, constitute the
"Offer") enclosed herewith. Please furnish copies of the enclosed materials to
those of your clients for whose accounts you hold Shares registered in your
name or in the name of your nominee.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE OF THE OFFER (AS
DEFINED IN THE OFFER TO PURCHASE) THAT NUMBER OF SHARES WHICH REPRESENTS AT
LEAST A MAJORITY OF THE TOTAL NUMBER OF SHARES OUTSTANDING ON A FULLY DILUTED
BASIS ON THE DATE SHARES ARE ACCEPTED FOR PAYMENT. THE OFFER ALSO IS SUBJECT
TO THE OTHER CONDITIONS SET FORTH IN THE OFFER TO PURCHASE INCLUDING THE
CONSENT OF CERTAIN STATE INSURANCE REGULATORY AUTHORITIES WHICH ARE NOT
EXPECTED TO BE RECEIVED UNTIL THE FOURTH QUARTER OF 1999. THE PARTIES EXPECT
THAT THE EXPIRATION DATE WILL BE EXTENDED IN ORDER TO PERMIT THE PARTIES TO
OBTAIN SUCH CONSENTS. SEE SECTIONS 11, 14 AND 15 OF THE OFFER TO PURCHASE.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are
enclosing the following documents:
1. Offer to Purchase dated July 16, 1999;
<PAGE>
2. Letter of Transmittal for your use in accepting the Offer and tendering
Shares and for the information of your clients. Facsimile copies of the
Letter of Transmittal may be used to tender Shares;
3. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares and all other required documents cannot be
delivered to the Depositary, or if the procedures for book-entry
transfer cannot be completed on a timely basis, prior to the expiration
of the Offer;
4. A letter which may be sent to your clients for whose accounts you hold
Shares registered in your name or in the name of your nominee, with
space provided for obtaining such clients' instructions with regard to
the Offer;
5. A letter to stockholders of the Company from W. Marston Becker, Chief
Executive Officer and Chairman of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 dated July 16,
1999, which has been filed by the Company with the Securities and
Exchange Commission;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. A return envelope addressed to Citibank N.A. (the "Depositary").
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and pay for Shares which are
validly tendered prior to the Expiration Date and not theretofore properly
withdrawn when, as and if Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance of such Shares for payment pursuant to
the Offer. Payment for Shares purchased pursuant to the Offer will in all
cases be made only after timely receipt by the Depositary of (i) certificates
for such Shares, or timely confirmation of a book-entry transfer of such
Shares into the Depositary's account maintained at one of the Book-Entry
Transfer Facilities (as defined in the Offer to Purchase), pursuant to the
procedures described in Section 3 of the Offer to Purchase, (ii) a properly
completed and duly executed Letter of Transmittal (or a properly completed and
manually signed facsimile thereof) or an Agent's Message (as defined in the
Offer to Purchase) in connection with a book-entry transfer and (iii) all
other documents required by the Letter of Transmittal.
Purchaser will not pay any fees or commissions to any broker or dealer or
other person (other than the Dealer Manager, the Depositary and the
Information Agent as described in the Offer to Purchase) for soliciting
tenders of Shares pursuant to the Offer. Purchaser will, however, upon
request, reimburse brokers, dealers, commercial banks and trust companies for
customary mailing and handling costs incurred by them in forwarding the
enclosed materials to their customers.
Purchaser will pay or cause to be paid all stock transfer taxes applicable
to its purchase of Shares pursuant to the Offer, subject to Instruction 6 of
the Letter of Transmittal.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, AUGUST 12, 1999, UNLESS THE OFFER IS EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's Message in connection with a book-entry
transfer of Shares, and any other required documents, should be sent to the
Depositary, and certificates representing the tendered Shares should be
delivered or such Shares should be tendered by book-entry transfer, all in
accordance with the Instructions set forth in the Letter of Transmittal and in
the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents or to complete the
procedures for delivery by book-entry transfer prior to the Expiration Date of
the Offer, a tender may be effected by following the guaranteed delivery
procedures specified in Section 3 of the Offer to Purchase.
2
<PAGE>
Any inquiries you may have with respect to the Offer should be addressed to
the Information Agent or the Dealer Manager, and additional copies of the
enclosed materials may be obtained from the Information Agent at the
respective addresses and telephone numbers set forth on the back cover of the
Offer to Purchase.
Very truly yours,
Salomon Smith Barney Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF PURCHASER, THE COMPANY, THE INFORMATION
AGENT, THE DEPOSITARY, OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE
YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF
ANY OF THEM IN CONNECTION WITH THE OFFER, OTHER THAN THE DOCUMENTS ENCLOSED
HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE>
Exhibit (a)(5)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
of
Orion Capital Corporation
at
$50.00 net per share
by
NTG Acquisition Corp.
an indirect wholly-owned subsidiary
of
Royal & Sun Alliance Insurance Group plc
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, AUGUST 12, 1999, UNLESS THE OFFER IS EXTENDED.
July 16, 1999
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated July 16,
1999 and the related Letter of Transmittal (which, together with any
amendments or supplements thereto, constitute the "Offer") in connection with
the offer by NTG Acquisition Corp. ("Purchaser"), a Delaware corporation and
an indirect wholly-owned subsidiary of Royal & Sun Alliance Group plc, a
public limited company organized under the laws of England and Wales, to
purchase for cash all outstanding shares of common stock, par value $1.00 per
share (the "Common Stock"), including the associated preferred stock purchase
rights (the "Rights" and, together with the Common Stock, the "Shares"), of
Orion Capital Corporation, a Delaware corporation (the "Company"). We are the
holder of record of Shares held for your account. A tender of such Shares can
be made only by us as the holder of record and pursuant to your instructions.
The enclosed Letter of Transmittal is furnished to you for your information
only and cannot be used by you to tender Shares held by us for your account.
We request instructions as to whether you wish us to tender any or all of
the Shares held by us for your account, upon the terms and subject to the
conditions set forth in the Offer.
Your attention is invited to the following:
1. The Offer price is $50.00 per Share, net to you in cash without
interest.
2. The Offer is being made for all outstanding Shares.
3. The Board of Directors of the Company has unanimously approved the
Merger Agreement (as defined in the Offer to Purchase) and the
transactions contemplated thereby, including the Offer and the Merger
(as defined in the Offer to Purchase), and has unanimously determined
that the Offer and the Merger
<PAGE>
are fair to, and in the best interests of, the Company's stockholders
and unanimously recommends that the stockholders accept the Offer and
tender their Shares pursuant to the Offer.
4. The Offer and withdrawal rights expire at 12:00 Midnight, New York City
time, on Thursday, August 12, 1999, unless the Offer is extended.
5. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the Expiration Date of the Offer (as
defined in the Offer to Purchase) that number of Shares which represents
at least a majority of the Shares outstanding on the date Shares are
accepted for payment. The Offer is also subject to the other conditions
set forth in the Offer to Purchase including the consent of certain
state insurance regulatory authorities which are not expected to be
received until the fourth quarter of 1999. The parties expect that the
Expiration Date will be extended in order to permit the parties to
obtain consents. See Sections 11, 14 and 15 of the Offer to Purchase.
6. Any stock transfer taxes applicable to the sale of Shares to Purchaser
pursuant to the Offer will be paid by Purchaser, except as otherwise
provided in Instruction 6 of the Letter of Transmittal.
Purchaser is not aware of any state in which the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. In any jurisdiction in which the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of Purchaser by one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form set forth
on the reverse side of this letter. An envelope to return your instructions to
us is enclosed. If you authorize the tender of your Shares, all such Shares
will be tendered unless otherwise specified on the reverse side of this
letter. Your instructions should be forwarded to us in ample time to permit us
to submit a tender on your behalf prior to the expiration of the Offer.
2
<PAGE>
Instructions with Respect to the Offer to Purchase for Cash
All of the Outstanding Shares of Common Stock
of
Orion Capital Corporation
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated July 16, 1999 and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, constitute the "Offer")
in connection with the offer by NTG Acquisition Corp., a Delaware corporation
and an indirect wholly-owned subsidiary of Royal & Sun Alliance Insurance
Group plc, a public limited company organized under the laws of England and
Wales, to purchase all outstanding shares of common stock, par value $1.00 per
share (the "Common Stock"), including the associated preferred stock purchase
rights (the "Rights" and, together with the Common Stock, the "Shares"), of
Orion Capital Corporation, a Delaware corporation.
This will instruct you to tender the number of Shares indicated below (or if
no number is indicated below, all Shares) held by you for the account of the
undersigned, upon the terms and subject to the conditions set forth in the
Offer.
Number of Shares to be Tendered:
_____________________________ Shares*
Dated: ________________________, 1999
_____________________________________
_____________________________________
Signature(s)
_____________________________________
Print name(s)
_____________________________________
Address(es)
_____________________________________
Area Code and telephone number
_____________________________________
Tax ID or social security number
- --------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
3
<PAGE>
Exhibit (a)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the
Payer -- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
- ---------------------------------------------
Give the name and
Social Security
For this type of account: number of:
- ---------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, any one
of the
individuals(1)
3. Husband and wife (joint The actual owner
account) of the account
or, if joint
funds, either
person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if
account) the minor is the
only
contributor, the
minor(3)
6. Account in the name of The ward, minor,
guardian or committee or incompetent
for a designated ward, person(4)
minor, or incompetent
person
7.a. The usual revocable The grantor
savings trust account trustee(3)
(grantor is also
trustee)
b. So-called trust account The actual
that is not a legal or owner(3)
valid trust under State
law
- ---------------------------------------------
- ---------------------------------------------
Give the name and
Employer
Identification
For this type of account: number of:
- ---------------------------------------------
8. Sole proprietorship The owner(5)
account
9. A valid trust, estate, The legal entity
or pension trust (Do not furnish
the identifying
number of the
personal
representative
or trustee
unless the legal
entity itself is
not designated
in the account
title.)(3)
10. Corporate account The corporation
11. Religious, charitable, The organization
or educational
organization account
12. Partnership account The partnership
held in the name of
the business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or
nominee nominee
15. Account with the The public
Department of entity
Agriculture in the
name of a public
entity (such as a
State or local
government, school
district, or prison)
that receives
agricultural program
payments
- ---------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) List first and circle the name of the legal trust, estate, or pension
trust.
(4) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(5) Show the name of the owner.
Note: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Obtaining a Number
If you don't have a TIN or you don't know your number, obtain Internal Revenue
Service Form SS-5, Application for a Social Security Number Card, or Form SS-
4, Application for Employer identification Number, at your local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
Payees Exempt from Backup Withholding
Payees specifically exempted from backup withholding on ALL payments include
the following:
(1) A corporation.
(2) A financial institution.
(3) An organization exempt from tax under section 501(a) or an individual
retirement plan.
(4) The United States or any agency or instrumentality thereof.
(5) A State, the District of Columbia, a possession of the United States,
or any subdivision or instrumentality thereof.
(6) A foreign government, a political subdivision of a foreign government,
or any agency or instrumentality thereof.
(7) An international organization or any agency, or instrumentality
thereof.
(8) A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
(9) A real estate investment trust.
(10) A common trust fund operated by a bank under section 584(a).
(11) An exempt charitable remainder trust, or a non-exempt trust described
in section 4947(a)(1).
(12) An entity registered at all times under the Investment Company Act of
1940.
(13) A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
. Payments of interest not generally subject to backup withholding include
the following:
. Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain in foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT
TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
Privacy Act Notice--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish
a taxpayer identification number to a payer. Certain penalties may also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number.--If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) Failure to Report Certain Dividend and Interest Payments.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and
convincing evidence to the contrary.
(3) Civil Penalty for False Information With Respect To Withholding.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) Criminal Penalty for Falsifying Information.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
Exhibit (a)(7)
For Orion Capital For Royal & SunAlliance
Investors: Jeanne Hotchkiss Media: Libby McLaughlin
Farmington, CT Charlotte, NC 28273
860-674-6754 (704) 522-3064
Media: Dawn Dover, Kekst and Co.
New York, New York
212-521-4817
FOR IMMEDIATE RELEASE
ROYAL & SUN ALLIANCE INSURANCE GROUP plc to ACQUIRE
ORION CAPITAL CORPORATION
(July 12, 1999) -- Royal & Sun Alliance Insurance Group plc, London, and Orion
Capital Corporation (NYSE:OC), Farmington, CT, today announced that Orion and a
wholly-owned US subsidiary of Royal & Sun Alliance have signed a definitive
agreement providing for the acquisition of Orion Capital for $50 per Orion share
in cash, or approximately $1.4 billion. The $50 per share price represents a 23%
premium on Orion's Friday closing price and a 65% premium from the share price
one month ago.
The transaction has been unanimously approved by the boards of both companies.
Pursuant to the terms of the agreement, a wholly owned subsidiary of Royal &
SunAlliance USA, will, within five business days, commence an offer to purchase
any and all outstanding shares of Orion's common stock. Due to the need for
insurance regulatory approvals, it is not expected that the tender offer will be
completed until the fourth quarter of 1999.
Royal & SunAlliance's tender offer will be conditioned on the tender of at least
a majority of Orion's outstanding shares. Consummation of the tender offer will
be subject to the expiration or termination of any applicable antitrust waiting
period, the receipt of any required regulatory approvals and customary
conditions. Following the tender offer the acquisition of Orion will be
completed by merging it with a subsidiary of Royal & SunAlliance USA, and all of
Orion's shares not owned by Royal & SunAlliance will be converted into the right
to receive $50 per share in cash. The merger agreement provides for the payment
to Royal & SunAlliance of a fee of $45 million if the merger agreement is
terminated in certain circumstances. Orion has also granted to Royal &
SunAlliance an option to purchase up to 19.9% of Orion's shares, exercisable
under the same circumstances.
Robert V. Mendelsohn, Group Chief Executive of Royal & Sun Alliance Insurance
Group plc, said from London: "The addition of Orion's distinctive specialty
franchises and the complementary nature of the respective product and skill
portfolios of our companies create broad product line potential and revenue
synergies. This transaction effectively doubles the size of Royal & SunAlliance
USA. Together, the combined 1998 net written premium would
-more-
<PAGE>
have been $3.0 billion, placing the company among the top 25 US property and
casualty insurers, and the 13th largest US commercial carrier. The case for the
combination of Royal & SunAlliance and Orion is a compelling one that we believe
both the capital and insurance markets will immediately recognize and rightly
reward."
W. Marston Becker, Orion Capital's Chairman and CEO, said: "Orion Capital has
built strong franchises and market leadership positions in our core specialty
businesses. This merger provides our shareholders with solid value for their
investments and enables our businesses to gain access to a broad range of
products that will further enhance their importance to customers and agents.
This is the catalyst that will take our specialty operations to a new level.
Equally important, Orion's organizational skills, products and specialty
expertise will support Royal & SunAlliance's course toward industry leadership."
Becker will join the Royal & SunAlliance USA Strategic Leadership Team.
Terry Broderick, Royal & SunAlliance USA President, added: "This is a bold and
exciting move for both companies. Importantly, our cultures are very compatible
and customer focused. At Royal & SunAlliance, we view industry leadership as
the best people, customers, products, and financial results. Orion has excelled
at identifying customer needs in specialized market segments and has responded
with exciting and innovative products. The combined leadership uniquely
positions the new enterprise to deliver high value to customers, making it a
powerful force in the marketplace. The resulting strong core commercial,
personal and specialty product platform will allow us to take full advantage of
the current and future changes in our industry."
Following the close of the transaction, Royal & SunAlliance will maintain the
Orion brands and operate three major divisions: commercial, personal and
specialty. The Commercial Insurance division will include Royal & SunAlliance's
retail branches and Orion's EBI Companies. OrionAuto will join the Personal
Insurance division.
Becker will lead the Specialty Insurance division. Under his direction, Royal &
SunAlliance will expand its existing platform of specialty products, further
complementing the company's core commercial insurance business, both
domestically and internationally. The Specialty Insurance division will be
headquartered in Farmington, CT, and will continue to have specialty operations
throughout the US.
Orion Capital is a leader in the specialty property and casualty insurance
business through wholly owned subsidiaries operating in three focused segments:
nonstandard personal automobile insurance through OrionAuto, workers
compensation through EBI Companies and specialty commercial insurance through
Orion Specialty, which includes DPIC Companies.
-more-
-2-
<PAGE>
Royal & SunAlliance USA, Inc. is part of Royal & Sun Alliance Insurance Group
plc which operates in over 55 countries worldwide and transacts business in over
130 countries. Worldwide net premium income in 1998 was $16 billion with total
assets over $100 billion. The company is listed on the London Stock Exchange
(RSA.L) and has a Level 1 American Depositary Receipt Program (RSAIY).
Statements herein concerning the growth and strategies of Royal & SunAlliance
and Orion include forward-looking statements. Royal & SunAlliance's and/or
Orion's actual results may differ materially from those suggested as a result of
various factors, including, without limitation, Royal & SunAlliance's and
Orion's ability to recruit and retain qualified technical consultants, and, the
companies' ability to consummate the transaction, successfully integrate Orion's
operations and compete successfully with existing and future competitors.
Interested parties should refer to the disclosure set forth in Royal &
SunAlliance's and Orion's recent public filings for additional information
regarding the companies' financial conditions and results of operations.
Royal & SunAlliance's financial advisor was Salomon Smith Barney Inc. and Orion
Capital's financial advisor was Donaldson Lufkin & Jenrette Securities
Corporation.
For more information about Royal & Sun Alliance or Orion Capital, visit their
web sites at www.royalsunalliance.com and www.orioncapital.com.
------------------------ --------------------
####
-3-
<PAGE>
Exhibit (a)(8)
FOR IMMEDIATE RELEASE:
ROYAL & SUN ALLIANCE INSURANCE GROUP plc COMMENCES TENDER OFFER FOR
ORION CAPITAL CORPORATION
AT $50.00 PER SHARE
New York, New York, July 16, 1999 - Royal & Sun Alliance Insurance Group plc,
London, announced today that it has commenced through an indirect wholly-owned
subsidiary (NTG Acquisition Corp.) its previously announced US$50.00 per share
cash tender offer for all the outstanding shares of common stock of Orion
Capital Corporation (NYSE:OC), Farmington, CT. The tender offer is scheduled to
expire at 12:00 midnight, New York City time, on Thursday, August 12, 1999,
unless the tender offer is extended. Following the consummation of the tender
offer, Royal & Sun Alliance intends to consummate a second step merger to
acquire all shares not purchased in the tender offer at the same price paid in
the tender offer. This would result in an aggregate equity purchase price on a
fully diluted basis of approximately US$1.4 billion.
As previously announced, the Board of Directors of Orion has unanimously
approved the tender offer and the related transactions, has determined that the
terms of the tender offer and merger are fair to, and in the best interests of,
Orion's stockholders, and has recommended that all stockholders accept the
offer. Due to the need for insurance regulatory approvals, it is not expected
that the tender offer will be completed until the fourth quarter of 1999. The
parties expect that the expiration date of the tender offer will be extended in
order to permit the parties to obtain such approvals.
The tender offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the tender offer that
number of shares which represents at least a majority of the total number of
shares outstanding on the date shares are accepted for payment. Consummation of
the tender offer will be subject to the expiration or termination of any
applicable antitrust waiting period, the receipt of any required regulatory
approvals and customary conditions. Other terms and conditions of the tender
offer are set forth in the definitive tender offer documents being filed with
the Securities Exchange Commission and mailed to Orion stockholders.
Following the tender offer, the acquisition of Orion will be completed by
merging NTG into Orion, and all of Orion's shares not owned by Royal & Sun
Alliance and its subsidiaries will be converted into the right to receive $50
per share in cash. The merger agreement provides for the payment to Royal &
Sun Alliance of a fee of $45 million if the merger agreement is terminated in
certain circumstances. Orion has also granted to Royal & Sun Alliance USA an
option to purchase up to 19.9% of Orion's shares, exercisable under the same
circumstances.
Citibank N.A. will act as depositary for the tender offer, MacKenzie Partners,
Inc. will act as information agent, and Salomon Smith Barney, Inc. will act as
dealer manager.
Following the close of the transaction, Royal & Sun Alliance will maintain the
Orion brands and operate its three major divisions: commercial, personal and
specialty. The Commercial
<PAGE>
Insurance division will include Royal & SunAlliance USA's retail branches and
Orion's EBI Companies. OrionAuto will join the Personal Insurance division.
Orion Capital is a leader in the specialty property and casualty insurance
business through wholly owned subsidiaries operating in three focused segments:
nonstandard personal automobile insurance through OrionAuto, workers
compensation through EBI Companies and specialty commercial insurance through
Orion Specialty, which includes DPIC Companies. Royal & SunAlliance USA, Inc. is
part of Royal & SunAlliance Insurance Group plc which operates in over 55
countries worldwide and transacts business in over 130 countries. Worldwide net
premium income in 1998 was $16 billion with total assets over $100 billion. The
company is listed on the London Stock Exchange (RSA.L) and has a Level 1
American Depositary Receipt Program (RSAIY).
Statements herein concerning the growth and strategies of Royal & Sun Alliance
and Orion include forward-looking statements. Royal & Sun Alliance's and/or
Orion's actual results may differ materially from those suggested as a result
of various factors, including, without limitation, Royal & Sun Alliance's and
Orion's ability to recruit and retain qualified technical consultants, and, the
companies' ability to consummate the transaction, successfully integrate Orion's
operations and compete successfully with existing and future competitors.
Interested parties should refer to the disclosure set forth in Royal & Sun
Alliance's and Orion's recent public filings for additional information
regarding the companies' financial conditions and results of operations.
For more information about Royal & Sun Alliance or Orion Capital, visit their
web sites at www.royalsunalliance.com and www.orioncapital.com.
------------------------ ---------------------
CONTACT: MacKenzie Partners, Inc. Daniel H. Burch, (212) 929-5748.
<PAGE>
Exhibit (a)(9)
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares (as defined below). The Offer (as defined below) is made
solely by the Offer to Purchase, dated July 16, 1999, and the related Letter of
Transmittal, and is being made to all holders of Shares. The Offer is not being
made to (nor will tenders be accepted from or on behalf of) holders of Shares in
any jurisdiction in which the making of the Offer or the acceptance thereof
would not be in compliance with the laws of such jurisdiction. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of NTG Acquisition Corp. by Salomon Smith Barney Inc. or by one or more
registered brokers or dealers that are licensed under the laws of such
jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
of
Orion Capital Corporation
at
$50.00 Net Per Share in Cash
by
NTG Acquisition Corp.,
an indirect wholly-owned subsidiary of
Royal & Sun Alliance
Insurance Group plc
NTG Acquisition Corp., a Delaware corporation ("Purchaser") and an indirect
wholly-owned subsidiary of Royal & Sun Alliance Insurance Group plc, a public
limited company organized under the laws of England and Wales ("Royal plc"), is
offering to purchase all outstanding shares of common stock, par value $1.00 per
share (the "Shares"), of Orion Capital Corporation, a Delaware corporation (the
"Company"), and the associated preferred stock purchase rights (the "Rights")
issued pursuant to the Rights Agreement, dated as of September 11, 1996, as
amended, by and between the Company and First Chicago Trust Company of New York,
as Rights Agent (as the same may be amended, the "Rights Agreement"), at a
purchase price of $50.00 per Share net to the seller in cash without interest
thereon, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated July 16, 1999 (the "Offer to Purchase"), and in the related
Letter of Transmittal (which, together with any amendments and supplements
thereto, collectively constitute the "Offer"). Unless the context otherwise
requires, all references to Shares herein and in the Offer to Purchase shall
include the associated Rights.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, AUGUST 12, 1999, UNLESS THE OFFER IS EXTENDED. THE BOARD
OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND
HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT
THE STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer that number of
Shares which represents at least a majority of the total number of Shares
outstanding on the date Shares are accepted for payment. The Offer also is
subject to the other conditions set forth in the Offer to Purchase including the
consent of certain state insurance regulatory authorities which are not expected
to be received until the fourth quarter of 1999. The parties expect that the
Expiration Date will be extended in order to permit the parties to obtain such
consents. See Sections 11, 14 and 15 of the Offer to Purchase.
1
<PAGE>
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of July 12, 1999, by and between the Company, Purchaser and Purchaser's
parent, Royal Group, Inc., a Delaware corporation and an indirect wholly-owned
subsidiary of Royal plc ("Royal US") (the "Merger Agreement"), pursuant to
which, following the consummation of the Offer and the satisfaction of certain
conditions, Purchaser will be merged with and into the Company (the "Merger"),
with the Company continuing as the surviving corporation. On the effective date
of the Merger, each outstanding Share (other than any Shares held by Purchaser,
any direct or indirect subsidiary of Purchaser, the Company or any direct or
indirect subsidiary of the Company and other than Shares, if any, held by
stockholders who perfect their appraisal rights under Delaware law) will, by
virtue of the Merger and without any action by the holder thereof, be converted
into the right to receive an amount equal to $50.00 in cash without interest
thereon.
As a condition and inducement to Purchaser and Royal US entering into the
Merger Agreement, concurrently with the execution and delivery of the Merger
Agreement, Royal US and the Company have entered into a Stock Option Agreement,
dated as of July 12, 1999, pursuant to which, among other things, the Company
has granted Royal US an irrevocable option to purchase up to 5,443,697 newly
issued Shares at $50.00 per Share (the "Option"). The Option only can be
exercised in certain circumstances as described in Section 11 of the Offer to
Purchase.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as, if
and when Purchaser gives oral or written notice to Citibank N.A., as depositary
(the "Depositary"), of Purchaser's acceptance of such Shares for payment
pursuant to the Offer. In all cases, upon the terms and subject to the
conditions of the Offer, payment for Shares purchased pursuant to the Offer will
be made by deposit of the purchase price therefor with the Depositary, which
will act as agent for tendering stockholders for the purpose of receiving
payment from Purchaser and transmitting payment to validly tendering
stockholders. In all cases, payment for Shares purchased pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates for
such Shares (or a timely Book Entry Confirmation (as defined in the Offer to
Purchase) with respect thereto), (ii) the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees or an Agent's Message (as defined in the Offer to Purchase) in
connection with a book-entry transfer and (iii) any other documents required by
the Letter of Transmittal. The per share consideration paid to any holder of
Shares pursuant to the Offer will be the highest per share consideration paid to
any other holder of such Shares pursuant to the Offer. Under no circumstances
will interest on the purchase price for Shares be paid by Purchaser, regardless
of any extension of the Offer or any delay in making such payment.
Subject to the terms and conditions of the Merger Agreement, Purchaser
expressly reserves the right, in its sole discretion, at any time and from time
to time, to extend the period during which the Offer is open for any reason,
including the existence of any of the conditions specified in Section 14 of the
Offer to Purchase, by giving oral or written notice of such extension to the
Depositary. Any such extension will be followed as promptly as practicable by
public announcement thereof, and such announcement will be made no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date (as defined in the Offer to Purchase).
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time on or prior
to the Expiration Date and, unless theretofore accepted for payment as provided
in the Offer to Purchase, may also be withdrawn at any time after September 13,
1999. In order for a withdrawal to be effective, a written, telegraphic or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of the Offer to
Purchase. Any such notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn, and
the name of the registered holder of the Shares to be withdrawn, if different
from the name of the person who tendered the Shares. If certificates evidencing
Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, then, prior to physical release of such certificates, the serial
numbers shown on such certificates must be submitted to the Depositary and the
signature on the notice of withdrawal must be guaranteed by a financial
institution (including most commercial banks, savings and loan associations and
brokerage houses) that is a participant in the Security Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program or the Stock Exchange Medallion Program (an "Eligible Institution"),
except in the case of Shares tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedures for
2
<PAGE>
book-entry transfer set forth in Section 3 of the Offer to Purchase, any notice
of withdrawal must specify the name and number of the account at the appropriate
Book-Entry Transfer Facility (as defined in the Offer to Purchase) to be
credited with the withdrawn Shares and otherwise comply with such Book-Entry
Transfer Facility's procedures, in which case a notice of withdrawal will be
effective if delivered to the Depositary by any method of delivery described in
this paragraph. All questions as to the form and validity (including time of
receipt) of notices of withdrawal will be determined by Purchaser, in its sole
discretion, whose determination shall be final and binding. Any Shares properly
withdrawn will be deemed not validly tendered for purposes of the Offer, but may
be tendered at any subsequent time prior to the Expiration Date by following any
of the procedures described in Section 3 of the Offer to Purchase.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase, and is incorporated herein by
reference.
The Company has provided Purchaser with the Company's stockholder lists and
security position listings for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase and the related Letter of Transmittal and, if
required, other relevant materials will be mailed to record holders of Shares
and will be furnished to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing for subsequent transmittal to beneficial
owners of Shares.
The Offer to Purchase and the related Letter of Transmittal contain
important information which should be read carefully before any decision is made
with respect to the Offer.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective telephone numbers listed below.
Requests for copies of the Offer to Purchase, the related Letter of Transmittal
and all other tender offer materials may be directed to the Information Agent or
brokers, dealers, commercial banks and trust companies, and copies will be
furnished promptly at Purchaser's expense. None of Purchaser, Royal US or Royal
plc will pay any fees or commissions (other than to the Dealer Manager or the
Information Agent) for soliciting tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
Mackenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
Call Toll-Free (800) 322-2885
The Dealer Manager for the Offer is:
Salomon Smith Barney
388 Greenwich Street
New York, New York 10013
(212) 816-1057
July 16, 1999
3
<PAGE>
Exhibit (c)(1)
================================================================================
AGREEMENT AND PLAN OF MERGER
Among
ORION CAPITAL CORPORATION,
ROYAL GROUP INC.
and
NTG ACQUISITION CORP.
Dated as of July 12, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I.
THE MERGER; CLOSING; EFFECTIVE TIME; TENDER OFFER
1.1. The Merger...............................................................1
1.2. Closing..................................................................2
1.3. Effective Time...........................................................2
1.4. Tender Offer.............................................................2
1.5. The Tender Offer.........................................................2
(a) Conditions; Consideration; Schedule 14D-1........................2
(b) Expiration Date..................................................3
(c) Company Action...................................................4
(d) Schedule 14D-9; Meeting of Stockholders..........................4
(e) Mailing and Content of Offer Documents and Schedule 14D-9........4
(f) Directors........................................................5
ARTICLE II.
CHARTER AND BY-LAWS OF THE SURVIVING CORPORATION
2.1. The Charter..............................................................6
2.2. The By-Laws..............................................................6
ARTICLE III.
OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
3.1. Directors................................................................6
3.2. Officers.................................................................6
ARTICLE IV.
EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES
4.1. Conversion of Shares; Consideration......................................6
4.2. Dissenting Stockholders..................................................7
4.3. Company Options and Restricted Stock.....................................7
(a) Company Options..................................................7
(b) Restricted Stock.................................................8
(c) Performance Units................................................8
(d) Notices..........................................................8
4.4. Exchange Procedures......................................................8
(a) Exchange Agent...................................................8
(b) Exchange Procedures..............................................8
4.5. Rights of Former Company Stockholders....................................9
4.6. Termination of Exchange Fund............................................10
4.7. Adjustments to Prevent Dilution.........................................10
(i)
<PAGE>
4.8. Merger Without Meeting of Stockholders..................................10
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of the Company...........................10
(a) Organization, Good Standing and Qualification...................10
(b) Capital Structure...............................................11
(c) Corporate Authority; Approval and Fairness......................12
(d) Governmental Filings; No Violations.............................13
(e) Company Reports; Financial Statements...........................14
(f) Absence of Certain Changes......................................15
(g) Litigation......................................................16
(h) Employee Benefits...............................................16
(i) Compliance with Laws; Permits...................................18
(j) Takeover Statutes...............................................18
(k) Environmental Matters...........................................19
(l) Taxes...........................................................19
(m) Labor Relations and Employment..................................21
(n) Intellectual Property; Year 2000................................21
(o) Material Contracts..............................................22
(p) Rights Plan.....................................................22
(q) Title to Assets; Liens..........................................23
(r) Insurance Matters...............................................23
(s) Liabilities and Reserves........................................24
(t) Brokers and Finders.............................................25
5.2. Representations and Warranties of Parent and Merger Subsidiary..........25
(a) Capitalization of Merger Subsidiary.............................25
(b) Organization, Good Standing and Qualification...................25
(c) Corporate Authority.............................................25
(d) Governmental Filings; No Violations.............................25
(e) Financing.......................................................26
(f) Share Ownership.................................................26
(g) Brokers or Finders..............................................26
ARTICLE VI.
COVENANTS
6.1. Interim Operations......................................................27
6.2. Acquisition Proposals...................................................29
6.3. Information Supplied....................................................30
6.4. Stockholders Meeting....................................................30
6.5. Filings; Other Actions; Notification....................................31
6.6. Access..................................................................32
6.7. Publicity...............................................................33
6.8. Employee Benefits.......................................................33
(ii)
<PAGE>
6.9. Expenses................................................................34
6.10. Indemnification; Directors' and Officers' Insurance....................34
6.11. Other Actions by the Company and Parent................................36
(a) Rights..........................................................36
(b) Takeover Statute................................................36
(c) NYSE De-Listing.................................................36
ARTICLE VII.
CONDITIONS
7.1. Conditions to Each Party's Obligation to Effect the Merger..............36
(a) Stockholder Approval............................................36
(b) Regulatory Consents.............................................36
(c) Legal Prohibition...............................................37
(d) Purchase of Shares Pursuant to Tender Offer.....................37
ARTICLE VIII.
TERMINATION
8.1. Termination by Mutual Consent...........................................37
8.2. Termination by Either Parent or the Company.............................37
8.3. Termination by the Company..............................................37
8.4. Termination by Parent...................................................38
8.5. Effect of Termination and Abandonment...................................38
ARTICLE IX.
MISCELLANEOUS AND GENERAL
9.1. Survival................................................................40
9.2. Modification or Amendment...............................................40
9.3. Waiver of Conditions....................................................40
9.4. Counterparts............................................................41
9.5. Governing Law; Consent to Jurisdiction..................................41
9.6. Notices.................................................................41
9.7. Entire Agreement; No Other Representations..............................42
9.8. No Third Party Beneficiaries............................................42
9.9. Obligations of Parent and of the Company................................42
9.10. Severability...........................................................42
9.11. Interpretation.........................................................43
9.12. Assignment.............................................................43
Annex I Certain Conditions of the Tender Offer
Annex II Index of Defined Terms
Exhibit A Stock Option Agreement
Exhibit B Officers of Surviving Corporation
(iii)
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 12, 1999 (this
"Agreement"), among ORION CAPITAL CORPORATION, a Delaware corporation (the
"Company"), ROYAL GROUP INC., a Delaware corporation ("Parent"), and NTG
ACQUISITION CORP., a Delaware corporation and a direct or indirect wholly owned
subsidiary of Parent ("Merger Subsidiary") (the Company and Merger Subsidiary
sometimes being hereinafter collectively referred to as the "Constituent
Corporations").
RECITALS
WHEREAS, Parent is a direct or indirect wholly owned subsidiary of
Royal & Sun Alliance Insurance Group plc, a public limited company organized
under the laws of England and Wales ("PLC");
WHEREAS, the respective boards of directors of each of Parent, Merger
Subsidiary and the Company have determined that the Tender Offer (as defined in
Section 1.4) and the merger of Merger Subsidiary with and into the Company (the
"Merger") upon the terms and subject to the conditions set forth in this
Agreement are advisable and have approved the Tender Offer and the Merger;
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition and inducement to Parent's willingness to enter into this
Agreement, the Company and Parent have entered into that certain Stock Option
Agreement dated as of the date of this Agreement and attached hereto as Exhibit
A (the "Stock Option Agreement"), pursuant to which the Company has granted
Parent an option to purchase shares of common stock, par value $1.00 per share,
of the Company (the "Common Shares") under certain circumstances; and
WHEREAS, the Company, Parent and Merger Subsidiary desire to make
certain representations, warranties, covenants and agreements as set forth in
this Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I.
The Merger; Closing; Effective Time; Tender Offer
1.1. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time (as defined in Section 1.3)
Merger Subsidiary shall be merged with and into the Company and the separate
corporate existence of Merger Subsidiary shall thereupon cease. The Company
shall be the surviving corporation in the Merger (sometimes hereinafter referred
to as the "Surviving Corporation"), and the separate corporate existence of the
Company with all its rights, privileges, immunities, powers and franchises shall
continue
<PAGE>
unaffected by the Merger. The Merger shall have the effects specified in the
Delaware General Corporation Law (the "DGCL").
1.2. Closing. The closing of the Merger (the "Closing") shall take
place (i) at the offices of Willkie Farr & Gallagher, 787 Seventh Avenue, New
York, New York 10019 at 9:00 A.M. on the second business day after satisfaction
or waiver of the conditions set forth in Article VII (other than those
conditions that by their nature are to be satisfied at the Closing, but subject
to the fulfillment or waiver of those conditions) or (ii) at such other place
and time and/or on such other date as the Company and Parent may agree in
writing (the "Closing Date").
1.3. Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on the Closing Date, if this Agreement shall not have
been terminated as provided in Article VIII, the parties shall acknowledge and
cause a certificate of merger or other appropriate documents (the "Certificate
of Merger") executed in accordance with the relevant provisions of the DGCL to
be filed with the Secretary of State of the State of Delaware (the "Secretary")
as provided in Section 251 of the DGCL. The Merger shall become effective at the
time the Certificate of Merger is duly filed with the Secretary or at such later
time as may be agreed by the parties and specified in the Certificate of Merger
(the "Effective Time").
1.4. Tender Offer. Parent shall, within five business days after
the public announcement of the execution of this Agreement, cause Merger
Subsidiary to commence (within the meaning of Rule 14d-2(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) a tender offer (the
"Tender Offer") to acquire all of the outstanding Common Shares together with
all associated Rights (as defined in Section 5.1(p)) issued pursuant to the
Rights Agreement (as defined in Section 5.1(b)), at a purchase price per Common
Share of not less than the Per Share Purchase Price (as defined in Section
4.1(c)), net to the seller in cash, without interest thereon and less any
required withholding tax, with such Tender Offer being upon the terms and
subject solely to the conditions set forth in Annex I to this Agreement
including the Minimum Tender Condition (as defined therein) and such further
customary terms as may be set forth in an Offer to Purchase and Letter of
Transmittal (the "Offer Documents") to be mailed by Merger Subsidiary in
connection with the Tender Offer.
1.5. The Tender Offer.
(a) Conditions; Consideration; Schedule 14D-1. Parent and Merger
Subsidiary shall, within five business days after the public announcement of the
execution of this Agreement, file with the Securities and Exchange Commission
(the "SEC") a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1")
with respect to the Tender Offer which will contain the Offer Documents as
exhibits. The Schedule 14D-1, and all amendments and supplements thereto, shall
comply in all material respects with the provisions of applicable federal
securities laws. Parent, Merger Subsidiary and the Company each agrees promptly
to correct any information provided by it for use in the Schedule 14D-1 if and
to the extent that it shall have become false or misleading in any material
respect or any event occurs which should be set forth in an amendment or
supplement to the Schedule 14D-1. Merger Subsidiary agrees to take all steps
necessary to cause the Schedule 14D-1, as so corrected if applicable, to be
filed with the SEC and to be disseminated to holders of Common Shares, in each
case as and to the extent required by applicable federal
-2-
<PAGE>
securities laws. The Company shall cooperate fully in the preparation of the
Schedule 14D-1 prior to its being filed with the SEC. The Company and its
counsel shall be given the reasonable opportunity to review and comment on the
Offer Documents and the Schedule 14D-1, and any amendments thereto, prior to the
filing thereof with the SEC. Parent and Merger Subsidiary shall provide the
Company and its counsel with a copy of any written comments or telephonic
notification of any oral comments Parent or Merger Subsidiary may receive from
the SEC or its staff with respect to the Offer Documents and the Schedule 14D-1
promptly after the receipt thereof. Parent and Merger Subsidiary shall provide
the Company and its counsel with a reasonable opportunity to participate in all
communications with the SEC and its staff, including any meetings and telephone
conferences, relating to the Tender Offer or this Agreement. Without the prior
written consent of the Company, Merger Subsidiary shall not decrease the Per
Share Purchase Price or change the form of consideration payable in the Tender
Offer, decrease the number of Common Shares sought, impose additional conditions
to the Tender Offer or make any other change to the terms and conditions of the
Tender Offer in any manner adverse to the holders of Common Shares. Upon the
terms and subject to the conditions of the Tender Offer, unless the Agreement is
terminated in accordance with Article VIII, Merger Subsidiary will accept for
payment and will purchase, as soon as permitted under the terms of the Tender
Offer, all Common Shares validly tendered and not withdrawn prior to the
expiration of the Tender Offer.
(b) Expiration Date. Parent and Merger Subsidiary agree that, unless the
Agreement is terminated in accordance with Article VIII, Merger Subsidiary shall
not terminate or withdraw the Tender Offer prior to the expiration date thereof,
which shall be a date at least 20 business days from the date of commencement
thereof (the "Expiration Date"). If, at the Expiration Date, the conditions to
the Tender Offer described in Annex I hereto shall not have been satisfied or
earlier waived, Merger Subsidiary may extend the Expiration Date on one or more
occasions for such additional period or periods of time as Merger Subsidiary
determines in its sole discretion (provided that following the 90th day after
the date of this Agreement, such extensions shall be in increments of not more
than ten business days each) and, unless this Agreement has been terminated in
accordance with its terms, shall extend it until a date that is not later than
the Termination Date (as defined in Section 8.2), if requested to do so by the
Company, and Parent is otherwise going to let the Tender Offer expire without
the purchase of Common Shares thereunder, but shall not be required to so extend
if any of the conditions not satisfied or earlier waived on the then-scheduled
expiration date are one or more of the Minimum Tender Condition or the
conditions set forth in paragraphs (b)(ii), (b)(iii) or (b)(iv) of Annex I
hereto, provided that (x) if the only condition not satisfied is the Minimum
Tender Condition, the satisfaction or waiver of all other conditions shall have
been publicly disclosed at least five business days before termination of the
Tender Offer and (y) if paragraph (b)(ii), (b)(iii) or (b)(iv) of Annex I hereto
has not been satisfied and the failure to so satisfy can be remedied, the Tender
Offer shall not be terminated unless the failure is not remedied within 20 days
after Parent has furnished the Company with written notice of such failure. In
addition, Merger Subsidiary, at its sole option, may extend the Expiration Date
for an aggregate period of not more than ten business days beyond the latest
expiration date that would otherwise be permitted (but in no event later than
the Termination Date) if there shall not have been tendered sufficient Common
Shares so that the Merger could be effected without a meeting of the Company's
stockholders in accordance with Section 253 of the DGCL. Parent and Merger
Subsidiary shall use their reasonable best efforts to
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consummate the Tender Offer in accordance with the terms of this Agreement and
the conditions to the Tender Offer set forth in Annex I.
(c) Company Action. The board of directors of the Company has received
the opinion of Donaldson, Lufkin & Jenrette Securities Corporation (the "Company
Financial Advisor") to the effect set forth in Section 5.1(c)(ii). The Company
has been authorized by the Company Financial Advisor to permit, subject to its
prior review and consent (such consent not to be unreasonably withheld), the
inclusion of such opinion and appropriate references thereto in the Offer
Documents and in the Schedule 14D-9 referred to below and the Proxy Statement
referred to in Section 6.5(a). The Company hereby consents to the inclusion in
the Offer Documents of the recommendation of the Company's board of directors
described in Section 5.1(c)(ii), unless the Company's board of directors
determines in good faith, after consultation with and receipt of advice of
outside legal counsel, that it is required in order for its directors to comply
with their respective fiduciary duties under applicable law to withdraw, modify
or qualify its recommendation in a manner adverse to Parent in response to a
Superior Proposal (as defined in Section 6.2).
(d) Schedule 14D-9; Meeting of Stockholders. The Company agrees that it
shall, on the same day that Merger Subsidiary and Parent file with the SEC the
Schedule 14D-1, file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Tender Offer (including exhibits, and as
amended from time to time, the "Schedule 14D-9"), which shall reflect the
actions of the board of directors of the Company referred to above and shall
comply in all material respects with the provisions of applicable federal
securities laws. The Company, Parent and Merger Subsidiary each agrees promptly
to correct any information provided by it for use in the Schedule 14D-9 to the
extent that it shall have become false or misleading in any material respect.
The Company agrees to take all steps necessary to cause the Schedule 14D-9 as so
corrected to be filed with the SEC and to be disseminated to holders of Common
Shares, in each case as and to the extent required by applicable federal
securities laws. Parent and Merger Subsidiary shall cooperate fully in the
preparation of the Schedule 14D-9 prior to its being filed with the SEC. Parent
and Merger Subsidiary, and their counsel, shall be given the reasonable
opportunity to review and comment on the Schedule 14D-9 and any amendments
thereto prior to the filing thereof with the SEC. The Company shall provide
Parent and Merger Subsidiary, and their counsel, with a copy of any written
comments or telephonic notification of any oral comments the Company may receive
from the SEC or its staff with respect to the Schedule 14D-9 promptly after the
receipt thereof. The Company shall provide Parent and Merger Subsidiary and
their counsel with a reasonable opportunity to participate in all communications
with the SEC and its staff, including any meetings and telephone conferences,
relating to the Tender Offer or this Agreement. The Schedule 14D-9 shall contain
the recommendation of the board of directors of the Company that the holders of
Common Shares accept the Tender Offer, unless the Company's board of directors
determines in good faith, after consultation with and receipt of advice of
outside legal counsel, that it is required in order for its directors to comply
with their respective fiduciary duties under applicable law to withdraw, modify
or qualify its recommendation in a manner adverse to Parent in response to a
Superior Proposal.
(e) Mailing and Content of Offer Documents and Schedule 14D-9. The
Company agrees that copies of the Schedule 14D-9 (excluding exhibits) shall be
enclosed with the Offer
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Documents to be mailed by Merger Subsidiary to the stockholders of the Company
in connection with the Tender Offer. In connection with the Tender Offer, the
Company shall promptly furnish Parent and Merger Subsidiary with such
information, including lists of the names and addresses of stockholders of the
Company, mailing labels and lists of security positions, each as of the most
recent practicable date, and shall furnish such assistance as Parent or Merger
Subsidiary or their agents may request in communicating the Tender Offer to the
record and beneficial holders of the Common Shares. Subject to the requirements
of applicable law and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Tender
Offer, Merger Subsidiary and its affiliates will hold in confidence such
listings and other information, shall use such information only in connection
with the Tender Offer and, if this Agreement is terminated, shall, and shall
cause its agents or other representatives to, promptly deliver to the Company or
dispose of all copies of all such information (and extracts or summaries
thereof) then in their possession.
(f) Directors. (i) Promptly upon the purchase by Merger Subsidiary of
Common Shares pursuant to the Tender Offer which represent at least a majority
of the outstanding Common Shares, Merger Subsidiary or Parent shall be entitled
to designate up to such number of directors but in no event less than a
majority, rounded up to the next whole number, on the board of directors of the
Company as shall give Merger Subsidiary representation on such board of
directors equal to the product of the total number of directors on such board
(giving effect to the directors elected pursuant to this sentence) multiplied by
the percentage that the aggregate number of Common Shares beneficially owned by
Parent, Merger Subsidiary and any other Subsidiary (as defined in Section
5.1(a)) of Parent bears to the total number of Common Shares then outstanding,
and the Company shall, at such time, promptly use its reasonable best efforts to
cause Merger Subsidiary's or Parent's designees, as the case may be, to be so
elected, including either increasing the size of the board of directors or
securing the resignations of incumbent directors or both. The Company will use
its reasonable best efforts to cause directors designated by Merger Subsidiary
to constitute the same percentage as is on the board of (i) each committee of
the board of directors, (ii) each board of directors of each Subsidiary of the
Company and (iii) each committee of each such Subsidiary board, in each case
only to the extent permitted by applicable Law (as defined in Section 5.1(i)).
(ii) The Company shall promptly (subject to the prompt provision of
information by Parent and Merger Subsidiary) take all actions required pursuant
to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder in order to
fulfill its obligations under this Section 1.5(f) and shall include in the
Schedule 14D-9 or a separate Rule 14f-1 information statement provided to
stockholders such information with respect to the Company and its officers and
directors as is required under Section 14(f) of the Exchange Act and Rule 14f-1
thereunder to fulfill its obligations under this Section 1.5(f). Parent or
Merger Subsidiary will promptly supply to the Company and be solely responsible
for any information with respect to either of them and their nominees, officers
and directors required by Section 14(f) of the Exchange Act and Rule 14f-1
thereunder.
(iii) From and after the time, if any, that Parent's designees
constitute a majority of the Company's board of directors, any amendment of this
Agreement, any termination of this Agreement by the Company, any extension of
time for performance of any of the obligations of
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Parent or Merger Subsidiary hereunder, any waiver of any condition or any of the
Company's rights hereunder or other action by the Company hereunder may be
effected only by unanimous vote of the entire board of directors of the Company.
ARTICLE II.
Charter and By-Laws
of the Surviving Corporation
2.1. The Charter. The Certificate of Incorporation of the Company as in
effect immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation (the "Charter"), until duly amended
or repealed as provided therein or by applicable Law.
2.2. The By-Laws. The by-laws of the Company as in effect immediately
prior to the Effective Time shall be the by-laws of the Surviving Corporation
(the "By-Laws"), until duly amended or repealed as provided therein or by
applicable Law.
ARTICLE III.
Officers and Directors
of the Surviving Corporation
3.1. Directors. The directors of Merger Subsidiary at the Effective Time
shall, from and after the Effective Time, be the directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Charter and the By-Laws.
3.2. Officers. The officers of the Surviving Corporation shall, from and
after the Effective Time, be as set forth on Exhibit B until their successors
have been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Charter and the By-Laws.
ARTICLE IV.
Effect of the Merger on Capital Stock;
Exchange of Certificates
4.1. Conversion of Shares; Consideration. Subject to the provisions of
this Article IV, at the Effective Time, by virtue of the Merger and without any
future action on the part of Parent, the Company, Merger Subsidiary or the
stockholders of any of the foregoing, the shares of the Constituent Corporations
shall be converted as follows:
(a) Each share of Merger Subsidiary Common Stock (as defined in Section
5.2(a)) issued and outstanding immediately prior to the Effective Time shall
cease to be outstanding and shall be converted into that number of fully paid
and nonassessable shares of common stock of the Surviving Corporation equal to
(x) the number of Common Shares issued and outstanding
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immediately prior to the Effective Time less (y) the number of those Common
Shares set forth in Section 4.1(b)(ii) (A) and (B).
(b) (i) Each Common Share held by the Company and not held on behalf of
third parties shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor and (ii) each Common Share
held by (A) any Subsidiary of the Company or (B) PLC or any Subsidiary thereof
(PLC and each of its Subsidiaries being referred to as "Parent Companies") other
than Merger Subsidiary shall be converted into one fully paid and non-assessable
share of common stock of Surviving Corporation (the Common Shares in this
Section 4.1(b) together with the Common Shares held by Merger Subsidiary are
hereinafter referred to as "Excluded Shares").
(c) Each Common Share (including any associated Rights), but excluding
(i) Excluded Shares and (ii) Dissenting Shares (as defined in Section 4.2),
issued and outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be converted into and exchanged for the right to receive
from Merger Subsidiary a cash payment in the amount of Fifty Dollars ($50.00) or
if a higher price was paid in the Tender Offer, such higher price (the "Per
Share Purchase Price"; the aggregate cash paid for all Common Shares being the
"Merger Consideration"), without interest.
4.2. Dissenting Stockholders. Notwithstanding anything in this Agreement
to the contrary, any issued and outstanding Common Shares held by a Person (as
defined in Section 5.1(b)) (a "Dissenting Stockholder") who duly demands
appraisal of his Common Shares pursuant to the DGCL and complies with all the
provisions of the DGCL concerning the right of holders of Common Shares to
demand appraisal of their Common Shares in connection with the Merger
("Dissenting Shares") shall not be converted as described in Section 4.1(c) but
shall become the right to receive such cash consideration as may be determined
to be due to such Dissenting Stockholder as provided in the DGCL. If, however,
such Dissenting Stockholder withdraws his demand for appraisal or fails to
perfect or otherwise loses his right of appraisal, in any case pursuant to the
DGCL, his Common Shares shall be deemed to be converted as of the Effective Time
into the right to receive the Per Share Purchase Price net of all withholding
Taxes, if any, and without interest. The Company shall give Parent (i) prompt
notice of any demands for appraisal of Common Shares received by the Company and
(ii) the opportunity to participate in and direct all negotiations and
proceedings with respect to any such demands. The Company shall not, without the
prior written consent of Parent, make any payment with respect to, or settle,
offer to settle or otherwise negotiate, any such demands.
4.3. Company Options and Restricted Stock.
(a) Company Options. At the Effective Time, each outstanding option to
purchase Common Shares issued by the Company, whether issued pursuant to any
stock plan of the Company or otherwise, and whether or not exercisable (a
"Company Option"), shall no longer represent the right to purchase or receive
Common Shares, but in lieu thereof shall be canceled and, in consideration of
such cancellation, Parent shall (or shall cause the Company to), pay to each
holder of a Company Option an amount in cash equal to (x) the difference (if
positive) between the Per Share Purchase Price and the price per Common Share
pursuant to which the
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holder of such Company Option (the "Exercise Price") may purchase the Common
Shares to which such Company Option relates, multiplied by (y) the number of
Common Shares subject to such Company Option, less (z) any withholding of Taxes
as may be required by applicable Law. With respect to any Company Option as to
which the Exercise Price exceeds the Per Share Purchase Price, such Company
Option shall also be canceled and in consideration of such cancellation, Parent
shall (or cause the Company to) pay to each holder thereof an amount in cash
equal to (x) $5, multiplied by (y) the number of Common Shares subject to such
Company Option, less (z) any withholding taxes as may be required by applicable
Law.
(b) Restricted Stock. Each Common Share which is subject to vesting or
other similar restrictions, whether issued pursuant to any stock plan of the
Company or otherwise ("Restricted Stock"), shall become fully vested and free of
such restrictions in accordance with the Company Stock Plans (as defined in
Section 5.1(b)), and otherwise shall be treated in the same manner as the Common
Shares as described in Section 4.1(c), provided that amounts payable in respect
of Restricted Stock shall be reduced by the amount of any loans or other
indebtedness owing to the Company in respect of the Restricted Stock from
holders thereof.
(c) Performance Units. At the Effective Time, each outstanding
performance unit (each, a "Performance Unit"), whether issued pursuant to any
stock plans of the Company or otherwise shall become immediately vested and
immediately thereafter shall be canceled. In exchange for such cancellation,
Parent shall (or shall cause the Company to) pay each holder of a Performance
Unit an amount in cash equal to (x) the book value per Common Share, determined
as of the end of the fiscal quarter immediately preceding the Effective Time, in
accordance with GAAP, multiplied by (y) the number of Performance Units then
held by such holder, less (z) any withholding Taxes as may be required by
applicable Law.
(d) Notices. At or prior to the Effective Time, the Company shall take
all actions necessary to provide notice of the provisions of this Section 4.3 to
all holders of Company Options, Restricted Stock, and Performance Units with
Parent's prior review and consent (not to be unreasonably withheld or delayed)
to the form of such notice.
4.4. Exchange Procedures.
(a) Exchange Agent. Promptly after the Effective Time, Parent shall
deposit, or shall cause to be deposited, the Merger Consideration with an
exchange agent selected by Parent and reasonably satisfactory to the Company
(the "Exchange Agent"), for the benefit of the holders of Common Shares (the
"Exchange Fund").
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall cause the Exchange Agent to mail
to each holder of record of a certificate which represented Common Shares
immediately prior to the Effective Time (the "Certificates") (i) a letter of
transmittal specifying that delivery shall be effected, and risk of loss and
title to such Certificates shall pass, only upon proper delivery of such
Certificates (or affidavits of loss in lieu thereof) to the Exchange Agent, such
letter of transmittal to be in such form and have such other provisions as
Parent shall reasonably determine, and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for the consideration described in
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Section 4.1 and 4.3(b). The Certificates so delivered shall be duly endorsed as
the Exchange Agent may require. The Exchange Agent may establish such other
reasonable and customary rules and procedures in connection with its duties as
it may deem appropriate. After the Effective Time, each holder of Common Shares
(other than Excluded Shares and Dissenting Shares) issued and outstanding at the
Effective Time shall surrender the Certificates representing such Common Shares
to the Exchange Agent together with the letter of transmittal and such other
documents as may reasonably be required by the Exchange Agent. Upon surrender of
a Certificate, such holder shall be entitled to receive in exchange therefor the
consideration provided in Section 4.1 or 4.3(b), as applicable, together with
all undelivered dividends or distributions in respect of such Common Shares
(without interest thereon) pursuant to Section 4.5, less any withholding of
Taxes as may be required by applicable Law, and the Certificate so surrendered
shall forthwith be canceled. Subject to the second and third succeeding
sentences, Parent shall not be obligated to deliver the consideration to which
any former holder of Common Shares is entitled as a result of the Merger until
such holder surrenders such holder's Certificates for exchange as provided in
this Section 4.4. In the event of a transfer of ownership of Common Shares
represented by Certificates that are not registered in the transfer records of
the Company, the consideration provided in Section 4.1 or 4.3(b), as applicable,
may be issued to a transferee if the Certificates representing such Common
Shares are delivered to the Exchange Agent, accompanied by all documents
required to evidence such transfer. If payment of the Merger Consideration is to
be made to a Person other than the Person in whose name the surrendered
Certificate is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or shall be otherwise in
proper form for transfer and that the Person requesting such payment shall have
paid any transfer and other taxes required by reason of the payment of the
Merger Consideration to a Person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of the
Surviving Corporation that such tax either has been paid or is not applicable.
If any Certificate shall have been lost, stolen, mislaid or destroyed, upon
receipt of (a) an affidavit of that fact from the holder claiming such
Certificate to be lost, mislaid, stolen or destroyed, (b) such bond, security or
indemnity as Parent and the Exchange Agent may reasonably require, and (c) any
other documents reasonably necessary to evidence and effect the bona fide
exchange thereof, the Exchange Agent shall issue to such holder the
consideration into which the Common Shares represented by such lost, stolen,
mislaid or destroyed Certificate shall have been converted. Any other provision
of this Agreement notwithstanding, neither Parent, the Surviving Corporation nor
the Exchange Agent shall be liable to a holder of Common Shares for any amounts
paid or property delivered in good faith to a public official pursuant to any
applicable abandoned property, escheat or similar Law.
4.5. Rights of Former Company Stockholders. At the Effective Time, the
stock transfer books of the Company shall be closed as to holders of Common
Shares immediately prior to the Effective Time and no transfer of Common Shares
by any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 4.4, each Certificate
theretofore representing Common Shares (other than Excluded Shares or Dissenting
Shares) shall from and after the Effective Time represent for all purposes only
the right to receive the consideration provided in Section 4.1 or 4.3(b), as
applicable, in exchange therefor, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other distributions
with a record date prior to the Effective Time which have been declared or
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made by the Company in respect of such Common Shares in accordance with the
terms of this Agreement and which remain unpaid at the Effective Time. Upon
surrender of such Certificate, any undelivered dividends and cash payments
payable hereunder (without interest) shall be delivered and paid with respect to
each Common Share represented by such Certificate.
4.6. Termination of Exchange Fund. Any holder of Common Shares who has
not exchanged his Certificates for the Merger Consideration in accordance with
Section 4.1(c) or 4.3(b), as applicable, within one year after the Effective
Time shall have no further claim upon the Exchange Agent and shall thereafter
look only to Parent for payment in respect of his Common Shares. Any portion of
the Exchange Fund (including the proceeds of any investments thereof) that
remains unclaimed by the stockholders of the Company for one year after the
Effective Time shall be paid to Parent. The Exchange Agent shall invest the
Exchange Fund, as directed by Parent, on a daily basis. Any interest and other
income resulting from such investments shall be paid to Parent.
4.7. Adjustments to Prevent Dilution. Without limiting the provisions of
Section 6.1, in the event that prior to the Effective Time the Company changes
the number of Common Shares or securities convertible or exchangeable into or
exercisable for Common Shares as a result of a reclassification, stock split
(including a reverse split), stock dividend or distribution, recapitalization,
merger, subdivision or other similar transaction, the Merger Consideration shall
be equitably adjusted.
4.8. Merger Without Meeting of Stockholders. In the event that Merger
Subsidiary, or any other direct or indirect subsidiary of PLC, shall acquire at
least 90 percent of the outstanding Common Shares pursuant to the Tender Offer,
the parties hereto shall take all necessary and appropriate action to cause the
Merger to become effective as soon as practicable after the expiration of the
Tender Offer without a vote of stockholders of the Company, in accordance with
Section 253 of the DGCL.
ARTICLE V.
Representations and Warranties
5.1. Representations and Warranties of the Company. Except as set forth
in the corresponding sections or subsections of the disclosure letter delivered
to Parent by the Company on or prior to entering into this Agreement (the
"Company Disclosure Letter") or in any Company Report (as defined in Section
5.1(e)(i)) filed prior to the date hereof, the Company hereby represents and
warrants to Parent and Merger Subsidiary that:
(a) Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the Laws
of the State of Delaware and each of its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the Laws of its
respective jurisdiction of organization. Each of the Company and its
Subsidiaries has all requisite corporate or similar power and authority to own
and operate its properties and assets and to carry on its business as presently
conducted and is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the ownership
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or operation of its properties or conduct of its business requires such
qualification, except where the failure to be so qualified or in good standing,
individually or in the aggregate, would not have a Company Material Adverse
Effect. The Company has made available to Parent a complete and correct copy of
the articles or certificate of incorporation and by-laws or other similar
governing documents as amended to date (collectively, "Governing Documents") of
the Company and each of its Subsidiaries. The Company's and its Subsidiaries'
Governing Documents as so made available are in full force and effect.
As used in this Agreement, the term (i) "Subsidiary" means, with respect
to the Company, PLC, Parent or Merger Subsidiary, as the case may be, any
entity, whether incorporated or unincorporated, of which at least a majority of
the securities or ownership interests having by their terms ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions is directly or indirectly owned or controlled by such party or
by one or more of its respective Subsidiaries or by such party and any one or
more of its respective Subsidiaries, and (ii) "Company Material Adverse Effect"
means a material adverse effect on the financial condition or results of
operations of the Company and its Subsidiaries, taken as a whole; provided,
however, that the term "Company Material Adverse Effect" shall not be deemed to
include any (i) fundamental changes in the property and casualty insurance
industry in general, (ii) events resulting from changes in general United States
or global economic conditions, (iii) changes in GAAP or SAP, or (iv) adverse
changes in the Company's financial condition or results of operations following
the date hereof as set forth in Section 5.1(a) of the Company Disclosure Letter.
The Company conducts its insurance operations through the Subsidiaries
set forth in Section 5.1(a) of the Company Disclosure Letter which are
identified as insurance companies (collectively, the "Company Insurance
Subsidiaries"). Each of the Company Insurance Subsidiaries is (i) duly licensed
or authorized as an insurance company and, where applicable, a reinsurer in its
jurisdiction of incorporation, (ii) duly licensed or authorized as an insurance
company and, where applicable, a reinsurer in each other jurisdiction where it
is required to be so licensed or authorized, and (iii) duly authorized in its
jurisdiction of incorporation and each other applicable jurisdiction to write
each line of business reported as being written in the most recent Company SAP
Statements (as defined in Section 5.1(e)(ii)), except where the failure to be so
licensed or authorized would not, individually or in the aggregate, have a
Company Material Adverse Effect. The Company has made all required filings under
applicable insurance holding company statutes except where the failure to file
would not, individually or in the aggregate, have a Company Material Adverse
Effect.
(b) Capital Structure. The authorized stock of the Company consists of
50,000,000 Common Shares, of which 30,675,300 Common Shares were issued and
outstanding and 3,320,037 Common Shares were held by the Company in treasury as
of the close of business on July 9, 1999, and 5,000,000 shares of preferred
stock, no par value, of which 1,000,000 shares have been authorized as Series B
Junior Participating Preferred Stock, none of which are outstanding. All of the
outstanding Common Shares have been duly authorized and are validly issued,
fully paid and nonassessable. The Company has no commitments to issue or deliver
Common Shares, except that, as of July 9, 1999, there were (i) 1,408,066 Common
Shares subject to issuance upon exercise of outstanding Company Options pursuant
to the Company's
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Equity Incentive Plan, the 1994 Stock Option Plan For Non-Employee Directors and
the 1982 Long-Term Performance Incentive Plan, (ii) 1,546,559 Common Shares
reserved for issuance upon exercise of authorized but unissued Company Options
and 167,000 shares reserved for issuance as Restricted Stock under the Company
Stock Plans, and (iii) 243,157 Common Shares reserved for issuance under the
Company's Employee Stock Purchase Plan (the plans in clauses (i) and (iii) are
hereinafter collectively referred to as the "Company Stock Plans"). The Company
has no commitments to issue or deliver shares of preferred stock, except that as
of the date hereof, there were 1,000,000 shares of Series B Junior Participating
Preferred Stock subject to issuance pursuant to the Rights Agreement, dated as
of September 11, 1996, between the Company and ChaseMellon Shareholder Services,
LLC, as Rights Agent (the "Rights Agreement"). Except as set forth in Section
5.1(a) of the Company Disclosure Letter, each of the outstanding shares of
capital stock or other securities of each of the Company's Subsidiaries is duly
authorized, validly issued, fully paid and nonassessable and owned by the
Company or a direct or indirect wholly owned Subsidiary of the Company, free and
clear of any lien, pledge, security interest, claim or other encumbrance. Except
as set forth above and in the Stock Option Agreement, there are no preemptive or
other outstanding rights, options, warrants, conversion rights, stock
appreciation rights, redemption rights, repurchase rights, agreements,
arrangements or commitments to issue, sell, repurchase, redeem or otherwise
acquire any shares of capital stock or other securities of the Company or any of
its Subsidiaries or any securities or obligations convertible or exchangeable
into or exercisable for, or giving any Person a right to subscribe for or
acquire, any securities of the Company or any of its Subsidiaries, and no
securities or obligations evidencing such rights are authorized, issued or
outstanding. There are no outstanding contractual obligations of the Company to
vote any shares of the capital stock of any of its Subsidiaries. The Company
does not have outstanding any bonds, debentures, notes or other obligations the
holders of which have the right to vote (or which are convertible into or
exercisable for securities having the right to vote) with the stockholders of
the Company on any matter.
For purposes of this Agreement, the term "Person" shall mean any
individual, corporation (including not-for-profit), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, Governmental Entity or other entity of any kind or
nature.
(c) Corporate Authority; Approval and Fairness. (i) The Company has the
requisite corporate power and authority and has taken all corporate action
necessary in order to execute, deliver and perform its obligations under this
Agreement and the Stock Option Agreement and to consummate the Merger, subject
only to approval of the Merger by the holders of at least a majority of the
outstanding Common Shares, if applicable (the "Company Requisite Vote"). This
Agreement and the Stock Option Agreement are the valid and binding agreements of
the Company enforceable against the Company in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar Laws of general applicability relating to or affecting
creditors' rights and to general equity principles (the "Bankruptcy and Equity
Exception").
(ii) The board of directors of the Company (at a meeting duly called and
held) has by the requisite vote of all directors present (A) declared that the
Agreement, the Stock Option Agreement, the Tender Offer, the Merger and the
other transactions contemplated hereby and thereby are advisable and fair and in
the best interests of the Company and its stockholders, (B)
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authorized, approved and adopted the Agreement, the Stock Option Agreement, the
Tender Offer, the Merger and the other transactions contemplated hereby and
thereby, (C) recommended that the shareholders of the Company accept the Tender
Offer and tender their Common Shares, (D) recommended the approval of this
Agreement and the Merger by the holders of the Common Shares and directed that
the Merger be submitted for consideration by the Company's stockholders at the
Stockholders Meeting (as defined in Section 6.4) (if applicable) and (E)
received the opinion of the Company Financial Advisor to the effect that the Per
Share Purchase Price to be received by the holders of the Common Shares in the
Tender Offer and the Merger, taken together, is fair from a financial point of
view to such holders.
(d) Governmental Filings; No Violations. (i) Other than the filings
and/or notices (A) pursuant to Section 1.3, (B) under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") and the Exchange
Act as amended, (C) required to be made with the New York Stock Exchange
("NYSE"), and (D) the filing of appropriate documents with, and approval of, the
respective Commissioners of Insurance or similar regulatory authorities of the
states set forth in Section 5.1(d) of the Company Disclosure Letter and such
notices and consents as may be required under the antitrust notification or
insurance Laws of any state or country in which the Company, Parent or any of
their respective subsidiaries is domiciled or does business, no notices, reports
or other filings are required to be made by the Company with, nor are any
consents, registrations, approvals, permits or authorizations required to be
obtained by the Company from, any foreign or domestic governmental or regulatory
authority, agency, commission, legislature, body or other governmental entity
("Governmental Entity"), in connection with the execution and delivery of this
Agreement and the Stock Option Agreement by the Company and the consummation by
the Company of the Merger and the other transactions contemplated hereby and
thereby, except those that the failure to make or obtain would not, individually
or in the aggregate, (i) have a Company Material Adverse Effect, (ii) prevent,
materially delay or materially impair the ability of the Company to consummate
the transactions contemplated by this Agreement or the Stock Option Agreement or
(iii) materially impair the ability of any Parent Company, (including the
Company following the Effective Time), to conduct its business in the manner as
such business is now being conducted.
(ii) Subject to the approval, if necessary, of the Merger by the
Company's stockholders in accordance with the DGCL and assuming the consents,
approvals, authorizations or permits and filings or notifications referred to in
Section 5.1(d)(i) are duly and timely obtained or made, the execution, delivery
and performance of this Agreement and the Stock Option Agreement by the Company
do not, and the consummation by the Company of the Merger and the other
transactions contemplated hereby and thereby will not, constitute or result in
(A) a breach or violation of, or a default under, any Governing Document of the
Company or any of its Subsidiaries, (B) a breach or violation of, a default
under, the right of cancellation, termination or acceleration by another Person
of, or the creation of a lien, pledge, security interest or other encumbrance on
the properties or assets of the Company or any of its Subsidiaries (with or
without notice, lapse of time or both) pursuant to, any agreement, lease,
contract, note, mortgage, indenture, arrangement or other obligation
("Contract") binding upon the Company or any of its Subsidiaries or (C) a
violation of any Law (as defined in Section 5.1(i)) or governmental or
non-governmental permit or license to which the Company or any of its
Subsidiaries is subject, except, in the case, of clause (B) or (C) above, for
any breach, violation, default, acceleration, creation or
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change that, individually or in the aggregate, would not (i) have a Company
Material Adverse Effect, (ii) prevent, materially delay or materially impair the
ability of the Company to consummate the transactions contemplated by this
Agreement or the Stock Option Agreement or (iii) materially impair the ability
of any Parent Company, (including the Company following the Effective Time), to
conduct its business in the manner as such business is now being conducted.
Neither the Company nor any of its Subsidiaries is a party to any contract
pursuant to which consents or waivers are or may be required of any other Person
in connection with the execution and delivery of this Agreement and the Stock
Option Agreement by the Company or the performance by the Company of its
obligations hereunder and thereunder, except where the failure to obtain any
such consent or waiver would not, individually or in the aggregate, have a
Company Material Adverse Effect or prevent, materially delay or materially
impair the ability of the Company to consummate the transactions contemplated
hereby and thereby.
(e) Company Reports; Financial Statements. (i) The Company has
delivered to Parent each registration statement, report, proxy statement or
information statement prepared by it since December 31, 1996 including (A) the
Company's Annual Report on Form 10-K for the year ended December 31, 1998 (the
"Audit Date"), and (B) the Company's Quarterly Report on Form 10-Q for the
period ended March 31, 1999 in the form (including exhibits, annexes and any
amendments thereto) filed with the SEC (collectively, including any such reports
filed subsequent to the date hereof, the "Company Reports"). As of their
respective dates, the Company Reports complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
or the Exchange Act, as the case may be, and did not, and any Company Reports
filed with the SEC subsequent to the date hereof will not, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading. The financial statements
of the Company included in the Company Reports comply in all material respects
as to form with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Each of the consolidated balance
sheets included in or incorporated by reference into the Company Reports
(including the related notes and schedules) fairly presents, or will fairly
present, the consolidated financial position of the Company and its Subsidiaries
as of its date and each of the consolidated statements of income and of changes
in financial position included in or incorporated by reference into the Company
Reports (including any related notes and schedules) fairly presents, or will
fairly present, the results of operations, retained earnings and changes in
financial position, as the case may be, of the Company and its Subsidiaries for
the periods set forth therein (subject, in the case of unaudited statements, to
the failure to include all required notes thereto and normal year-end audit
adjustments that will not be material in amount or effect), in each case
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except as may be noted
therein.
(ii) Each of the Company Insurance Subsidiaries has filed all annual and
quarterly statements for the periods beginning January 1, 1996, including all
exhibits, interrogatories, notes, schedules and any actuarial opinions,
affirmations or certifications or other supporting documents required to be
filed in connection therewith, required to be filed with or submitted to the
appropriate regulatory authorities of the jurisdiction in which it is domiciled
or commercially domiciled on forms prescribed or permitted by such authority
(collectively, including any such
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annual or quarterly statements filed subsequent to the date hereof, the "Company
SAP Statements"). The Company has delivered to Parent all Company SAP Statements
for each Company Insurance Subsidiary each in the form (including exhibits,
annexes and any amendments thereto) filed with the applicable domiciliary state
insurance regulatory agency. All of the Company SAP Statements for the period
beginning January 1, 1998 and Company SAP Statements for the periods beginning
January 1, 1996 for the Company Insurance Subsidiaries set forth in Section
5.1(e)(ii) of the Company Disclosure Letter (such Company SAP Statements being
collectively referred to herein as the "Company Prepared SAP Statements") were
(or will be) prepared in conformity with statutory accounting practices
prescribed or permitted by the applicable insurance regulatory authority ("SAP")
consistently applied for the periods covered thereby, were prepared in
accordance with the books and records of the Company or the Company Insurance
Subsidiary, as the case may be, and present (or will present) fairly the
statutory financial position of such Company Insurance Subsidiaries as at the
respective dates thereof and the results of operations of such Subsidiaries for
the respective periods then ended. The Company Prepared SAP Statements complied
(or will comply) in all material respects with all applicable Laws, rules and
regulations when filed, and no material deficiency has been asserted with
respect to any Company Prepared SAP Statements by the applicable insurance
regulatory body or any other governmental agency or body. Except as indicated
therein, all assets that are reflected on the Company Prepared SAP Statements
comply with all applicable foreign, federal, state and local statutes and
regulations regulating the business and products of insurance and all applicable
Insurance Laws (as defined in Section 5.1(i)) with respect to admitted assets
and are in an amount at least equal to the minimum amounts required by Insurance
Laws. The statutory balance sheets and income statements included in the Company
Prepared SAP Statements have been audited by independent certified public
accountants, and the Company has made available to Parent true and complete
copies of all audit opinions related thereto. The Company has made available to
Parent true and complete copies of all financial examination reports of
insurance departments and any insurance regulatory agencies since January 1,
1996 relating to the Company Insurance Subsidiaries and a list of all pending
market conduct examinations.
(f) Absence of Certain Changes. Except as disclosed in the Company
Reports filed prior to the date hereof or otherwise set forth in Section 5.1(f)
of the Company Disclosure Letter, since the Audit Date and prior to the date
hereof the Company and its Subsidiaries have conducted their businesses only in
the ordinary and usual course of such businesses and there has not been (i) any
change, event or circumstance which, individually or in the aggregate, has had
or would reasonably be expected to have a Company Material Adverse Effect; (ii)
any material damage, destruction or other casualty loss with respect to any
material tangible asset or property owned, leased or otherwise used by the
Company or any of its Subsidiaries, whether or not covered by insurance; (iii)
any declaration, setting aside or payment of any dividend or other distribution
in respect of the stock of the Company, except for regular quarterly cash
dividends on its Common Shares publicly announced prior to the date hereof; (iv)
any material change by the Company in accounting principles, practices or
methods other than those required by GAAP or SAP; (v) any material addition, or
any development involving a prospective material addition, to the Company's
aggregate reserves for future policy benefits or other policy claims and
benefits; or (vi) any change in the accounting, actuarial, investment,
reserving, underwriting or claims administration policies, practices,
procedures, methods, assumptions or principles of any
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Company Insurance Subsidiary that is material to the Company and its
Subsidiaries, taken as a whole. Since the Audit Date, except as provided for
herein, or as set forth in Section 5.1(f) of the Company Disclosure Letter, or
as disclosed in the Company Reports filed prior to the date hereof, there has
not been any increase in the compensation payable or that could become payable
by the Company or any of its Subsidiaries to any of the top 12 most highly
compensated employees or any amendment of any of the Compensation and Benefit
Plans (as defined in Section 5.1(h)(i)) other than increases or amendments in
the ordinary course and increases or amendments approved by Parent.
(g) Litigation. Except as specifically disclosed in the Company Reports
filed prior to the date hereof, there are no civil, criminal or administrative
actions, suits, claims, hearings, investigations or proceedings pending or, to
the knowledge of the Company, threatened against the Company or any of its
Subsidiaries, directors or officers, except for those that would not,
individually or in the aggregate, have a Company Material Adverse Effect or
prevent or materially burden or materially impair the ability of the Company to
consummate the transactions contemplated by this Agreement or by the Stock
Option Agreement.
(h) Employee Benefits. (i) Section 5.1(h) of the Company Disclosure
Letter contains a partial list of the Company's material bonus, deferred
compensation, pension, retirement, profit-sharing, thrift, savings, employee
stock ownership, stock bonus, stock purchase, restricted stock, stock option,
employment, termination, severance, change of control, compensation, medical,
health or other plan, agreement, policy or arrangement that covers any
employees, directors, former employees or former directors of the Company or any
of its Subsidiaries including the principal terms of the Stay Bonus Plan
approved by the board of directors of the Company. (This list, together with all
other such plans, arrangements and the like, is hereinafter referred to as the
"Compensation and Benefit Plans.") The Compensation and Benefit Plans or any
amendments to any Compensation and Benefit Plans not delivered to Parent do not,
individually or in the aggregate, have undisclosed liabilities in any material
amount.
(ii) All Compensation and Benefit Plans are in substantial compliance
with all applicable Law, including the Internal Revenue Code of 1986, as amended
(together with all regulations promulgated thereunder, the "Code"), and the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Each
Compensation and Benefit Plan that is an "employee pension benefit plan" within
the meaning of Section 3(2) of ERISA (a "Pension Plan") and that is intended to
be qualified under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service (the "IRS"), and the
Company has no knowledge of any circumstances reasonably likely to result in
revocation of any such favorable determination letter. There is no pending or,
to the knowledge of the Company, threatened material litigation relating to the
Compensation and Benefit Plans. Neither the Company nor any of its Subsidiaries
has engaged in a transaction with respect to any Compensation and Benefit Plan
that, assuming the taxable period of such transaction expired as of the date
hereof, would subject the Company or any of its Subsidiaries to a material tax
or penalty imposed by either Section 4975 of the Code or Section 502 of ERISA.
(iii) No liability under Subtitle C or D of Title IV of ERISA has been
or is expected to be incurred by the Company or any Subsidiary with respect to
any ongoing, frozen or terminated
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"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any of them, or the single-employer plan of
any entity which is considered one employer with the Company under Section 4001
of ERISA or Section 414 of the Code (an "ERISA Affiliate"). The Company and its
ERISA Affiliates have not contributed, or been obligated to contribute, to a
multiemployer plan under Subtitle E of Title IV of ERISA at any time since
September 26, 1980. No notice of a "reportable event," within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Pension Plan by the Company or any
ERISA Affiliate.
(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan as of the date hereof have been timely made or
have been reflected on the most recent consolidated balance sheet included or
incorporated by reference in the Company Reports filed prior to the date hereof.
Neither any Pension Plan nor any single-employer plan of an ERISA Affiliate has
an "accumulated funding deficiency" (whether or not waived) within the meaning
of Section 412 of the Code or Section 302 of ERISA. Neither the Company nor its
Subsidiaries has provided, or is required to provide, security to any Pension
Plan or to any single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of the Code.
(v) Neither the Company nor its Subsidiaries have any obligations for
retiree health or life benefits under any Compensation and Benefit Plan, except
as set forth in the Company Disclosure Letter.
(vi) Except as described in Section 5.1(h)(vi) of the Company
Disclosure Letter or as provided in this Agreement, the consummation of the
Merger and the other transactions contemplated by this Agreement, either alone
or in connection with a subsequent termination of employment, will not (x)
entitle any employees of the Company or its Subsidiaries to severance pay, or
(y) accelerate the time of payment or vesting or trigger any payment of
compensation or benefits under, increase the amount payable or trigger any other
material obligation pursuant to, any of the Compensation and Benefit Plans.
(vii) All Compensation and Benefit Plans covering current or former
non-U.S. employees or former employees of the Company and its Subsidiaries
comply in all material respects with applicable Law. The Company and its
Subsidiaries have no material unfunded liabilities with respect to any employee
benefit plan that covers such non-U.S. employees.
(viii) Except as provided in Section 5.1(h)(viii) of the Company
Disclosure Letter, no amount that could be received (whether in cash, options or
property, or as a result of the vesting of cash, options or property) by any
employee, officer, director or independent contractor of the Company who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) will be treated as an "excess parachute payment"
(as such term is defined in Section 280G(b)(1) of the Code).
(ix) All Compensation and Benefit Plans that are indicated as frozen
in Section 5.1(h) of the Company Disclosure Letter have been properly amended to
freeze participation and discontinue benefit accruals and notices, if required,
were timely provided to participants.
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(i) Compliance with Laws; Permits. (i) The business and operations of
the Company, and the Company Insurance Subsidiaries, have been conducted in
compliance with all applicable domestic and foreign statutes, regulations and
rules regulating the business of insurance and all applicable orders and
directives of insurance regulatory authorities and market conduct
recommendations resulting from market conduct examinations of insurance
regulatory authorities (collectively, "Insurance Laws"), except where the
failure to so conduct such business and operations would not, individually or in
the aggregate, have a Company Material Adverse Effect. Notwithstanding the
generality of the foregoing, each Company Insurance Subsidiary has marketed,
sold and issued insurance products in compliance, in all material respects, with
Insurance Laws applicable to the business of such Company Insurance Subsidiary
in the respective jurisdictions in which such products have been sold,
including, without limitation, in compliance with all applicable prohibitions
against "redlining" or withdrawal of business lines. In addition, the Company
has no knowledge that its agents have not marketed, sold and issued insurance
products in compliance, in all material respects, with Insurance Laws applicable
to the business of the Company Insurance Subsidiaries in the respective
jurisdictions in which such products have been sold, including, without
limitation, in compliance with all applicable prohibitions against "redlining"
or withdrawal of business lines. In addition, (i) none of the Company Insurance
Subsidiaries is subject to any order or decree of any insurance regulatory
authority relating specifically to such Company Insurance Subsidiary (as opposed
to insurance companies generally); and (ii) each of the Company Insurance
Subsidiaries has filed all reports required to be filed with any insurance
regulatory authority on or before the date hereof as to which the failure to
file such reports would, individually or in the aggregate, have a Company
Material Adverse Effect.
(ii) In addition to Insurance Laws, except as set forth in the Company
Reports filed prior to the date hereof, the businesses of each of the Company
and its Subsidiaries have not been, and are not being, conducted in violation of
any federal, state, local or foreign law, statute, ordinance, rule, regulation
judgment, order, injunction, decree, arbitration award, agency requirement,
license or permit of any Governmental Entity (collectively with Insurance Laws,
"Laws"), except for violations or possible violations that would not,
individually or in the aggregate, have a Company Material Adverse Effect or
prevent or materially burden or materially impair the ability of the Company to
consummate the transactions contemplated by this Agreement or the Stock Option
Agreement. No material change is required in the Company's or any of its
Subsidiaries' processes, properties or procedures in connection with any
applicable Laws, and the Company has not received any notice or communication of
any material noncompliance with any such Laws that has not been cured as of the
date hereof. The Company and its Subsidiaries each has all permits, licenses,
trademarks, patents, trade names, copyrights, service marks, franchises,
variances, exemptions, orders and other governmental authorizations, consents
and approvals necessary to conduct its business as presently conducted except
those the absence of which would not, individually or in the aggregate, have a
Company Material Adverse Effect.
(j) Takeover Statutes. The Company has taken all actions necessary such
that no restrictive provision of any "fair price," "moratorium," "control share
acquisition," "interested shareholder" or other similar anti-takeover statute or
regulation (including, without limitation, Section 203 of the DGCL) (each a
"Takeover Statute") or restrictive provision of any applicable
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anti-takeover provision in the Governing Documents of the Company is, or at the
Effective Time will be, applicable to the Company, Parent, PLC, the Common
Shares, the Tender Offer, the Merger or any other transaction contemplated by
this Agreement or the Stock Option Agreement.
(k) Environmental Matters. Except as disclosed in the Company Reports
filed prior to the date hereof and except for such matters as are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect or as set forth in Section 5.1(k) to the Company Disclosure
Letter: (i) to the knowledge of the Company, there are no liabilities of the
Company or any of its Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined or otherwise arising or relating to any
Environmental Law, and there are no facts, conditions, situations or set of
circumstances that would reasonably be expected to result in or be the basis for
any such liability; (ii) neither the Company nor any of its Subsidiaries has
received any notice, demand, letter, claim or request for information alleging
that the Company or any of its Subsidiaries may be in violation of or liable
under any Environmental Law; or (iii) neither the Company nor any of its
Subsidiaries is subject to any orders, decrees, injunctions or other written
arrangements with any Governmental Entity relating to liability under any
Environmental Law or relating to Hazardous Substances.
As used herein, the term "Environmental Law" means any federal, state,
local or foreign law, statute, ordinance, regulation, judgment, order, decree,
arbitration award, relating to: (A) the protection, investigation or restoration
of the environment, health and safety, wildlife or natural resources, (B) the
handling, use, presence, disposal, release or threatened release of any
Hazardous Substance or (C) noise, odor, wetlands, pollution or environmental
contamination.
As used herein, the term "Hazardous Substance" means any substance that
is: (A) listed, classified or regulated pursuant to any Environmental Law or (B)
any petroleum product or by-product, asbestos-containing material,
lead-containing paint, polychlorinated biphenyls, radioactive materials or
radon.
(l) Taxes. Except as set forth in Section 5.1(l) of the Company
Disclosure Letter or except for such matters as would not, individually or in
the aggregate, have a Company Material Adverse Effect:
(i) the Company and each of its Subsidiaries have (w) filed all Tax
Returns (as defined below) that are required by all applicable Laws to be filed
by them, and such Tax Returns are correct and complete or requests for
extensions to file such Tax Returns have been properly obtained and have not
expired, (x) paid (or the Company has paid on its behalf) all Taxes shown as due
on such Tax Returns, (y) paid, or made adequate provision for the payment of,
all Taxes payable by the Company and each of its Subsidiaries, including all
estimated Taxes due, and (z) paid all other deficiencies or other claims for
Taxes received to date other than those deficiencies or claims for Taxes being
contested in good faith for which adequate provision has been made on the most
recent balance sheet included in the Company Reports;
(ii) all Taxes which the Company and its Subsidiaries are required by
Law to withhold and collect have been duly withheld and collected, and have been
paid over, in a timely manner, to the proper Taxing Authorities (as defined
below) to the extent due and payable;
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(iii) neither the Company nor any of its Subsidiaries have executed any
written waiver to extend the applicable statute of limitations in respect of any
Tax liabilities of the Company or its Subsidiaries;
(iv) neither the Company nor any of its Subsidiaries is a party to any
tax sharing agreement or arrangement, other than between or among the Company
and its Subsidiaries;
(v) all of the federal income Tax Returns filed by or on behalf of
each of the Company and its Subsidiaries have been examined by and settled with
the IRS or the statute of limitations with respect to the relevant Tax liability
has expired, for all taxable periods through and including the period ended on
December 31, 1994;
(vi) all Taxes of the Company and its Subsidiaries due with respect to
any completed audit, examination or deficiency litigation with any Taxing
Authority have been paid in full;
(vii) there is no suit, claim, dispute, audit, deficiency or refund
litigation pending with respect to Taxes of the Company or any of its
Subsidiaries (A) that has a reasonable possibility of being resolved in a manner
adverse to the Company or any of its Subsidiaries and (B) for which adequate
provision has not been made on the most recent balance sheet included in the
Company Reports;
(viii) none of the Company or any of its Subsidiaries is bound by any
currently effective private ruling, closing agreement or similar agreement with
any Taxing Authority relating to a material amount of Taxes;
(ix) none of the Company or any of its Subsidiaries is a "consenting
corporation" within the meaning of Section 341(f) of the Code;
(x) any liability of the Company or any of its Subsidiaries for Taxes
not yet due and payable have been provided for on the most recent balance sheet
included in the Company Reports, in accordance with GAAP; and
(xi) the Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
As used in this Agreement, (A) the term "Tax" (including, with
correlative meaning, the terms "Taxes" and "Taxable") shall mean, with respect
to any Person, (a) all taxes, domestic or foreign, including without limitation
any income (net, gross or other, including recapture of any tax items such as
investment tax credits), alternative or add-on minimum tax, gross income, gross
receipts, premium, gains, sales, use, ad valorem, transfer, recording,
franchise, profits, property (real or personal, tangible or intangible), fuel,
license, withholding (whether on amounts paid to or by such Person), payroll,
employment, unemployment, social security, excise, severance, stamp, occupation,
or environmental tax, customs duties, or other assessments or governmental
charges of any kind whatsoever, together with any interest, penalties, additions
or additional amounts imposed with respect thereto (including, without
limitation, penalties for failure to file Tax Returns, or interest on such
amounts), (b) any joint or several liability of such Person with any
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other Person for the payment of any amounts of the type described in clause (a)
hereof, including as a result of being, or having been at any time, a member of
an affiliated, consolidated, combined or unitary group, and (c) any liability of
such Person for the payment in respect of any amounts of the type described in
(a) as a result of any express or implied obligation to reimburse or indemnify
any other Person, including pursuant to any tax sharing agreement or tax
indemnity arrangement; (B) the term "Tax Return(s)" shall mean all reports,
statements and returns, consolidated, combined, unitary or otherwise (including
without limitation information returns), required to be filed with any Taxing
Authority; and (C) the term "Taxing Authority" shall mean any Governmental
Entity responsible for the imposition, collection or administration of any Tax.
(m) Labor Relations and Employment. (i) Except as set forth in Section
5.1(m) of the Company Disclosure Letter or as would not have a Company Material
Adverse Effect, (a) to the best of the Company's knowledge, the Company or its
Subsidiaries are in compliance with all applicable laws respecting employment
and employment practices, terms and conditions of employment and wages and
hours; (b) the Company or its Subsidiaries have not received written notice of
any investigation, charge or complaint against the Company or its Subsidiaries
pending before the Equal Employment Opportunity Commission, the National Labor
Relations Board, or any other governmental agency or court or other tribunal
regarding an unlawful employment practice; (c) there are no complaints, lawsuits
or other proceedings pending, or to the best of the Company's knowledge,
threatened by or on behalf of any present or former employee of the Company, or
any of its Subsidiaries alleging breach of any express or implied contract of
employment; (d) the Company or its Subsidiaries have not received notice that
any representation petition respecting the employees of the Company or its
Subsidiaries has been filed with the National Labor Relations Board; (e) the
Company or its Subsidiaries are and have been in substantial compliance with all
notice and other requirements under the Worker Adjustment and Retaining
Notification Act or similar state statute. The Company or its Subsidiaries are
not party to any collective bargaining agreement and there is no labor strike,
slowdown or stoppage actually pending or threatened against or affecting the
Company and its Subsidiaries.
(ii) The Company is not aware that any officer or key employee, or that
any group of key employees, intends to terminate their employment with the
Company or any of its Subsidiaries, nor does the Company have a present
intention to terminate the employment of any of the foregoing.
(n) Intellectual Property; Year 2000.
(i) The Company and/or each of its Subsidiaries owns, or is licensed or
otherwise possesses legally enforceable rights to use, all patents, trademarks,
trade names, service marks, copyrights, and any applications therefor,
technology, know-how, computer software programs or applications, and tangible
or intangible proprietary information or materials that are used in the business
of the Company and its Subsidiaries as currently conducted, except for any such
failures to own, be licensed or possess that would not, individually or in the
aggregate, have a Company Material Adverse Effect, and to the knowledge of the
Company all patents, trademarks, trade names, service marks and copyrights owned
by the Company and/or its Subsidiaries are valid and subsisting.
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(ii) All computer systems and computer software used by the Company or
any of its Subsidiaries which the Company expects to be using after December 31,
1999 (A) recognize or are being adapted so that, prior to December 31, 1999,
they shall recognize the advent of the year A.D. 2000 without any adverse change
in operation associated with such recognition, (B) can correctly recognize or
are being adapted so that they can correctly recognize and manipulate date
information relating to dates before, on or after January 1, 2000, including but
not limited to accepting date input, performing calculations on dates or portion
of dates and providing date output, and the operation and functionality of such
computer systems and such computer software will not be adversely affected by
the advent of the year A.D. 2000 or any manipulation of data featuring
information relating to dates before, on or after January 1, 2000, and (C) can
suitably interact with other computer systems and computer software in a way
that does not compromise (y) its ability to correctly recognize the advent of
the year A.D. 2000 or (z) its ability to correctly recognize and manipulate date
information relating to dates before, on or after January 1, 2000 (the
operations of clauses (A), (B) and (C) together, "Millennium Functionality"),
except in each case for such computer systems and computer software, the failure
of which to achieve Millennium Functionality would not, individually or in the
aggregate, have a Company Material Adverse Effect. As of the date hereof, the
future costs in excess of those disclosed in the Company Reports of the
adaptions necessary to achieve Millennium Functionality would not, individually
or in the aggregate, have a Company Material Adverse Effect. The Company is in
compliance with all applicable state insurance department requests for "Year
2000" filings. The Company reasonably believes, after due inquiry, that the
suppliers, vendors, customers or other material third parties used or served by
the Company and its Subsidiaries are addressing or will address Millennium
Functionality in a timely manner, except to the extent that a failure to address
Millennium Functionality by any supplier, vendor, customer or material third
party would not, individually or in the aggregate, have a Company Material
Adverse Effect.
(o) Material Contracts. Other than Contracts of the Company and its
Subsidiaries that are required to be filed and have been filed as exhibits to
the Company Reports, there are no Contracts that are material to the business,
financial position or results of operations of the Company. Each material
Contract is valid, binding and enforceable against the Company in accordance
with its terms and is in full force and effect. True and complete copies of all
such material Contracts have been delivered or have been made available by the
Company to Parent. Neither the Company nor any of its Subsidiaries nor, to the
knowledge of the Company, any other party is in breach of or in default under
any such Contract, and to the knowledge of the Company, no event has occurred
which, with due notice or lapse of time or both, would constitute such a breach
or default, except for such breaches, defaults and events as would not,
individually or in the aggregate, have a Company Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is party to any agreement
containing any provision or covenant limiting in any respect the ability of the
Company or any of its Subsidiaries or, assuming the consummation of the
transactions contemplated by this Agreement, Parent or any of its Subsidiaries,
to (i) sell any products or services of or to any other person, (ii) engage in
any line of business or (iii) compete with or to obtain products or services
from any Person or limiting the ability of any Person to provide products or
services to the Company or any of its Subsidiaries.
(p) Rights Plan. (i) The Company has taken all actions necessary such
that, for all purposes under the Rights Agreement, Parent shall not be deemed an
Acquiring Person (as
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defined in the Rights Agreement), the Distribution Date (as defined in the
Rights Agreement) shall not be deemed to occur, and the rights issuable pursuant
to the Rights Agreement (the "Rights") will not separate from the Common Shares,
as a result of Parent's entering into this Agreement, or the Stock Option
Agreement or consummating the Tender Offer, the Merger and/or the other
transactions contemplated hereby or thereby.
(ii) The Company has taken all necessary action with respect to all of
the outstanding Rights so that, as of immediately prior to the Effective Time
and immediately prior to the consummation of the Tender Offer, (A) neither the
Company nor PLC will have any obligations under the Rights or the Rights
Agreement and (B) the holders of Rights will have no rights under the Rights or
the Rights Agreement.
(q) Title to Assets; Liens. The Company and the Subsidiaries, have good
and marketable title to all of their respective premium balances receivable,
property, equipment and other assets, and such assets are free and clear of any
mortgages, liens, charges, encumbrances, or title defects of any nature
whatsoever, except for (i) such mortgages, liens, charges, encumbrances or title
defects which would not, individually or in the aggregate, have a Company
Material Adverse Effect and (ii) liens for Taxes not yet due or payable or that
are being contested in good faith. The Company and the Subsidiaries have valid
and enforceable leases for the material premises and the equipment, furniture
and fixtures purported to be leased by them.
(r) Insurance Matters. (i) Except as otherwise would not, individually
or in the aggregate, have a Company Material Adverse Effect, all policies,
binders, slips, certificates, annuity contracts and participation agreements and
other agreements of insurance, whether individual or group, in effect as of the
date hereof (including all applications, supplements, endorsements, riders and
ancillary agreements in connection therewith) that are issued by the Company
Insurance Subsidiaries (the "Company Insurance Contracts") and any and all
marketing materials, are, to the extent required under applicable Law, on forms
approved by applicable insurance regulatory authorities or which have been filed
and not objected to by such authorities within the period provided for
objection, and such forms comply in all material respects with all Insurance
Laws applicable thereto and, as to premium rates established by the Company or
any Company Insurance Subsidiary which are required to be filed with or approved
by insurance regulatory authorities, the rates have been so filed or approved,
the premiums charged conform thereto in all material respects, and such premiums
comply in all material respects with all Insurance Laws applicable thereto.
(ii) All reinsurance and coinsurance treaties or agreements, including
retrocessional agreements, to which the Company or any Company Insurance
Subsidiary is a party or under which the Company or any Company Insurance
Subsidiary has any existing rights, obligations or liabilities are in full force
and effect, except for such treaties or agreements the failure to be in full
force and effect of which would not, individually or in the aggregate, have a
Company Material Adverse Effect. Neither the Company nor any Company Insurance
Subsidiary, nor, to the knowledge of the Company, any other insurer or reinsurer
which is party to a reinsurance or coinsurance treaty or agreement to which the
Company or any Company Insurance Subsidiary is a party, is in default in any
material respect as to any provision thereof, and no such agreement contains any
provision providing that such other party thereto may terminate such agreement
by
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reason of the transactions contemplated by this Agreement. The Company has not
received any notice to the effect that the financial condition of any other
insurer or reinsurer which is party to any such agreement is impaired with the
result that a default thereunder may reasonably be anticipated, whether or not
such default may be cured by the operation of any offset clause in such
agreement. No insurer or reinsurer or group of affiliated insurers or reinsurers
accounted for the direction to the Company and the Company Insurance
Subsidiaries or the ceding by the Company and the Company Insurance Subsidiaries
of insurance or reinsurance business in an aggregate amount equal to five
percent or more of the consolidated gross premium income of the Company and the
Company Insurance Subsidiaries for the year ended December 31, 1998. The Company
SAP Statements accurately reflect the extent to which, pursuant to Insurance
Laws, rules and regulations, the Company is entitled to take credit for such
reinsurance.
(iii) Prior to the date hereof, the Company has delivered or made
available to Parent a true and complete copy of the actuarial reports set forth
in Section 5.1(r)(iii) of the Company Disclosure Letter (the "Company Actuarial
Analyses"). The information and data furnished by the Company or any Company
Insurance Subsidiary to its independent actuaries in connection with the
preparation of the Company Actuarial Analyses was accurate and responsive to
their requests in all material respects. Furthermore, to the knowledge of the
Company, each Company Actuarial Analysis was based upon an accurate inventory of
policies in force for the Company and the Company Insurance Subsidiaries, as the
case may be, at the relevant time of preparation. Except as set forth in Section
5.1(r)(iii) of the Company Disclosure Letter, there has not been an independent
actuarial report completed on the Company since December 31, 1996.
(iv) None of Standard & Poor's Corporation, Moody's Investors Service,
Inc. or A.M. Best Company has announced that it presently has under surveillance
or review its rating of the financial strength or claims-paying ability of any
Company Insurance Subsidiary other than normal annual reviews.
(s) Liabilities and Reserves. (i) The reserves for incurred losses,
incurred loss adjustment expenses, incurred but not reported losses and loss
adjustment expenses for incurred but not reported losses carried on the Company
SAP Statements of each Company Insurance Subsidiary were, as of the respective
dates of such Company SAP Statements, in compliance in all material respects
with the requirements for reserves established by the insurance departments of
the state of domicile of such Company Insurance Subsidiary, were determined in
all material respects in accordance with generally accepted actuarial standards
and principles consistently applied, were based on actuarial assumptions that
were in accordance with or stronger than those called for in relevant policy and
contract provisions and were fairly stated in all material respects in
accordance with sound actuarial and statutory accounting principles.
(ii) Except for regular periodic assessments in the ordinary course of
business or assessments based on developments which are publicly known within
the insurance industry, no claim or assessment is pending or, to the knowledge
of the Company, threatened against any Company Insurance Subsidiary which is
peculiar or unique to such Company Insurance Subsidiary by any state insurance
guaranty association in connection with such association's fund relating to
insolvent insurers which if determined adversely, would, individually or in the
aggregate, have a Company Material Adverse Effect.
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(t) Brokers and Finders. Neither the Company nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders fees in connection with
the Tender Offer or the other transactions contemplated in this Agreement except
that the Company has employed Donaldson, Lufkin & Jenrette Securities
Corporation as its financial advisor, the arrangements with which have been
disclosed to Parent prior to the date hereof.
5.2. Representations and Warranties of Parent and Merger Subsidiary.
Parent and Merger Subsidiary each hereby represent and warrant to the Company
that:
(a) Capitalization of Merger Subsidiary. The authorized stock of Merger
Subsidiary consists of 1,000 shares of common stock, par value $.01 per share
("Merger Subsidiary Common Stock"), all of which are duly authorized, validly
issued and outstanding, fully paid and non-assessable. All of the issued and
outstanding stock of Merger Subsidiary is, and at the Effective Time will be,
owned by Parent or a wholly owned Subsidiary of Parent, and there are (i) no
other shares of stock or voting securities of Merger Subsidiary, (ii) no
securities of Merger Subsidiary convertible into or exchangeable for shares of
stock or voting securities of Merger Subsidiary and (iii) no options or other
rights to acquire from Merger Subsidiary, and no obligations of Merger
Subsidiary to issue or deliver, any stock, voting securities or securities
convertible into or exchangeable for stock or voting securities of Merger
Subsidiary, except securities that may be delivered to Parent. Merger Subsidiary
has not conducted any business prior to the date hereof and has no, and prior to
the Effective Time will have no, assets, liabilities or obligations of any
nature other than those incident to its formation and pursuant to this Agreement
and the Merger and the other transactions contemplated by this Agreement.
(b) Organization, Good Standing and Qualification. Each of Parent and
Merger Subsidiary is a corporation duly organized, validly existing and in good
standing under the Laws of its jurisdiction of organization and has all
requisite corporate power and authority to own and operate its properties and
assets and to carry on its business as presently conducted and is qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction where the ownership or operation of its properties or conduct of
its business requires such qualification, except where the failure to be so
qualified or in such good standing, would not, individually or in the aggregate,
have a Parent Material Adverse Effect. As used in this Agreement, the term
"Parent Material Adverse Effect" means a material adverse effect that is
reasonably likely to prevent, materially delay or materially impair the ability
of Parent or Merger Subsidiary to consummate the transactions contemplated by
this Agreement.
(c) Corporate Authority. Each of Parent and Merger Subsidiary has all
requisite corporate power and authority and has taken all corporate action
necessary in order to execute, deliver and perform its obligations under this
Agreement and to consummate the Tender Offer and the Merger. This Agreement is a
valid and binding agreement of Parent and Merger Subsidiary, enforceable against
each of Parent and Merger Subsidiary in accordance with its terms, subject to
the Bankruptcy and Equity Exception.
(d) Governmental Filings; No Violations. (i) Other than the filings
and/or notices (A) pursuant to Section 1.3, (B) under the HSR Act and the
Exchange Act, (C) required to be made
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with the NYSE or the London Stock Exchange, and (D) the filing of appropriate
documents with, and approval of, the respective Commissioners of Insurance or
similar regulatory authorities of the states set forth in Section 5.1(d) of the
Company Disclosure Letter and such notices and consents as may be required under
the antitrust notification or insurance Laws of any state or country in which
the Company, Parent or any of their respective subsidiaries is domiciled or does
business, no notices, reports or other filings are required to be made by Parent
or Merger Subsidiary with, nor are any consents, registrations, approvals,
permits or authorizations required to be obtained by Parent or Merger Subsidiary
from, any Governmental Entity, in connection with the execution and delivery of
this Agreement by Parent and Merger Subsidiary and the consummation by Parent
and Merger Subsidiary of the Merger and the other transactions contemplated
hereby, except those that the failure to make or obtain would not, individually
or in the aggregate, have a Parent Material Adverse Effect.
(ii) The execution, delivery and performance of this Agreement by Parent
and Merger Subsidiary do not, and the consummation by Parent and Merger
Subsidiary of the Merger and the other transactions contemplated hereby will
not, constitute or result in (A) a breach or violation of, or a default under,
the Governing Documents of Parent and Merger Subsidiary or the comparable
governing instruments of any of its Subsidiaries, (B) a breach or violation of,
a default under, the right of cancellation, termination or acceleration by
another Person or the creation of a lien, pledge, security interest or other
encumbrance on the assets of Parent or any of its Subsidiaries (with or without
notice, lapse of time or both) pursuant to, any Contracts binding upon Parent or
any of its Subsidiaries or (C) any Law or governmental or non-governmental
permit or license to which Parent or any of its Subsidiaries is subject, except,
in the case of clause (B) or (C) above, for a breach, violation, default,
acceleration, creation or change that would not, individually or in the
aggregate, have a Parent Material Adverse Effect.
(e) Financing. Parent has, or will have prior to the Closing Date,
sufficient cash, available lines of credit or other sources of immediately
available funds to enable it to make the aggregate cash payments required to be
paid pursuant to the Tender Offer and Section 4.1 and any other amounts to be
paid by it hereunder.
(f) Share Ownership. PLC, Parent, Merger Subsidiary and their
respective Subsidiaries beneficially do not own in the aggregate more than 3.5%
of the outstanding Common Shares.
(g) Brokers or Finders. Neither Parent, PLC nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders fees in connection with
the Tender Offer or the other transactions contemplated in this Agreement except
that Parent or an affiliate of Parent has employed Salomon Smith Barney Inc. as
its financial advisor.
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ARTICLE VI.
Covenants
6.1. Interim Operations. Except as set forth in Section 6.1 of the
Company Disclosure Letter, the Company covenants and agrees as to itself and its
Subsidiaries that, after the date hereof and prior to the Effective Time (unless
Parent shall otherwise approve in writing, and except as otherwise expressly
contemplated by this Agreement or the Stock Option Agreement):
(a) its and its Subsidiaries' businesses shall be conducted
only in the ordinary and usual course (it being understood and agreed
that nothing contained herein shall permit the Company to enter into or
engage in (through acquisition, product extension or otherwise) the
business of selling any products or services materially different from
existing products or services of the Company and its Subsidiaries or to
enter into or engage in new lines of business (as such term is defined
in the National Association of Insurance Commissioner's instructions
for the preparation of the annual statement form) without Parent's
prior written approval);
(b) to the extent consistent with (a) above, it and each of
its Subsidiaries shall use its respective reasonable best efforts to
preserve its business organization intact and maintain its existing
relations and goodwill with customers, suppliers, reinsurers,
distributors, creditors, lessors, employees and business associates;
(c) it shall not (i) amend any Governing Document or amend,
modify or terminate the Rights Agreement; (ii) split, combine or
reclassify its outstanding shares of capital stock; (iii) authorize,
declare, set aside or pay any dividend payable in cash, stock or
property in respect of any capital stock other than dividends from its
wholly owned Subsidiaries and other than regular quarterly dividends
paid by the Company on its Common Shares not in excess of $0.18 per
share, with usual record and payment dates and in accordance with the
Company's past dividend policy; or (iv) repurchase, redeem or otherwise
acquire, or permit any of its Subsidiaries to purchase or otherwise
acquire, any shares of its stock or any securities convertible into or
exchangeable or exercisable for any shares of its stock;
(d) neither it nor any of its Subsidiaries shall (i) issue,
sell, pledge, dispose of or encumber any shares of, or securities
convertible into or exchangeable or exercisable for, or options,
warrants, calls, commitments or rights of any kind to acquire any
shares, of its or any Subsidiary's capital stock of any class or any
other property or assets (other than Common Shares issuable pursuant to
options outstanding on the date hereof under any of the Company Stock
Plans); (ii) other than in the ordinary and usual course of business,
transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of
or encumber any other property or assets (including capital stock of
any of its Subsidiaries) or incur or modify any material indebtedness
or other liability; or (iii) except as set forth in Section 6.1(d) of
the Company Disclosure Letter, make or authorize or commit for any
capital expenditures, including entering into capital lease
obligations, other than in amounts not exceeding $1,000,000 in the
aggregate or, by any means, make any acquisition of, or
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investment in, assets or stock of any other Person or entity, including
by way of assumption reinsurance, in excess of $1,000,000 individually
or $5,000,000 in the aggregate (other than in connection with ordinary
course investment activities);
(e) neither it nor any of its Subsidiaries shall terminate,
establish, adopt, enter into, make any new grants or awards under,
amend or otherwise modify, any Compensation and Benefit Plans including
the Stay Bonus Plan, or increase the salary, wage, bonus or other
compensation of any employees except increases occurring in the
ordinary and usual course of business (which shall include normal
periodic performance reviews and related compensation and benefit
increases) or promote any employee into any of bands 1, 2, 3 or 4, or
from one of such bands into another of such bands;
(f) neither it nor any of its Subsidiaries shall pay,
discharge, settle or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, settlement, discharge or satisfaction of
claims, liabilities or obligations legally due and payable and arising
in the ordinary and usual course of business, claims arising under the
terms of products, contracts or policies issued by the Company
Insurance Subsidiaries in the ordinary and usual course of business and
such other claims, liabilities or obligations as shall not, subject to
Section 5.1(a) of the Company Disclosure Letter, exceed $2,000,000 in
the aggregate;
(g) neither it nor any of its Subsidiaries shall make, change
or revoke any material Tax election, settle or compromise any material
Tax liability arising in any audit, change its method of accounting if
such change would have a material impact on Taxes, enter into any
closing or other agreement with respect to a material amount of Taxes,
file a request for refund of a material amount of Taxes (but not
including the prosecution of any refund claim pending on the date
hereof), or file an amended Tax Return if such Tax Return is materially
different from the original return to which it relates, except, in each
case, (i) in the ordinary course of business and consistent with the
Company's past practice in respect of the Tax at issue in the
jurisdiction in question or (ii) with the consent of Parent, such
consent not to be unreasonably withheld;
(h) neither it nor any of its Subsidiaries shall enter into
any agreement containing any provision or covenant limiting in any
material respect the ability of the Company or any Subsidiary or
affiliate to (i) sell any products or services of or to any other
Person, (ii) engage in any line of business or (iii) compete with or to
obtain products or services from any Person or limiting the ability of
any Person to provide products or services to the Company or any of its
Subsidiaries or Affiliates;
(i) neither it nor any of its Subsidiaries shall enter into
any (A) commutations or (B) new quota share or other reinsurance
transaction, in the case of clause (B), (i) which does not contain
cancellation and termination provisions reasonably customary in the
industry for that type of transaction, (ii) which, except in the
ordinary course of business, materially increases or reduces the
Company Insurance Subsidiaries' consolidated ratio of net written
premiums to gross written premiums or (iii) except as set forth in
Section 6.1(i) of the Company Disclosure Letter, pursuant to which
$5,000,000 or more
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in gross written premiums are ceded by the Company Insurance
Subsidiaries to any Person other than the Company or any of its
Subsidiaries;
(j) neither it nor any of the Company Insurance Subsidiaries
will alter or amend in any material respect their existing investment
guidelines or policies;
(k) neither it nor any of its Subsidiaries shall take any
action or omit to take any action that would cause any of its
representations and warranties herein to become untrue in any material
respect;
(l) neither it nor its Subsidiaries shall permit a material
change in any of its underwriting, investment, actuarial, financial
reporting or accounting practices or policies or in any material
assumption underlying an actuarial practice or policy, except as may be
required by any change in GAAP, statutory accounting principles or
applicable Law; and
(m) neither it nor any of its Subsidiaries will authorize or
enter into an agreement to do any of the foregoing.
6.2. Acquisition Proposals. The Company will not, and will not permit
or cause any of its Subsidiaries or any of its or its Subsidiaries officers or
directors to, and shall direct its and its Subsidiaries' Representatives (as
defined in Section 6.6(a)(i)) not to, directly or indirectly, initiate, solicit,
encourage or otherwise facilitate any inquiries or the making of any proposal or
offer with respect to a merger, reorganization, share exchange, consolidation,
business combination, recapitalilzation or similar transaction involving, or any
purchase of 15% or more of the assets or any equity securities of, the Company
or any of its Subsidiaries (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal"). The Company will not, and will not
permit or cause any of its Subsidiaries or any of its or its Subsidiaries
officers or directors to, and shall direct its and its Subsidiaries'
Representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, directly or indirectly,
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any Person relating to an Acquisition
Proposal, whether made before or after the date of this Agreement, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal
(including, without limitation, by means of an amendment to the Rights
Agreement); provided, however, that nothing contained in this Agreement shall
prevent the Company or its board of directors from: (i) complying with Rule
14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal
or (ii) at any time prior to the approval of the Merger by the Company Requisite
Vote (A) providing information in response to a request therefor by a Person who
has made an unsolicited bona fide written Acquisition Proposal if the board of
directors receives from the Person so requesting such information an executed
confidentiality agreement on terms substantially equivalent to those contained
in the Confidentiality Agreement (as defined in Section 9.7); (B) engaging in
any negotiations or discussions with any Person who has made an unsolicited bona
fide written Acquisition Proposal or (C) recommending such an Acquisition
Proposal to the stockholders of the Company, if and only to the extent that, in
the case of clauses (A), (B) and (C) above, (i) the board of directors of the
Company determines in good faith, after consultation with and receipt of advice
of outside legal counsel, that such action is required in order for its
directors to comply with their respective
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fiduciary duties under applicable law and (ii) the board of directors of the
Company determines in good faith (after consultation with its financial advisor)
that such Acquisition Proposal, if accepted, is reasonably likely to be
consummated, taking into account all legal, financial and regulatory aspects of
the proposal and the Person making the proposal, and would, if consummated,
result in a more favorable transaction than the transaction contemplated by this
Agreement (any such Acquisition Proposal being referred to in this Agreement as
a "Superior Proposal"). The Company will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing. The Company agrees
that it will take the necessary steps to promptly inform the individuals or
entities referred to in the first sentence hereof of the obligations undertaken
in this Section 6.2 and in the Confidentiality Agreement. The Company will
notify Parent promptly, but in any event not later than one day following
receipt, if any such inquiries, proposals or offers are received by, any such
information is requested from, or any such discussions or negotiations are
sought to be initiated or continued with, any of its Representatives indicating,
in connection with such notice, the name of such Person and the material terms
and conditions of any proposals or offers and thereafter shall keep Parent
informed, on a current basis, of the status and terms of any such proposals or
offers and the status of any such negotiations or discussions. The Company also
will promptly request each Person that has heretofore executed a confidentiality
agreement in connection with its consideration of an Acquisition Proposal to
return or dispose of all confidential information heretofore furnished to such
Person by or on behalf of it or any of its Subsidiaries in accordance with such
agreement.
6.3. Information Supplied. The Company and Parent each agrees, as to
itself and its Subsidiaries, that none of the information supplied or to be
supplied by it or its Subsidiaries for inclusion or incorporation by reference
in (i) the Offer Documents, the Schedule 14D-1 and the Schedule 14D-9 will, at
the time of filing thereof and at the time of distribution thereof, contain any
untrue statement of material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading, and (ii) the
Proxy Statement (as defined in Section 6.5(a)) and any amendment or supplement
thereto will, at the date of mailing to stockholders and at the time of the
Stockholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
6.4. Stockholders Meeting. If the approval by the holders of Common
Shares constituting the Company Requisite Vote is required under DGCL to
consummate the Merger and is required to be given at a duly held meeting of
stockholders (the "Stockholders Meeting"), the Company will take, in accordance
with its Governing Documents, all action necessary to convene a meeting of
holders of Common Shares as promptly as practicable upon the written request of
Parent to consider and vote upon the approval of the Merger. The Company's board
of directors shall recommend approval of the Merger, shall not withdraw or
modify such recommendation and shall take all lawful action to solicit such
approval unless, in the good faith judgment of the board of directors of the
Company, after consultation with and receipt of advice of outside legal counsel,
the failure to take the foregoing actions is required under applicable law.
Without limiting the generality of the foregoing, in the event that the
Company's board of directors withdraws or modifies its recommendation, the
Company nonetheless shall, if Parent so
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requests, cause such a meeting of the stockholders to be convened and a vote
taken with respect to the Merger, as contemplated by Section 251 of the DGCL.
6.5. Filings; Other Actions; Notification. (a) In connection with the
Stockholders Meeting referred to in Section 6.4 above, the Company shall
promptly prepare and deliver to Parent a draft of a proxy statement (the "Proxy
Statement"). Thereafter, the Company and Parent shall use their reasonable best
efforts to cooperate fully to make such changes to the Proxy Statement as may be
reasonably requested by Parent or otherwise may be appropriate, file the Proxy
Statement with the SEC as soon as practicable and respond promptly to any SEC
comments. Upon filing the final, definitive Proxy Statement with the SEC, the
Company shall mail such Proxy Statement to its stockholders. Notwithstanding the
foregoing, if Merger Subsidiary obtains 90 percent or more of the Common Shares
through the Tender Offer, Merger Subsidiary shall use the short form merger
provisions of Section 253 of the DGCL.
(b) The Company and Parent shall use and shall cause their "ultimate
parent entities," (if applicable) to use, their best efforts to as promptly as
practicable file notifications under the HSR Act in connection with the Merger
(and the Tender Offer as applicable) and the transactions contemplated hereby,
including, but not limited to, the Stock Option Agreement, and to respond as
promptly as practicable to any inquiries received from the Federal Trade
Commission and the Antitrust Division of the Department of Justice for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other Governmental Entity in connection with antitrust matters.
(c) The Company and Parent shall cooperate with each other and use
(and shall cause their respective Subsidiaries to use) all reasonable efforts
(i) to cause to be done all things, necessary, proper or advisable on its part
under this Agreement and applicable Laws to consummate and make effective the
Tender Offer, the Merger and the other transactions contemplated by this
Agreement and the Stock Option Agreement as soon as practicable, including
preparing and filing as promptly as practicable all documentation to effect all
necessary notices, reports and other filings, and (ii) to obtain as promptly as
practicable all consents, registrations, approvals, permits and authorizations
necessary or advisable to be obtained from any third party and/or any
Governmental Entity in connection with, as a result of or in order to consummate
the Tender Offer, the Merger or any of the other transactions contemplated by
this Agreement or the Stock Option Agreement, provided, however, that nothing in
this Section 6.5 shall require, or be construed to require, Parent, in
connection with the receipt of any regulatory approval, to proffer to, or agree
to any conditions relating to, or changes or restriction in, the operations of
any such assets or businesses which, in either case, could, in the reasonable
judgment of the board of directors of Parent, materially and adversely impact
the economic or business benefits to PLC and its Subsidiaries of the
transactions contemplated by this Agreement or materially impair the ability of
any Parent Company (including the Company following the Effective Time), to
conduct its business in the manner as such business is now being conducted.
Parent and Merger Subsidiary shall use reasonable best efforts to cause to be
filed such statements on Form A as are required to be filed with the
Governmental Entities identified in Section 5.1(d) of the Company Disclosure
Letter by August 1, 1999. It is expressly understood by the parties hereto that
the representatives of the Company and Parent respectively shall have the right
to attend and participate in any hearing, proceeding, meeting or conference
before or with a
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Governmental Entity relating to the transactions contemplated hereby. In
furtherance of the foregoing, the Company and Parent shall provide each other
reasonable advance notice of any such hearing, proceeding, meeting or
conference. Subject to applicable Laws relating to the exchange of information,
Parent and the Company shall have the right to review in advance, and to the
extent practicable each will consult the other on, all the information relating
to Parent or the Company, as the case may be, and any of their respective
Subsidiaries, that appear in any filing made with, or written materials
submitted to any Governmental Entity in connection with the Tender Offer, the
Merger and the other transactions contemplated by this Agreement; provided that
nothing in this Section 6.5 shall require Parent to provide information
contained in its notification under the HSR Act to the Company that it
reasonably deems to be confidential. In exercising the foregoing right, each of
the Company and Parent shall act reasonably and as promptly as practicable.
(d) The Company and Parent each shall, upon request by the other,
furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with the Offer Documents, the Schedule
14D-1, the Schedule 14D-9, the Proxy Statement, or any other statement, filing,
notice or application made by or on behalf of Parent, the Company or any of
their respective Subsidiaries to any third party and/or any Governmental Entity
in connection with the Tender Offer, the Merger and the other transactions
contemplated by this Agreement; provided that nothing in this Section 6.5 shall
require Parent to provide information contained in its notification under the
HSR Act to the Company that it reasonably deems to be confidential.
(e) (i) The Company and Parent each shall keep the other apprised of
the status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notices or other
communications received by Parent or the Company, as the case may be, or any of
its Subsidiaries, from any third party and/or any Governmental Entity with
respect to the Tender Offer, the Merger and the other transactions contemplated
by this Agreement. The Company and Parent each shall give prompt notice to the
other of any change that would have a Company Material Adverse Effect or Parent
Material Adverse Effect, respectively.
(ii) The Company and Parent each shall give prompt notice to the
other of (A) the occurrence, or nonoccurrence, of any event the occurrence, or
nonoccurrence, of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at or prior to the Effective Time and (B) any material failure of any party to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that the delivery of notice
pursuant to this Section 6.5(e)(ii) shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
6.6. Access. (a) (i) Upon reasonable notice, and except as may
otherwise be required by applicable Law, the Company shall (and shall cause its
Subsidiaries to) afford Parent's directors, officers, employees, counsel,
accountants, financial advisors and other authorized agents and representatives
(collectively, "Representatives") access, during normal business hours
throughout the period prior to the earlier of the termination of this Agreement
or the Effective
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Time, to the Company's and its Subsidiaries' management, properties, books,
contracts, records and personnel (and will use commercially reasonable efforts
to provide access to its auditors (including such auditors' work papers)) and,
during such period, shall (and shall cause its Subsidiaries to) furnish promptly
to Parent all information concerning the Company's and its Subsidiaries'
business, properties and personnel as may reasonably be requested; provided,
that no investigation pursuant to this Section shall affect or be deemed to
modify any representation or warranty made by the Company and provided, further,
that the foregoing shall not require the Company to permit any inspection, or to
disclose any information, that in the reasonable judgment of the board of
directors of the Company would result in the disclosure of any trade secrets of
third parties or violate any of its obligations with respect to confidentiality
if the Company shall have used all reasonable efforts to obtain the consent of
such third party to such inspection or disclosure. All requests for information
made pursuant to this Section 6.6 (a) shall be directed to an executive officer
of the Company or such Person as may be designated by the Company's executive
officers. All such information shall be governed by the terms of the
Confidentiality Agreement.
6.7. Publicity. The initial press release relating to the transaction
contemplated by this Agreement shall be a joint press release and thereafter the
Company and Parent shall consult with each other prior to issuing any press
releases or otherwise making public announcements with respect to the Tender
Offer, the Merger and the other transactions contemplated by this Agreement and
the Stock Option Agreement and prior to making any filings with any third party
and/or any Governmental Entity (including any national securities exchange) with
respect thereto, except as may be required by Law or by obligations pursuant to
any listing agreement with or rules of any national or foreign securities
exchange.
6.8. Employee Benefits. (a) Parent agrees that those individuals who
are employed by the Company or any of its Subsidiaries immediately prior to the
Effective Time shall continue to be employees of the Surviving Corporation and
its Subsidiaries as of the Effective Time (each such employee, an "Affected
Employee"); provided, however, that this Section 6.8 shall not be construed to
limit the ability of the applicable employer to terminate the employment of any
Affected Employee at any time.
(b) From the Effective Time until December 31, 2000, Parent shall, or
shall cause the Surviving Corporation to, continue and maintain in effect all
employee benefit plans and programs of the Company and its Subsidiaries which
are listed in Section 6.8(b) of the Company Disclosure Letter, as in effect on
the date hereof or in the alternative for retirement plan purposes, a retirement
plan of Parent which provides the same or substantially similar employer
provided benefits, to the extent such continuance and maintenance is permissible
under applicable law.
(c) Effective as of January 1, 2001, or such other date as Parent
makes participation in employee benefit plans or arrangements of Parent
available to Affected Employees (the "Plan Entry Date"), Parent shall, or shall
cause the Surviving Corporation to, give Affected Employees full credit for
purposes of eligibility, vesting, benefit accrual (except to the extent giving
such credit would result in the duplication of benefits and except for benefit
accruals under any defined benefit pension plan or defined benefit supplemental
retirement plan (other than as required by law)) and determination of the level
of benefits under any such employee benefit plans or
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arrangements for such Affected Employees' service with the Company or any
Subsidiary of the Company to the same extent recognized by the Company or such
Subsidiary immediately prior to the Plan Entry Date.
(d) Effective as of the Plan Entry Date, Parent shall, or shall cause
the Surviving Corporation to, (i) waive all limitations as to preexisting
conditions, exclusions and waiting periods with respect to participation and
coverage requirements applicable to the Affected Employees under any welfare
benefit plans of Parent in which such Affected Employees may be eligible to
participate, other than limitations or waiting periods that were already in
effect with respect to such Affected Employees and that had not been satisfied
as of the Plan Entry Date under any welfare plan maintained for the Affected
Employees immediately prior to the Plan Entry Date. With respect to any plan for
which the Plan Entry Date is prior to January 1, 2000, Parent shall, or shall
cause the Surviving Corporation to, provide each Affected Employee with credit
for any co-payments and deductibles paid prior to the Plan Entry Date in
satisfying any applicable deductible or out-of-pocket requirements under any
welfare plans that such Affected Employees are eligible to participate in after
the Plan Entry Date.
(e) Parent shall cause the Surviving Corporation to honor the
obligations described in Section 6.8(e) of the Company Disclosure Letter with
respect to stay bonuses and other incentive compensation arrangements, it being
agreed that such stay bonus arrangements will provide benefits in lieu of
benefits that would otherwise have been provided under the Orion Specialty
Restructuring Retention Plan and the Security Re Retention Agreements.
(f) During calendar year 2000, Affected Employees shall be eligible to
participate in the incentive compensation programs of Parent, subject to the
eligibility conditions and other terms of such plans, with the level of such
participation being subject to the discretion of the Persons or committees
administering such plans.
6.9. Expenses. If the Merger or the Tender Offer is consummated, the
Surviving Corporation shall pay all charges and expenses, including those of the
Exchange Agent, in connection with the transactions contemplated in Article IV.
Except as otherwise provided in Section 8.5(b), whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the Tender Offer, the Merger and the other transactions contemplated by this
Agreement shall be paid by the party incurring such expense, except that
expenses incurred in connection with the printing and mailing of the Offer
Documents, the Schedule 14D-1, the Schedule 14D-9 and the Proxy Statement shall
be shared equally by Parent and the Company.
6.10. Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time, Parent agrees that it will
indemnify and hold harmless each present and former director and officer of the
Company, (when acting in such capacity) determined as of the Effective Time
(each, an "Indemnified Party" and, collectively, the "Indemnified Parties"),
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities (collectively, "Costs") incurred
in connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal,
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administrative or investigative, arising out of matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time to the fullest extent that the Company was permitted
under Delaware Law and its Governing Documents in effect on the date hereof to
indemnify such Person (and Parent shall also advance expenses as incurred to the
fullest extent permitted under applicable Law provided the Person to whom
expenses are advanced provides a written affirmation of his or her good faith
belief that the standard of conduct necessary for indemnification has been met
and an undertaking to repay such advances if it is ultimately determined that
such Person is not entitled to indemnification).
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 6.11, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify Surviving Corporation
and Parent thereof but the failure to so notify shall not relieve Parent of any
liability it may have to such Indemnified Party if such failure does not
materially prejudice the indemnifying party. In the event of any such claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), (i) Parent or the Surviving Corporation shall have the right to
assume the defense thereof and neither Parent or Surviving Corporation shall be
liable to such Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, except that if Parent or the Surviving
Corporation elects not to assume such defense, or if counsel for the Indemnified
Parties advises that there are issues that raise conflicts of interest between
Parent or the Surviving Corporation and the Indemnified Parties, the Indemnified
Parties may retain counsel satisfactory to them, and Parent shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, however, that Parent and
the Surviving Corporation shall be obligated pursuant to this paragraph (b) to
pay for only one firm of counsel for all Indemnified Parties in any jurisdiction
unless the use of one counsel for such Indemnified Parties would present such
counsel with a conflict of interest, (ii) the Indemnified Parties will cooperate
in the defense of any such matter, and (iii) Parent and the Surviving
Corporation shall not be liable for any settlement effected without their prior
written consent; and provided, further, that neither Parent nor the Surviving
Corporation shall have any obligation hereunder to any Indemnified Party if and
when a court of competent jurisdiction shall ultimately determine, and such
determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
Law.
(c) The Surviving Corporation shall continue to maintain the Company's
existing officers' and directors' liability insurance ("D&O Insurance") or D&O
Insurance that is substantially comparable to the Company's existing D&O
Insurance for a period of six years after the Effective Time so long as the
annual premium therefor is not in excess of 200% of the last annual premium paid
prior to the date hereof (such last annual premium being hereinafter referred to
as the "Current Premium"); provided, however, that if the existing D&O Insurance
or substantially comparable D&O Insurance cannot be acquired during the six-year
period for not in excess of 200% of the Current Premium, then the Company will
obtain as much D&O Insurance as can be obtained for the remainder of such period
for a premium not in excess (on an annualized basis) of 200% of the Current
Premium.
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(d) The provisions of this Section 6.11 are intended to be for the
benefit of, and shall be enforceable by, each of the Indemnified Parties, their
heirs and their representatives.
6.11. Other Actions by the Company and Parent.
(a) Rights. Except as provided in Section 5.1(p) with respect to the
Merger, the Tender Offer and the other transactions contemplated by this
Agreement and the Option Agreements, the Company's board of directors shall not,
without the prior written consent of Parent, (a) amend the Rights Agreement or
(b) take any action with respect to, or make any determination under, the Rights
Agreement, including a redemption of the Rights to facilitate an Acquisition
Proposal.
(b) Takeover Statute. If any Takeover Statute is or may become
applicable to the Tender Offer, the Merger or the other transactions
contemplated by this Agreement or the Stock Option Agreement, each of Parent and
the Company and its respective board of directors shall grant such approvals and
take such actions as are necessary so that such transactions may be consummated
as promptly as practicable on the terms contemplated by this Agreement or the
Stock Option Agreement, as the case may be, or by the Tender Offer or the Merger
and otherwise act to eliminate or minimize the effects of such statute or
regulation on such transactions.
(c) NYSE De-Listing. The Surviving Corporation shall use its best
efforts to cause the Common Shares to be delisted from the NYSE and
de-registered under the Exchange Act as soon as practicable following the
Effective Time.
ARTICLE VII.
Conditions
7.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction (or, if permissible, waiver) at or prior to the Effective Time of
each of the following conditions:
(a) Stockholder Approval. If required under the DGCL, the Merger shall
have been duly approved by holders of Common Shares constituting the Company
Requisite Vote and shall have been duly approved by the sole stockholder of
Merger Subsidiary in accordance with applicable Law.
(b) Regulatory Consents. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and, other than the applicable filing provided for in Section 1.3,
all notices, reports and other filings required to be made prior to the
Effective Time by the Company or Parent or any of their respective Subsidiaries
with, and all consents, registrations, approvals, permits and authorizations
required to be obtained prior to the Effective Time by the Company or Parent or
any of their respective Subsidiaries from, any Governmental Entity
(collectively, "Governmental Consents"), including, but not limited to, the
consent of those insurance commissioners, directors or superintendents of the
state insurance departments set forth on Section 5.1(d) of the Company
Disclosure Letter, in connection with the
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execution and delivery of this Agreement and the consummation of the Merger and
the other transactions contemplated hereby shall have been made or obtained (as
the case may be) and shall be in full force and effect.
(c) Legal Prohibition. No court or Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
Law, statute, ordinance, rule, regulation, judgment, decree, injunction or other
order (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the Merger
(collectively, an "Order").
(d) Purchase of Shares Pursuant to Tender Offer. Merger Subsidiary
shall have purchased Common Shares pursuant to the Tender Offer; provided that
the purchase of Common Shares pursuant to the Tender Offer shall not be a
condition to the obligations of Parent and Merger Subsidiary hereunder if Merger
Subsidiary shall fail to accept for payment and pay for Common Shares pursuant
to the Tender Offer in violation of the terms thereof or of this Agreement.
ARTICLE VIII.
Termination
8.1. Termination by Mutual Consent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval by stockholders of the Company referred to in
Section 7.1 (a), by mutual written consent of the Company and Parent by action
of their respective boards of directors.
8.2. Termination by Either Parent or the Company. This Agreement may
be terminated and the transactions contemplated hereby may be abandoned (i) by
action of the board of directors of Parent or the Company if (x) the Tender
Offer shall have expired or been terminated in accordance with its terms without
any Common Shares being purchased pursuant thereto or (y) Merger Subsidiary
shall not have accepted for payment any Common Shares pursuant to the Tender
Offer by December 31, 1999 (the "Termination Date") or (ii) by action of the
board of directors of either Parent or the Company if any Order permanently
restraining, enjoining or otherwise prohibiting consummation of the Tender Offer
or the Merger shall become final and non-appealable (whether before or after the
approval by the stockholders of the Company); provided, that (A) the right to
terminate this Agreement pursuant to clause (i) above shall not be available to
any party that has breached in any material respect its obligations under this
Agreement in any manner that shall have proximately contributed to the
occurrence of the failure of the Tender Offer to be consummated and (B) the
Company shall not receive a termination fee pursuant to Section 8.5(e) of this
Agreement even if otherwise payable pursuant to the terms thereof, if it
exercises its right to terminate this Agreement pursuant to clause (i)(y) above
on or prior to February 29, 2000.
8.3. Termination by the Company. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the consummation of the Tender
Offer, by action of the board of directors of the Company:
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(a) if (i) the board of directors of the Company authorizes the
Company, subject to complying with the terms of this Agreement, to enter into a
binding written agreement concerning a transaction that constitutes a Superior
Proposal and the Company notifies Parent in writing that it intends to enter
into such an agreement, (ii) Parent does not make, prior to five business days
after receipt of the Company's written notification of its intention to enter
into a binding agreement for a Superior Proposal (the "Alternative Transaction
Notice") an offer that the board of directors of the Company determines, in good
faith after consultation with the Company Financial Advisor, is at least as
favorable, as the Superior Proposal, and (iii) the Company pays all amounts
required to be paid pursuant to Section 8.5. The Company agrees and acknowledges
(x) that it cannot terminate this Agreement pursuant to this Section 8.3(a) in
order to enter into a binding agreement referred to in clause (ii) above until
five business days after Parent's receipt of the Alternative Transaction Notice
and until the payment required by Section 8.5 has been received by Parent, and
(y) to notify Parent promptly if its intention to enter into a written agreement
referred to in its Alternative Transaction Notice shall change at any time after
giving such notification; or
(b) if there has been a material breach by Parent or Merger Subsidiary
of any representation, warranty, covenant or agreement contained in this
Agreement that is not curable or, if curable, is not cured within 20 days after
written notice of such breach is given by the Company to the party committing
such breach.
8.4. Termination by Parent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time by action of the
board of directors of Parent if (a) the Company enters into a binding agreement
for, or recommends, a Superior Proposal or the board of directors of the Company
shall have withdrawn or adversely modified its approval or recommendation of
this Agreement or, after the mailing of the Proxy Statement or the Offer
Documents, failed to reconfirm its recommendation of this Agreement within ten
business days after a reasonable written request by Parent to do so or the
Company redeems any rights under, or modifies or agrees to modify, the Rights
Agreement (or any replacement thereof), in order to facilitate any Acquisition
Proposal with any Person (other than PLC or any Subsidiary of PLC), or (b) prior
to consummation of the Tender Offer there has been a material breach by the
Company of any representation, warranty, covenant or agreement contained in this
Agreement that is not curable or, if curable, is not cured within 20 days after
written notice of such breach is given by Parent to the party committing such
breach.
8.5. Effect of Termination and Abandonment.
(a) In the event of termination of this Agreement and the abandonment
of the Merger pursuant to this Article VIII, this Agreement (other than as set
forth in Section 9.1) shall become void and of no effect with no liability
(other than the liabilities arising under the provisions, including this Section
8.5, set forth in Section 9.1) on the part of any party hereto (or of any of its
Representatives); provided, however, except as otherwise provided herein, no
such termination shall relieve any party hereto of any liability or damages
resulting from any willful breach of this Agreement.
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(b) In the event that this Agreement is terminated (i) by the Company
pursuant to Section 8.3(a), or (ii) by Parent pursuant to Section 8.4(a), then
the Company shall, not later than immediately prior to the time of such
termination or not later than immediately prior to the time of entering into an
agreement concerning a transaction that constitutes an Acquisition Proposal, pay
Parent a termination fee of $45,000,000 plus an amount equal to Parent's
out-of-pocket charges and expenses incurred in connection with the transactions
contemplated by this Agreement up to a maximum of $5,000,000 ("Expenses"). In
every case, such payments shall be made by wire transfer of same day funds. In
order to facilitate the timely making of the foregoing payments, in the event
that Parent elects to terminate this Agreement, Parent shall notify the Company
thereof not later than 10:00 A.M. (New York City time) on the business day
immediately preceding the date of such termination. In the event that Parent
fails to provide such advance notice of its election to terminate this
Agreement, the foregoing payments shall be made not later than 12:00 P.M. (New
York City time) on the business day immediately following the date of such
termination. The Company acknowledges that the agreements contained in this
Section 8.5(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent and Merger Subsidiary
would not have entered into this Agreement. If in order to obtain such payments,
Parent or Merger Subsidiary commences a suit that results in a judgment against
the Company for the amounts set forth in this paragraph (b) or paragraph 8.5(c),
the Company shall pay to Parent or Merger Subsidiary its costs and expenses
(including attorneys' fees) in connection with such suit, together with interest
from the date of termination of this Agreement on the amounts owed at the prime
rate of The Chase Manhattan Bank, in effect from time to time during such period
plus two percent.
(c) In the event that this Agreement is terminated by the Company or
Parent pursuant to Section 8.2(i)(x) (provided that (1) on the date of
expiration or termination of the Tender Offer the Minimum Tender Condition has
not been satisfied and (2)(x) at least 5 business days prior to such date, it
shall have been publicly disclosed that the conditions to the Tender Offer set
forth in paragraphs (a)(ii), (a)(iii), (a)(iv) and (b)(i) of Annex I have been
satisfied or on such date any of such conditions shall not have been satisfied
as a result of a material breach of this Agreement by the Company or (y) on such
date, the condition to the Tender Offer set forth in paragraph (b)(iii) of Annex
I has not been satisfied), in circumstances where within 9 months after the
termination of this Agreement the Company enters into a definitive agreement in
respect of, or approves or recommends an Acquisition Proposal or redeems any
rights under, or modifies or agrees to modify, the Rights Agreement (or any
replacement thereof), in order to facilitate any Acquisition Proposal with any
Person (other than PLC or any Subsidiary of PLC), then the Company shall make
payment to Parent by wire transfer of immediately available funds a fee in the
amount of $45,000,000 plus the Expenses of Parent, payable upon the earlier of
the time of entering into such agreement or consummation of an Acquisition
Proposal.
(d) In the event that this Agreement is terminated by the Company or
Parent pursuant to Section 8.2(i)(y) (provided that (i) on the date of
expiration or termination there is no condition to the Tender Offer which has
failed to be satisfied as a result of a material breach of this Agreement by
Parent or Merger Subsidiary and (2) prior to such termination an Acquisition
Proposal with respect to the Company shall have been publicly announced or
otherwise became public) in circumstances where within 9 months after the
termination of this Agreement the Company enters into a definitive agreement in
respect of, or approves or recommends an
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Acquisition Proposal or redeems any rights under, or modifies or agrees to
modify, the Rights Agreement (or any replacement thereof), in order to
facilitate any Acquisition Proposal with any person (other than Parent or any
Subsidiary of Parent), then the Company shall make payment to Parent by wire
transfer of immediately available funds a fee in the amount of $45,000,000 plus
the Expenses of Parent, payable upon the earlier of the time of entering into
such agreement or consummation of an Acquisition Proposal
(e) In the event that (i) this Agreement is terminated (x) by the
Company and Parent pursuant to Section 8.1, (y) by the Company or Parent
pursuant to Section 8.2(i)(y) (other than a termination resulting from a breach
of this Agreement by the Company) or Section 8.2(ii) or (z) by the Company
pursuant to Section 8.3(b) and (ii) as of the date of Termination, a Change in
Control of PLC shall have occurred, then Parent shall promptly, but in no event
later than two business days after the Company shall have requested payment
pursuant to this Section 8.5(e), pay the Company a termination fee of
$45,000,000. "Change in Control of PLC" shall mean, (i) offers for the entire
issued ordinary share capital of PLC in accordance with the requirements of the
United Kingdom Code on Takeovers and Mergers which (x) have been recommended by
the board of directors of PLC, (y) have been publicly announced by the offeror
to have become unconditional as to acceptances or (z) where the offeror has
publicly announced that acceptances have been received and not withdrawn by
Shareholders representing 50 percent of the issued ordinary share capital of
PLC; (ii) the conveyance, transfer or lease by Parent of all or substantially
all of its assets to any Person or (iii) PLC has entered into a binding written
agreement providing for any of the foregoing.
ARTICLE IX.
Miscellaneous and General
9.1. Survival. This Article IX and the agreements of the Company,
Parent and Merger Subsidiary contained in Sections 6.8 (Employee Benefits) and
6.10 (Indemnification; Directors' and Officers' Insurance) shall survive the
consummation of the Merger. This Article IX, the agreements of the Company,
Parent and Merger Subsidiary contained in Section 6.6 (Access), insofar as it
relates to the Company's and Parent's respective confidentiality obligations,
Section 6.9 (Expenses) and Section 8.5 (Effect of Termination and Abandonment)
shall survive the termination of this Agreement. All other representations,
warranties, covenants and agreements in this Agreement shall not survive the
consummation of the Merger or the termination of this Agreement.
9.2. Modification or Amendment. Subject to the provisions of applicable
Law, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties.
9.3. Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable Law. Any waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to this
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Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
9.5. Governing Law; Consent to Jurisdiction. (a) This Agreement shall
be deemed to be made in and in all respects shall be interpreted, construed and
governed by and in accordance with the laws of the State of Delaware without
regard to the conflict of law principles thereof.
(b) The Company, Parent and Merger Subsidiary each agrees that, in
connection with any legal suit or proceeding arising with respect to this
Agreement, it shall submit to the jurisdiction of the United States District
Court for the District of Delaware and agrees to venue in such courts. The
Company and Merger Subsidiary each hereby appoints the secretary of the Company
and Merger Subsidiary, respectively, as its agent for service of process for
purposes of the foregoing sentence only.
9.6. Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and shall be
deemed delivered (i) on the date personally delivered, (ii) one business day
after the date delivered by facsimile transmission with a confirmation copy sent
by overnight courier or first-class mail, or (iii) three business days after the
date sent by registered or certified mail, postage prepaid:
if to Parent or Merger Subsidiary:
Royal Group Inc.
9300 Arrowpoint Blvd
Charlotte, North Carolina 28273-8135
Attention: Joyce W. Wheeler
Fax: (704) 522-3111
Phone: (704) 522-2739
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Attention: Christopher E. Manno
Fax: (212) 728-8111
Phone: (212) 728-8000
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<PAGE>
if to the Company:
Orion Capital Corporation
9 Farm Springs Road
Farmington, Connecticut 06032
Attention: Corporate Secretary
Fax: (860) 674-6670
Phone: (860) 674-6904
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Alan C. Myers
Fax: (212) 735-2000
Phone: (212) 735-3780
or to such other persons or addresses as may be designated in
writing by the party to receive such notice as provided above.
9.7. Entire Agreement; No Other Representations. This Agreement
(including any exhibits and annexes hereto), the Company Disclosure Letter, the
Stock Option Agreement and the Confidentiality Agreement between Parent and the
Company dated June 18, 1999 (the "Confidentiality Agreement"), constitute the
entire agreement, and supersede all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof.
9.8. No Third Party Beneficiaries. Except as provided in Section 6.10
(Indemnification; Directors' and Officers' Insurance), this Agreement is not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
9.9. Obligations of Parent and of the Company. Whenever this Agreement
requires a Subsidiary of Parent to take any action, such requirement shall be
deemed to include an undertaking on the part of Parent to cause such Subsidiary
to take such action. Whenever this Agreement requires a Subsidiary of the
Company to take any action, such requirement shall be deemed to include an
undertaking on the part of the Company to cause such Subsidiary to take such
action and, after the Effective Time, on the part of the Surviving Corporation
to cause such Subsidiary to take such action.
9.10. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability or the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and
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<PAGE>
the application of such provision to other Persons or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
9.11. Interpretation. The table of contents and headings herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section, Exhibit or Annex, such
reference shall be to a Section of or Exhibit or Annex to this Agreement unless
otherwise indicated. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such term. References to a
person are also to its permitted successors and assigns. For purposes of this
Agreement, the words "the knowledge of the Company" or words of similar import
means the knowledge of any executive officer or any band 1 or band 2 employee of
the Company.
9.12. Assignment. This Agreement shall not be assignable by any party
hereto by operation of Law or otherwise, without the prior written consent of
the other parties; provided, however, that Parent may designate, by written
notice to the Company, another wholly owned direct or indirect Subsidiary of PLC
to be a Constituent Corporation in lieu of Merger Subsidiary, in which event all
references herein to Merger Subsidiary shall be deemed references to such other
Subsidiary. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties hereto as of the date first
written above.
ORION CAPITAL CORPORATION
By: /s/ W. Marston Becker
-------------------------------
Name: W. Marston Becker
Title: Chairman and CEO
ROYAL GROUP INC.
By: /s/ Terry Broderick
-------------------------------
Name: Terry Broderick
Title: President U.S. Operations
NTG ACQUISITION CORP.
By: /s/ Joyce Wheeler
-------------------------------
Name: Joyce Wheeler
Title: General Counsel
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<PAGE>
ANNEX I
CERTAIN CONDITIONS OF THE TENDER OFFER. The capitalized terms used in
this Annex I have the meanings set forth in the attached Agreement.
Notwithstanding any other provision of the Tender Offer, Merger Subsidiary shall
not be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-l(c) under the Exchange Act (relating
to Merger Subsidiary's obligation to pay for or return tendered Common Shares
promptly after termination or withdrawal of the Tender Offer), pay for, or may
delay the acceptance for payment of or, subject to the above restriction,
payment for, any tendered Common Shares, or may, in its sole discretion,
terminate or amend the Tender Offer as to any Common Shares not then paid for if
(a) prior to the Expiration Date (i) there shall not have been tendered and not
withdrawn at least that number of Common Shares that would represent at least a
majority of all outstanding Common Shares on the date of purchase (excluding for
all purposes in calculating such majority any outstanding Common Shares owned by
Parent or Merger Subsidiary pursuant to the exercise of Parent's rights under
the Stock Option Agreement) (the "Minimum Tender Condition"), (ii) any waiting
period applicable to the consummation of the Tender Offer and the Merger under
the HSR Act shall not have expired or been terminated, (iii) other than the
filing provided for in Section 1.3 of the Agreement, any notices, reports and
other filings required to be made prior to the Effective Time by the Company or
PLC or any of their respective Subsidiaries with, and any consents,
registrations, approvals, permits and authorizations required to be obtained
prior to the Effective Time by the Company or Parent or any of their respective
Subsidiaries from, any Governmental Entity, including but not limited to the
consent of those insurance commissioners, directors or superintendents of the
state insurance departments set forth in Section 5.1(d) of the Company
Disclosure Letter, in connection with the execution and delivery of the
Agreement and the consummation of the Tender Offer and the Merger and the other
transactions contemplated by the Agreement shall not have been made or obtained
(as the case may be) and shall not be in full force and effect, or (iv) the
Company shall not have obtained the consent or approval of each Person whose
consent or approval is set forth in Section I or Section 5.1(d) of the Company
Disclosure Letter or which shall be required under any Contract to which the
Company or any of its Subsidiaries is a party, except those for which the
failure to obtain such consents or approvals would not, individually or in the
aggregate, have a Company Material Adverse Effect or is not, individually or in
the aggregate, reasonably likely to prevent or materially burden or materially
impair the ability of the Company to consummate the transactions contemplated by
this Agreement; or any such consent or approval, or any Governmental Consent,
imposes any condition or conditions relating to, or requires changes or
restrictions in, the operations of any asset or businesses of the Company, PLC
or their respective Subsidiaries which could, in the reasonable judgment of the
board of directors of Parent, individually or in the aggregate, materially and
adversely impact the economic or business benefits to PLC and its Subsidiaries
of the transactions contemplated by the Agreement or materially impair the
ability of any Parent Company (including the Company following the Effective
Time) to conduct its business in the manner as such business is now being
conducted; or (b) at or before the time of payment for any of such Common Shares
(whether or not any Common Shares have theretofore been accepted for payment),
any of the following events shall occur:
(i) any court or Governmental Entity of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any Law, statute,
ordinance, rule, regulation,
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<PAGE>
judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) that is in effect and restrains, enjoins or
otherwise prohibits consummation of the Tender Offer or the Merger, or
which makes the acceptance for payment of, or payment for, any Common
Shares in the Tender Offer illegal;
(ii) the representations and warranties of the Company set forth in the
Agreement shall not be true and correct both when made and at and as of
the Expiration Date as though made on and as of the Expiration Date
(except to the extent any such representation or warranty expressly speaks
as of an earlier date) except where the failure of such representations
and warranties to be so true and correct (without giving effect to any
qualifications in the representations and warranties as to "Company
Material Adverse Effect," "material" or similar qualifications set forth
in the Agreement) would not have, individually or in the aggregate, a
Company Material Adverse Effect, or Parent shall not have received a
certificate on the Expiration Date signed on behalf of the Company by an
executive officer of the Company to such effect;
(iii) the Company shall not have performed in all material respects all
obligations required to be performed by it under the Agreement at or prior
to the Expiration Date; or
(iv) there shall have occurred a change, event or circumstance that has
had, or would reasonably be expected to have, a Company Material Adverse
Effect; or
(v) the Agreement shall have been terminated in accordance with its
terms prior to the Expiration Date; or Parent, Merger Subsidiary and the
Company shall have otherwise agreed that Merger Subsidiary may amend,
terminate or withdraw the Tender Offer;
The foregoing conditions are for the sole benefit of Parent and Merger
Subsidiary and may be asserted by Parent or Merger Subsidiary regardless of the
circumstances (including any action or inaction by Parent or Merger Subsidiary)
giving rise to such condition or may be waived by Parent or Merger Subsidiary,
by express and specific action to that effect, in whole or in part at any time
and from time to time in their sole discretion. Any determination by Parent and
Merger Subsidiary concerning any event described in this Annex I shall be final
and binding upon all holders of Common Shares. The failure by Merger Subsidiary
at any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right, the waiver of any such right with respect to particular facts
and other circumstances shall not be deemed a waiver with respect to any other
facts and circumstances, and each such right shall be deemed an ongoing right
that may be asserted at any time and from time to time.
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<PAGE>
ANNEX II
INDEX OF DEFINED TERMS
Section
Term Containing Definition
- ---- ---------------------
Acquisition Proposal.................................... 6.2
Affected Employee....................................... 6.8(a)
Agreement............................................... 1st Paragraph
Alternative Transaction Notice.......................... 8.3(a)
Audit Date.............................................. 5.1(e)(i)
Bankruptcy and Equity Exception......................... 5.1(c)(i)
By-Laws................................................. 2.2
Certificates............................................ 4.4(b)
Certificate of Merger................................... 1.3
Change in Control of Parent ............................ 8.5(e)
Charter................................................. 2.1
Closing................................................. 1.2
Closing Date............................................ 1.2
Code.................................................... 5.1(h)(ii)
Common Shares........................................... 3rd Recital
Company................................................. 1st Paragraph
Company Actuarial Analyses.............................. 5.1(r)(iii)
Company Disclosure Letter............................... 5.1
Company Financial Advisor............................... 1.5(c)
Company Insurance Contracts............................. 5.1(r)(i)
Company Insurance Subsidiaries.......................... 5.1(a)
Company Material Adverse Effect......................... 5.1(a)
Company Option.......................................... 4.3(a)
Company Prepared SAP Statements......................... 5.1(e)(ii)
Company Reports......................................... 5.1(e)(i)
Company Requisite Vote.................................. 5.1(c)(i)
Company SAP Statements.................................. 5.1(e)(ii)
Company Stock Plans..................................... 5.1(b)
Compensation and Benefit Plans.......................... 5.1(h)(i)
Confidentiality Agreement............................... 9.7
Constituent Corporations................................ 1st Paragraph
Contract................................................ 5.1(d)(ii)
Costs................................................... 6.10(a)
Current Premium......................................... 6.10(c)
D&O Insurance........................................... 6.10(c)
DGCL.................................................... 1.1
Dissenting Shares....................................... 4.2
Dissenting Stockholder.................................. 4.2
Effective Time.......................................... 1.3
47
<PAGE>
Section
Term Containing Definition
- ---- ---------------------
Environmental Law....................................... 5.1(k)
ERISA................................................... 5.1(h)(ii)
ERISA Affiliate......................................... 5.1(h)(iii)
Exchange Act............................................ 1.4
Exchange Agent.......................................... 4.4(a)
Exchange Fund........................................... 4.4(a)
Excluded Shares......................................... 4.1(b)
Exercise Price.......................................... 4.3(a)
Expenses................................................ 8.5(b)
Expiration Date......................................... 1.5(b)
GAAP.................................................... 5.1(e)(i)
Governing Documents..................................... 5.1(a)
Governmental Consents................................... 7.1(b)
Governmental Entity..................................... 5.1(d)(i)
Hazardous Substance..................................... 5.1(k)
HSR Act................................................. 5.1(d)(i)
Indemnified Parties..................................... 6.10(a)
Insurance Laws.......................................... 5.1(i)(i)
IRS..................................................... 5.1(h)(ii)
Laws.................................................... 5.1(i)(ii)
Merger.................................................. 2nd Recital
Merger Consideration.................................... 4.1(c)
Merger Subsidiary....................................... 1st Paragraph
Merger Subsidiary Common Stock.......................... 5.2(a)
Millennium Functionality................................ 5.1(n)(ii)
Minimum Tender Condition................................ Annex I
NYSE.................................................... 5.1(d)(i)
Offer Documents......................................... 1.4
Order................................................... 7.1(c)
Parent.................................................. 1st Paragraph
Parent Companies........................................ 4.1(b)
Parent Material Adverse Effect.......................... 5.2(b)
Pension Plan............................................ 5.1(h)(ii)
Per Share Purchase Price................................ 4.1(c)
Performance Unit........................................ 4.3(c)
Person.................................................. 5.1(b)
Plan Entry Date......................................... 6.8(c)
PLC..................................................... 1st Recital
Proxy Statement......................................... 6.5
Representatives......................................... 6.6(a)(i)
Restricted Stock........................................ 4.3(b)
Rights.................................................. 5.1(p)
Rights Agreement........................................ 5.1(b)
48
<PAGE>
Section
Term Containing Definition
- ---- ---------------------
SAP..................................................... 5.1(e)(ii)
Schedule 14D-1.......................................... 1.5(a)
Schedule 14D-9.......................................... 1.5(d)
SEC..................................................... 1.5(a)
Secretary............................................... 1.3
Securities Act.......................................... 5.1(e)(i)
Stock Option Agreement.................................. 3rd Recital
Stockholders Meeting.................................... 6.4
Subsidiary.............................................. 5.1(a)
Superior Proposal....................................... 6.2
Surviving Corporation................................... 1.1
Takeover Statute........................................ 5.1(j)
Tax..................................................... 5.1(l)
Tax Return.............................................. 5.1(l)
Taxing Authority........................................ 5.1(l)
Tender Offer............................................ 1.4
Termination Date........................................ 8.2
49
<PAGE>
EXHIBIT B
---------
Officers
- --------
Terry Broderick - President
Marston Becker - Vice President
Joseph Fisher - Chief Financial Officer
Joyce Wheeler - Secretary
Michael Pautler - Treasurer
50
<PAGE>
EXHIBIT (C)(2)
--------------
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of July 12, 1999 (the "Agreement"),
between ROYAL GROUP INC., a Delaware corporation (the "Grantee"), and ORION
CAPITAL CORPORATION, a Delaware corporation (the "Grantor").
WHEREAS, the Grantee, NTG Acquisition Corp., a Delaware corporation and a
direct or indirect wholly owned subsidiary of the Grantee ("Merger Subsidiary"),
and the Grantor are entering into an Agreement and Plan of Merger, dated as of
the date hereof (the "Merger Agreement"), which provides, among other things,
for the merger of Merger Subsidiary with and into the Grantor (the "Merger");
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, the Grantee and Merger Subsidiary have requested that the Grantor
grant to the Grantee an option to purchase up to 5,443,697 shares of Common
Stock, par value $1.00 per share, of the Grantor (the "Common Stock"), upon the
terms and subject to the conditions hereof; and
WHEREAS, in order to induce the Grantee and Merger Subsidiary to enter into
the Merger Agreement, the Grantor is willing to grant the Grantee the requested
option.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. The Option; Exercise; Adjustments; Payment of Spread.
(a) Contemporaneously herewith the Grantee, Merger Subsidiary and the
Grantor are entering into the Merger Agreement. Subject to the other terms
and conditions set forth herein, the Grantor hereby grants to the Grantee
an irrevocable option (the "Option") to purchase up to 5,443,697 shares of
Common Stock (the "Shares") at a cash purchase price equal to $50.00 per
share (the "Purchase Price"). The Option may be exercised by the Grantee,
in whole or in part, at any time, or from time to time, following the
occurrence of one of the events set forth in Section 2(d) hereof, and prior
to the termination of the Option in accordance with the terms of this
Agreement.
(b) In the event the Grantee wishes to exercise the Option, the
Grantee shall send a written notice to the Grantor (the "Stock Exercise
Notice") specifying a date (subject to the HSR Act (as defined below) and
applicable insurance regulatory approvals) not later than 10 business days
and not earlier than three business days following the date such notice is
given for the closing of such purchase. In the event of any change in the
number of issued and outstanding shares of Common Stock by reason of any
stock dividend, stock split, split-up, recapitalization, merger or other
change in the corporate or capital structure of the Grantor, the number of
Shares subject to this Option and the purchase price per Share shall be
appropriately adjusted to restore the Grantee to its rights hereunder,
including its right to purchase Shares representing 19.9% of the capital
stock of the Grantor entitled to vote generally for the election of the
directors of the Grantor
<PAGE>
which is issued and outstanding immediately prior to the exercise of the
Option at an aggregate purchase price equal to the Purchase Price
multiplied by 5,443,697.
(c) If at any time the Option is then exercisable pursuant to the
terms of Section l(a) hereof, the Grantee may elect, in lieu of exercising
the option to purchase Shares provided in Section 1(a) hereof, to send a
written notice to the Grantor (the "Cash Exercise Notice") specifying a
date not later than 20 business days and not earlier than 10 business days
following the date such notice is given on which date the Grantor shall pay
to the Grantee an amount in cash equal to the Spread (as hereinafter
defined) multiplied by all or such portion of the Shares subject to the
Option as Grantee shall specify, net of any taxes required to be withheld
under applicable law. As used herein "Spread" shall mean the excess, if
any, over the Purchase Price of the higher of (x) if applicable, the
highest price per share of Common Stock (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid or proposed
to be paid by any person pursuant to one of the transactions enumerated in
Section 2(d) hereof (the "Alternative Purchase Price") or (y) the closing
price of the shares of Common Stock on the NYSE Composite Tape on the last
trading day immediately prior to the date of the Cash Exercise Notice (the
"Closing Price"). If, in the case of clause (x) above, the Alternative
Purchase Price can be calculated by reference to an all cash amount paid or
proposed to be paid for any shares of Common Stock outstanding, such cash
amount shall be deemed to be the Alternative Purchase Price; if, in the
case of clause (x) above, no shares of Common Stock will be purchased for
all cash, the Alternative Purchase Price shall be the sum of (i) the fixed
cash amount, if any, included in the Alternative Purchase Price plus (ii)
the fair market value of such property other than cash included in the
Alternative Purchase Price. If such other property consists of securities
with an existing public trading market, the average of the closing prices
(or the average of the closing bid and asked prices if closing prices are
unavailable) for such securities in their principal public trading market
on the five trading days ending five days prior to the date of the Cash
Exercise Notice or, if Section l(d) is applicable, ending on the last
trading day immediately prior to termination of the Merger Agreement, shall
be used to calculate the fair market value of such property. If such other
property consists of something other than cash or securities with an
existing public trading market and, as of the payment date for the Spread,
agreement on the value of such other property has not been reached, the
Alternative Purchase Price shall be deemed to equal the Closing Price.
Upon exercise of its right to receive cash pursuant to this Section 1(c),
the obligations of the Grantor to deliver Shares pursuant to Section 3
shall be terminated with respect to such number of Shares for which the
Grantee shall have elected to be paid the Spread.
2. Conditions to Delivery of Shares. The Grantor's obligation to deliver
Shares upon exercise of the Option is subject only to the conditions that:
(a) No preliminary or permanent injunction or other order issued by
any federal or state court of competent jurisdiction in the United States
prohibiting the delivery of the Shares shall be in effect; and
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<PAGE>
(b) Any applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") shall have
expired or been terminated; and
(c) Any approval required to be obtained prior to the delivery of the
Shares under the insurance laws of any state or foreign jurisdiction shall
have been obtained and be in full force and effect; and
(d) Any of the events specified in Sections 8.5(b), 8.5(c) or 8.5(d)
of the Merger Agreement shall have occurred (each, a "Trigger Event").
3. The Closing.
(a) Any closing hereunder shall take place on the date specified by
the Grantee in its Stock Exercise Notice or Cash Exercise Notice, as the
case may be, at 9:00 A.M., local time, at the offices of Willkie Farr &
Gallagher, 787 Seventh Avenue, New York, New York, or if the conditions set
forth in Section 2(a), (b) or (c) have not then been satisfied, on the
second business day following the satisfaction of such conditions, or at
such other time and place as the parties hereto may agree (the "Closing
Date"). On the Closing Date, (i) in the event of a closing pursuant to
Section 1(b) hereof, the Grantor will deliver to the Grantee a certificate
or certificates, representing the Shares in the denominations designated by
the Grantee in its Stock Exercise Notice and the Grantee will purchase such
Shares from the Grantor at the price per Share equal to the Purchase Price,
or (ii) in the event of a closing pursuant to Section 1(c) hereof, as the
case may be, the Grantor will deliver to the Grantee cash in an amount
determined pursuant to Section 1(c) hereof, as the case may be. Any
payment made by the Grantee to the Grantor, or by the Grantor to the
Grantee, pursuant to this Agreement shall be made by certified or official
bank check or by wire transfer of federal funds to a bank designated by the
party receiving such funds.
(b) The certificates representing the Shares shall bear an appropriate
legend relating to the fact that such Shares have not been registered under
the Securities Act of 1933, as amended (the "Securities Act").
4. Representations and Warranties of the Grantor. The Grantor represents
and warrants to the Grantee that:
(a) Grantor is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the requisite
corporate power and authority to enter into and perform this Agreement;
(b) the execution and delivery of this Agreement by the Grantor and
the consummation by it of the transactions contemplated hereby have been
duly authorized by the Board of Directors of the Grantor and this Agreement
has been duly executed and delivered by a duly authorized officer of the
Grantor and constitutes a valid and binding obligation of the Grantor,
enforceable in accordance with its terms, subject to bankruptcy,
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<PAGE>
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
and to general equity principles;
(c) the Grantor has taken all necessary corporate action to authorize
and reserve the Shares issuable upon exercise of the Option and the Shares,
when issued and delivered by the Grantor upon exercise of the Option and
paid for by Grantee as contemplated hereby will be duly authorized, validly
issued, fully paid and non-assessable and free of preemptive rights;
(d) except as otherwise required by the HSR Act and applicable
insurance laws, the execution and delivery of this Agreement by the Grantor
and the consummation by it of the transactions contemplated hereby do not
require the consent, waiver, approval or authorization of or any filing
with any person or public authority and will not violate, result in a
breach of or the acceleration of any obligation under, or constitute a
default under, any provision of Grantor's charter or by-laws, or any
material indenture, mortgage, lien, lease, agreement, contract, instrument,
order, law, rule, regulation, judgment, ordinance, or decree, or
restriction by which the Grantor or any of its subsidiaries or any of their
respective properties or assets is bound;
(e) no "fair price", "moratorium", "control share acquisition,"
"interested shareholder" or other form of antitakeover statute or
regulation, including without limitation, Section 203 of the Delaware
General Corporation Law, or similar provision contained in the charter or
by-laws of Grantor, is or shall be applicable to the acquisition of Shares
pursuant to this Agreement; and
(f) the Grantor has taken all corporate action necessary so that any
Shares acquired pursuant to this Agreement shall not be counted for
purposes of determining the number of shares of Common Stock beneficially
owned by the Grantee or any of its Affiliates or Associates (as defined in
the Rights Agreement) pursuant to the Rights Agreement, dated as of
September 11, 1998, between the Grantor and Chase Mellon Shareholder
Services, LLC, as Rights Agent (the "Rights Agreement").
5. Representations and Warranties of the Grantee. The Grantee represents
and warrants to the Grantor that:
(a) the execution and delivery of this Agreement by the Grantee and
the consummation by it of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the
Grantee and this Agreement has been duly executed and delivered by a duly
authorized officer of the Grantee and constitutes a valid and binding
obligation of Grantee; and
(b) the Grantee is acquiring the Option and, if and when it exercises
the Option, will be acquiring the Shares issuable upon the exercise thereof
for its own account and not with a view to distribution or resale in any
manner which would be in violation of the Securities Act.
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<PAGE>
6. Listing of Shares; Filings; Governmental Consents. Subject to
applicable law and the rules and regulations of the New York Stock Exchange,
Inc. (the "NYSE"), the Grantor will promptly file an application to list the
Shares on the NYSE and will use its reasonable best efforts to obtain approval
of such listing and to effect all necessary filings by the Grantor under the HSR
Act and the applicable insurance laws of each state and foreign jurisdiction.
Each of the parties hereto will use its reasonable best efforts to obtain
consents of all third parties and governmental authorities, if any, necessary
for the consummation of the transactions contemplated.
7. Repurchase of Shares. If by the first anniversary of the date the
Merger Agreement was terminated (the "Merger Termination Date") pursuant to the
terms thereof, neither the Grantee nor any other Person has acquired more than
fifty percent (excluding the Shares) of the shares of outstanding Common Stock,
then the Grantor has the right to purchase (the "Repurchase Right") all, but not
less than all, of the Shares at the greater of (i) the Purchase Price or (ii)
the average of the last sales prices for shares of Common Stock on the five
trading days ending five days prior to the date the Grantor gives written notice
of its intention to exercise the Repurchase Right. If the Grantor does not
exercise the Repurchase Right within thirty days following the end of the one
year period after the Merger Termination Date, the Repurchase Right lapses. In
the event the Grantor wishes to exercise the Repurchase Right, the Grantor shall
send a written notice to the Grantee specifying a date (not later than 20
business days and not earlier than 10 business days following the date such
notice is given) for the closing of such purchase.
8. Sale of Shares. At any time prior to the first anniversary of the
Merger Termination Date, the Grantee shall have the right to sell (the "Sale
Right") to the Grantor all, but not less than all, of the Shares at the greater
of (i) the Purchase Price, or (ii) the average of the last sales prices for
shares of Common Stock on the five trading days ending five days prior to the
date the Grantee gives written notice of its intention to exercise the Sale
Right. If the Grantee does not exercise the Sale Right prior to the first
anniversary of the Merger Termination Date, the Sale Right terminates. In the
event the Grantee wishes to exercise the Sale Right, the Grantee shall send a
written notice to the Grantor specifying a date (not later than 20 business days
and not earlier than 10 business days following the date such notice is given)
for the closing of such sale.
9. Registration Rights.
(a) In the event that the Grantee shall desire to sell any of the
Shares within two years after the purchase of such Shares pursuant hereto,
and such sale requires, in the opinion of counsel to the Grantee, which
opinion shall be reasonably satisfactory to the Grantor and its counsel,
registration of such Shares under the Securities Act, the Grantor will
cooperate with the Grantee and any underwriters in registering such Shares
for resale, including, without limitation, promptly filing a registration
statement which complies with the requirements of applicable federal and
state securities laws, and entering into an underwriting agreement with
such underwriters upon such terms and conditions as are customarily
contained in underwriting agreements with respect to secondary
distributions; provided that the Grantor shall not be required to have
declared effective more than two registration statements hereunder and
shall be entitled to delay the filing or effectiveness of any registration
statement for up to 60 days if the offering would, in the judgment of the
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<PAGE>
Board of Directors of the Grantor, require premature disclosure of any
material corporate development or material transaction involving the
Grantor or interfere with any previously planned securities offering by the
Company.
(b) If the Common Stock is registered pursuant to the provisions of
this Section 9, the Grantor agrees (i) to furnish copies of the
registration statement and the prospectus relating to the Shares covered
thereby in such numbers as the Grantee may from time to time reasonably
request, and (ii) if any event shall occur as a result of which it becomes
necessary to amend or supplement any registration statement or prospectus,
to prepare and file under the applicable securities laws such amendments
and supplements as may be necessary to keep available for at least 45 days
a prospectus covering the Common Stock meeting the requirements of such
securities laws, and to furnish the Grantee such numbers of copies of the
registration statement and prospectus as amended or supplemented as may
reasonably be requested. The Grantor shall bear the cost of the
registration, including, but not limited to, all registration and filing
fees, printing expenses, and fees and disbursements of counsel and
accountants for the Grantor, except that the Grantee shall pay the fees and
disbursements of its counsel, and the underwriting fees and selling
commissions applicable to the shares of Common Stock sold by the Grantee.
The Grantor shall indemnify and hold harmless (i) Grantee, its affiliates
and its officers and directors, and (ii) each underwriter and each person
who controls any underwriter within the meaning of the Securities Act or
the Securities Exchange Act of 1934, as amended (collectively, the
"Underwriters") ((i) and (ii) being referred to as "Indemnified Parties")
against any losses, claims, damages, liabilities or expenses, to which the
Indemnified Parties may become subject, insofar as such losses, claims,
damages, liabilities (or actions in respect thereof) and expenses arise out
of or are based upon any untrue statement or alleged untrue statement, of
any material fact contained or incorporated by reference in any
registration statement filed pursuant to this paragraph, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the Grantor will not be
liable in any such case to the extent that any such loss, liability, claim,
damage or expense arises out of or is based upon an untrue statement or
alleged untrue statement in or omission or alleged omission from any such
documents in reliance upon and in conformity with written information
furnished to the Grantor by the Indemnified Parties expressly for use or
incorporation by reference therein.
(c) The Grantee and the Underwriters shall indemnify and hold harmless
the Grantor, its affiliates and its officers and directors against any
losses, claims, damages, liabilities or expenses to which the Grantor, its
affiliates and its officers and directors may become subject, insofar as
such losses, claims, damages, liabilities (or actions in respect thereof)
and expenses arise out of or are based upon any untrue statement of any
material fact contained or incorporated by reference in any registration
statement filed pursuant to this paragraph, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written
information furnished to the Grantor by the Grantee
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<PAGE>
Grantee or the Underwriters, as applicable, specifically for use or
incorporation by reference therein.
10. Expenses. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided
herein.
11. Specific Performance. The Grantor acknowledges that if the Grantor
fails to perform any of its obligations under this Agreement immediate and
irreparable harm or injury will be caused to the Grantee for which money damages
would not be an adequate remedy. In such event, the Grantor agrees that the
Grantee shall have the right, in addition to any other rights it may have, to
specific performance of this Agreement. Accordingly, if the Grantee should
institute an action or proceeding seeking specific enforcement of the provisions
hereof, the Grantor hereby waives the claim or defense that the Grantee has an
adequate remedy at law and hereby agrees not to assert in any such action or
proceeding the claim or defense that such a remedy at law exists. The Grantor
further agrees to waive any requirements for the securing or posting of any bond
in connection with obtaining any such equitable relief.
12. Notice. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and shall be
deemed delivered (i) on the date personally delivered, (ii) one business day
after the date delivered by facsimile transmission with a confirmation copy sent
by overnight courier or first-class mail, or (iii) three business days after the
date sent by registered or certified mail, postage prepaid:
If to the Grantee:
Royal Group Inc.
9300 Arrowpoint Blvd
Charlotte, North Carolina 28273-8135
Attention: Joyce W. Wheeler
Fax: (704) 522-3111
Phone: (704) 522-2739
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Attention: Christopher E. Manno
Fax: (212) 728-8111
Phone: (212) 728-8000
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If to the Grantor:
Orion Capital Corporation
9 Farm Springs Road
Farmington, Connecticut 06032
Attention: Corporate Secretary
Fax: (860) 674-6670
Phone: (860) 674-6904
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Alan C. Myers
Fax: (212) 735-2000
Phone: (212) 735-3780
or to such other persons or addresses as may be designated in writing by
the party to receive such notice as provided above.
13. Parties in Interest. This Agreement shall inure to the benefit of
and be binding upon the parties named herein and their respective successors and
assigns; provided, however, that such assigns shall agree to be bound by the
provisions of this Agreement. Nothing in this Agreement, express or implied, is
intended to confer upon any person, other than the Grantor or the Grantee or
their successors or assigns, any rights or remedies under or by reason of this
Agreement.
14. Entire Agreement; Amendments. This Agreement, together with the
Merger Agreement and the other documents referred to therein, contains the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions. This
Agreement may not be changed, amended or modified orally, but may be changed
only by an agreement in writing signed by the party against whom any waiver,
change, amendment, modification or discharge may be sought.
15. Assignment. No party to this Agreement may assign any of its rights
or obligations under this Agreement without the prior written consent of the
other party hereto, except that the Grantee may assign its rights and
obligations hereunder to any of its direct or indirect wholly owned subsidiaries
(including Merger Subsidiary) or direct or indirect parent companies, but no
such transfer shall relieve the Grantee of its obligations hereunder if such
transferee does not perform such obligations.
16. Headings. The section headings herein are for convenience only and
shall not affect the construction of this Agreement.
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<PAGE>
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (regardless of the laws that
might otherwise govern under applicable Delaware principles of conflicts of
law).
19. Termination. The right to exercise the Option granted pursuant to
this Agreement shall terminate at the earlier of (i) the Effective Time (as
defined in the Merger Agreement); (ii) 90 days after the date full payment of
the termination fee is made by Grantor to Grantee under Section 8.5(b), 8.5(c)
or 8.5(d) of the Merger Agreement (the date referred to in clause (ii) being
hereinafter referred to as the "Option Termination Date"), or (iii) one day
following the date on which it is certain that no termination fee will become
payable to Parent under Section 8.5 of the Merger Agreement; provided that, if
the Option cannot be exercised or the Shares cannot be delivered to Grantee upon
such exercise because the conditions set forth in Section 2(a), (b) or (c)
hereof have not yet been satisfied, the Option Termination Date shall be
extended until thirty days after such impediment to exercise or delivery has
been removed but not past December 31, 2001.
All representations and warranties contained in this Agreement shall
survive delivery of and payment for the Shares.
20. Profit Limitation. Notwithstanding any other provision of this
Agreement, in no event shall the Grantee's Total Profit (as hereinafter defined)
exceed $55,000,000 and, if it otherwise would exceed such amount, the Grantee,
at its sole election, shall either (a) reduce the number of shares of Common
Stock required to be delivered by Grantor pursuant to the Stock Exercise Notice,
(b) deliver to the Grantor for cancellation Shares previously purchased by
Grantee, (c) reduce the cash payable to Grantee pursuant to Section 1(c) or 1(d)
hereof, (d) pay cash or other consideration to the Grantor, or (e) undertake any
combination thereof, so that Grantee's Total Profit shall not exceed $55,000,000
after taking into account the foregoing actions.
Notwithstanding any other provision of this Agreement, this Option may not
be exercised for a number of Shares as would, as of the date of the Stock
Exercise Notice, result in a Notional Total Profit (as defined below) of more
than $55,000,000 and, if exercise of the Option otherwise would exceed such
amount, the Grantee, at its discretion, may increase the Purchase Price for that
number of Shares set forth in the Stock Exercise Notice so that the Notional
Total Profit shall not exceed $55,000,000; provided, that nothing in this
sentence shall restrict any exercise of the Option permitted hereby on any
subsequent date at the Purchase Price set forth in Section 1(a) hereof.
As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the amount of cash received by Grantee
pursuant to Section 8.5 of the Merger Agreement and Section l(c) and Section
l(d) hereof, (ii) the amount of (x) cash received by Grantee pursuant to the
Grantor's repurchase of Shares pursuant to Sections 7 or 8 hereof, less (y) the
Grantee's purchase price for such Shares, and (iii) (x) the net cash amounts
received by
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Grantee pursuant to the sale of Shares (or any other securities into
which such Shares are converted or exchanged) to any unaffiliated party prior to
the first anniversary of the Merger Termination Date, less (y) the Grantee's
purchase price for such Shares.
As used herein, the term "Notional Total Profit" with respect to any number
of Shares as to which Grantee may propose to exercise this Option shall be the
Total Profit determined as of the date of the Stock Exercise Notice assuming
that this Option were exercised on such date for such number of Shares and
assuming that such Shares, together with all other Shares held by Grantee and
its affiliates as of such date, were sold for cash at the closing market price
for the Common Stock as of the close of business on the preceding trading day
(less customary brokerage commissions).
21. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
22. Public Announcement. The Grantee will consult with the Grantor and
the Grantor will consult with the Grantee before issuing any press release with
respect to the initial announcement of this Agreement, the Option or the
transactions contemplated hereby and neither party shall issue any such press
release prior to such consultation except as may be required by law or the
applicable rules and regulations of the NYSE.
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IN WITNESS WHEREOF, the Grantee and the Grantor have caused this Agreement
to be duly executed and delivered on the day and year first above written.
ORION CAPITAL CORPORATION
By: /s/ W. Marston Becker
---------------------
Name: W. Marston Becker
Title: Chairman and CEO
ROYAL GROUP INC.
By: /s/ Terry Broderick
-------------------
Name: Terry Broderick
Title: President U.S. Operations
<PAGE>
Exhibit (c)(3)
June 18, 1999
Terry Broderick
President
Royal & SunAlliance, USA, Inc.
9300 Arrowpoint Blvd.
Charlotte, NC 28273-8135
Dear Terry:
In connection with consideration of a possible transaction (the
"Transaction") involving Royal & SunAlliance, USA, Inc. or one of its
affiliates, (collectively, "RSA") and Orion Capital Corporation ("Orion"), Orion
has furnished or will furnish to RSA, its directors, officers, employees, agents
or representatives, and RSA has furnished or will furnish to Orion, its
directors, officers, employees, agents or representatives, information (in both
written and oral form) related to the business and operations of Orion and RSA,
respectively All such information furnished to RSA and its Representatives (as
defined below) and all such information furnished to Orion and its Representa
tives whether prior to, on, or following the date hereof, together with
analysis, compilations, forecasts, studies or other documents or records
prepared by Orion or its Representatives on the one hand, or RSA or its
Representatives on the other, which contain, are based on or otherwise reflect
or are generated in whole or in part from such information, including that
stored on any computer, word processor or other similar device, are collectively
referred to herein as the "Evaluation Material."
Orion and RSA hereby agree as follows:
(1) Each shall use the Evaluation Material solely for the purpose of evaluating
the Transaction and each shall keep the Evaluation Material confidential,
except that each may disclose the Evaluation Material or portions thereof
to those of its directors, officers, employees, affiliates, representatives
(including, without limitation, financial advisors, attorneys and
accountants) and (with the prior written consent of Orion in each case,
which consent shall not be unreasonably withheld) potential sources of
financing (if any) for the Transaction (collectively, the
"Representatives") (a) who need to know such information for the purpose of
evaluating the Transaction, (b) who are informed of the confidential nature
of the Evaluation Material and (c) who agree to be bound by the terms of
<PAGE>
Sections 1 through 5 and 11 through 14 of this agreement as if they were
parties hereto. Each party shall be responsible for any breach of this
agreement by its Representatives. In the event that either party or any of
its Representatives are requested or required (by deposition,
interrogatory, request for documents, subpoena, civil investigative demand
or similar process) to disclose any of the Evaluation Material, that party
shall provide the other with prompt notice of such requirement, and shall
furnish only that portion of the Evaluation Material which is in the
opinion of its legal counsel legally required, and shall exercise its best
efforts to obtain reliable assurance that confidential treatment will be
accorded such Evaluation Material.
(2) If either Orion or RSA determines not to proceed with the Transaction, the
party making such determination will promptly inform the other of that
decision and, in that case or at any time upon the request of either party,
Orion and RSA shall, and each party's Representatives shall, at the option
of the party possessing the Evaluation Material, promptly (i) destroy all
copies of the written Evaluation Material in its possession or under their
custody or control (including that stored in any computer, word processor
or similar device) and confirm such destruction to the other party in
writing or (ii) return to the other party all copies of any Evaluation
Material furnished to it by or on behalf of the other party in its
possession or in the possession of its Representatives. Any oral
Evaluation Material will continue to be held subject to the terms of this
agreement.
(3) The term "Evaluation Material" does not include any information which (i)
is or becomes generally available to the public (other than as a result of
a disclosure by the party receiving the Evaluation Material (the "Receiving
Party") or by any of its Representatives); (ii) was available to the
Receiving Party or its Representatives on a non-confidential basis from a
source (other than the other party or its Representatives) that is not and
was not prohibited from disclosing such information to the Receiving Party
by a contractual, legal or fiduciary obligation of which the Receiving
Party is aware or should have been aware or (iii) is independently
developed based on information received by the Receiving Party as described
in (i) or (ii) of this paragraph.
(4) Without the prior written consent of the other, neither Orion nor RSA nor
their respective Representatives shall disclose to any person (a) that any
investigations, discussions or negotiations are taking place concerning
the Transaction or any other possible Transaction involving Orion and RSA,
(b) that either party has requested or received any Evaluation Material or
(c) any of the terms, conditions or other facts with respect to the
Transaction or such investigations, discussions or negotiations, including
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the status thereof. The term "person" as used in this agreement shall be
broadly interpreted to include the media and any corporation, partnership,
group, individual or entity.
(5) Orion and RSA each acknowledges that it and its Representatives may receive
material non-public information in connection with the evaluation of the
Transaction and each is aware (and will so advise its Representatives) that
the United States securities laws impose restrictions on trading in
securities when in possession of such information.
(6) Although Orion and RSA have endeavored to include in the Evaluation
Material information known to them which they believe to be relevant for
the purpose of consideration of the Transaction, each understands and
acknowledges that neither Orion nor RSA nor any of their respective
officers, directors, employees, affiliates, stockholders, agents or
controlling persons is making any representation or warranty, express or
implied, as to the accuracy or completeness of the Evaluation Material, and
each of Orion, RSA and such other persons expressly disclaims any and all
liability to the other or any other person that may be based upon or relate
to (a) the use of the Evaluation Material by either party or any of its
Representatives or (b) any errors therein or omissions therefrom. Orion
and RSA further agree that neither is entitled to rely on the accuracy and
completeness of the Evaluation Material and that each will be entitled to
rely solely on those particular representations and warranties, if any,
that are in a definitive agreement relating to the Transaction when, as,
and if it is executed, and subject to such limitations and restrictions as
may be specified in such definitive agreement.
(7) Orion and RSA acknowledge that remedies at law may be inadequate to protect
against any actual or threatened breach of this agreement by either party
or its Representatives, and, without prejudice to any other rights and
remedies otherwise available to the non-breaching party, each party agrees
that the non-breaching party shall be entitled to seek equitable relief in
its favor. In the event of litigation relating to this agreement, if a
court of competent jurisdiction determines in a final, nonappealable order
that this agreement has been breached by either party or its
Representatives, then the breaching party will reimburse the non-breaching
party for its costs and expenses (including, without limitation, legal fees
and expenses) incurred in connection with all such litigation.
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(8) For a period one year following the date hereof, neither party shall
directly or indirectly solicit for employment any officer, director, or
employee of the other or the other's affiliates, with whom such party had
contact or who became known to such party in connection with consideration
of the Transaction, except that neither party shall be precluded from
hiring any such employee who (i) initiates discussions regarding such
employment without any direct or indirect solicitation, (ii) responds to
any public advertisement or (iii) has been terminated by the other party or
its affiliates prior to commencement of employment discussions.
(9) In consideration of substantial expenditures of time, effort and expense to
be undertaken by RSA in connection with the evaluation of a possible
Transaction, Orion undertakes and agrees that from and after the date on
which RSA shall present a term sheet which is reasonably satisfactory to
Orion as a basis for further discussion and until the earliest of (i) the
execution of a definitive purchase agreement, (ii) the mutual termination
of the due diligence process relating to the Transaction or (iii) July 15 ,
1999 neither it, nor any officer, director, affiliate or agent shall
(except as provided below) solicit or encourage inquiries or proposals with
respect to, further information relating to, participate in any
negotiations or discussions concerning, or cooperate in any manner relating
to any change in control of Orion, or any sale of (or granting of any
option with respect to), any assets of, or of an equity interest in Orion
other than as contemplated in this agreement and will notify RSA
immediately if any such inquiries or proposals are received by, any
information is requested, or any such negotiations or discussions are
sought to be initiated with Orion. RSA acknowledges that it has been
informed that Orion has received preliminary indications of interest from
several entities with respect to the purchase by those entities of certain
program and binding authority business of Orion Specialty. RSA agrees that
Orion may continue to respond to requests from those entities for
information; provided, however, Orion agrees that during the period of
exclusivity referred to in the first sentence of this Section 9, Orion will
not enter into a definitive agreement with respect to the disposition of
such Orion Specialty business.
(10) Without the prior written consent of the Board of Directors of Orion, RSA
will not, prior to the first anniversary of this letter, (a) initiate any
contact with any of the directors or employees, shareholders, capital
providers or clients of Orion (other than in relation to matters which do
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not breach this confidentiality agreement and are unrelated to the
Transaction or any similar transaction) or (b) solicit, or join or
encourage or support any group to solicit, proxies or consents from the
shareholders of Orion or make any offer or proposal, or join or encourage
or support any group in making any offer or proposal, to Orion or its
Board of Directors or its shareholders which is intended to result in the
acquisition by RSA or such group of more than 10% of the business or assets
or earning power of Orion or more than 10% of the number of shares of
Common Stock of Orion outstanding at the time. Notwithstanding the
preceding sentence, if (a)(1) the Board of Directors of Orion approves a
transaction with any person (other than Orion or any employee benefit plans
of Orion) and (2) such transaction would result in such person beneficially
owning more than 50% of the outstanding voting securities of Orion or all
or substantially all of Orion's assets, or (b) any person or "group" within
the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, (other than Orion or RSA or a group of which RSA is a member)
shall have commenced or publicly announced its intention to commence a
tender or exchange offer for more than 50% of the outstanding voting
securities of Orion, or any securities convertible into more than 50% of
the outstanding voting securities of Orion, or any options, warrants or
other rights to acquire more than 50% of the outstanding voting securities
of Orion, then RSA shall not be prohibited thereafter from taking any of
the actions described in the preceding sentence.
(11) Each party agrees that no failure or delay by the other in exercising any
right, power or privilege hereunder will operate as a waiver thereof, nor
will any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.
(12) This agreement is for the benefit of Orion and RSA, and their respective
successors and assigns.
(13) This agreement and all controversies arising from or relating to
performance under this agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
its conflicts of laws principles.
(14) This agreement contains the entire agreement between Orion and RSA
concerning the subject matter hereof, and no modification of this agreement
or waiver of the terms and conditions hereof will be binding unless
approved in writing by Orion and RSA.
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Please confirm your agreement to the foregoing by signing both copies of
this agreement and returning one to Orion Capital Corporation, Attn: W. Marston
Becker
Very truly yours
ORION CAPITAL CORPORATION
By: _____________________________
W. Marston Becker
Chief Executive Officer
CONFIRMED AND AGREED AS
OF THE DATE WRITTEN ABOVE:
ROYAL & SUN ALLIANCE, USA, INC.
By: ______________________________
Terry Broderick
President
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