SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Commission File Number 0-3578
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: August 7, 1995
Piedmont Management Company Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-2612123
(State or other jurisdiction of corporation (IRS Employer
or organization) Identification Number)
80 Maiden Lane, New York, N.Y.
10038
(Address principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (212) 363-4650
INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events. On August 7, 1995, the Registrant entered into an
Agreement and Plan of Merger (the "Merger Agreement") with Chartwell Re
Corporation ("Chartwell"), pursuant to which the Registrant agreed to merge
(the "Merger") with and into Chartwell, with Chartwell being the surviving
corporation. Following the Merger, The Reinsurance Corporation of New York,
the Registrant's principal reinsurance underwriting subsidiary ("RECO"), will
become a subsidiary of Chartwell Reinsurance Company, the reinsurance
underwriting subsidiary of Chartwell.
In the Merger, holders of common and preferred stock of the
Registrant will receive newly-issued shares of common stock of Chartwell
representing approximately 45.25% of the outstanding common stock of the
combined entity. Chartwell intends to seek a stock exchange listing of its
common stock effective upon the closing of the Merger.
Prior to the Merger, Lexington Management Corporation (combined with
the Registrant's other asset management operations) will be spun-off to the
Registrant's stockholders in a tax-free transaction. Also prior to the
Merger, stockholders of the Registrant will receive a dividend of contingent
interest notes of the Registrant. The notes, which will mature on June 30,
2006 unless previously redeemed, will not pay any interest to holders until
maturity. The notes will provide for payment of up to $57.0 million to
holders at maturity, substantially depending on the results, particularly loss
reserve development, over time of RECO's previously written business. The
notes may be settled at maturity in registered common stock. The notes will
be assumed by Chartwell in the Merger. A form of the indenture under which
the notes will be issued is an exhibit to the Merger Agreement, which is filed
as an exhibit to this Report.
The combined entity will be managed by Chartwell's current
management team. Four members of the Registrant's existing Board of
Directors will become directors of Chartwell upon the Merger. Pursuant to
the Merger Agreement, the Registrant would increase RECO's reserves for
losses incurred but not reported in respect of its existing business by
$25.0 million prior to closing.
The Merger is subject to the consent of the Registrant's and
Chartwell's stockholders, the consent of the holders of Chartwell's 10-1/4%
Senior Notes due 2004, bank and regulatory approval and certain other
conditions. The Merger is expected to be consummated in the fourth quarter of
1995.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
Exhibit 1: Agreement and Plan of Merger dated as of August 7, 1995
between Piedmont Management Company Inc. and Chartwell Re
Corporation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly organized.
PIEDMONT MANAGEMENT COMPANY INC.
(Registrant)
/S/ PETER J. PALENZONA
_________________________________________
Peter J. Palenzona, Senior Vice President
Finance and Administration
(Chief Financial Officer)
Date: August 10, 1995
_____________________________________________________________
AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 7, 1995
BETWEEN
PIEDMONT MANAGEMENT COMPANY INC.
AND
CHARTWELL RE CORPORATION
________________________________________________________________
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
SECTION 1.1. The Merger........................................... 2
SECTION 1.2. Closing.............................................. 2
SECTION 1.3. Effective Time....................................... 2
SECTION 1.4. Effects of the Merger................................ 3
SECTION 1.5. Certificate of Incorporation......................... 3
ARTICLE II
EFFECT OF THE MERGER ON THE SECURITIES
OF THE CONSTITUENT CORPORATIONS
SECTION 2.1. Effect on Capital Stock............................. 3
(a) Cancellation of Treasury Stock and
Chartwell-Owned Stock............................. 3
(b) Conversion of Piedmont Common Stock................. 3
(c) Piedmont Preferred Stock............................ 4
(d) Piedmont Stock Options.............................. 4
(e) Conversion Number................................... 5
(f) Cancellation and Retirement of Piedmont
Common Stock..................................... 5
SECTION 2.2. Exchange of Certificates............................ 6
(a) Exchange Agent...................................... 6
(b) Exchange Procedures................................. 6
(c) Letter of Transmittal............................... 7
(d) Distributions with Respect to
Unexchanged Shares................................ 7
(e) No Further Ownership Rights in Piedmont
Common Stock....................................... 7
(f) No Fractional Shares................................ 8
(g) Termination of Exchange Fund........................ 8
(h) No Liability........................................ 8
SECTION 2.3. Supplemental Indenture.............................. 8
SECTION 2.4. Tax Consequences of Merger.......................... 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of
Chartwell...................................... 9
(a) Organization, Standing and Corporate
Power............................................. 9
(b) Capital Structure................................... 9
(c) Authority; Noncontravention......................... 11
(d) SEC Documents; Financial Statements................. 12
(e) Transaction Documents............................... 13
(f) Absence of Certain Changes or Events................ 14
(g) Benefit Plans....................................... 15
(h) Taxes............................................... 16
(i) No Excess Parachute Payments;
Section 162(m) of the Code........................ 17
(j) Compliance with Applicable Laws..................... 17
(k) Voting Requirements................................. 18
(l) Opinion of Financial Advisor........................ 18
(m) Brokers............................................. 18
(n) Litigation.......................................... 18
(o) Chartwell Investees................................. 19
(p) Tax Consequences of the Merger...................... 19
SECTION 3.2. Representations and Warranties of
Piedmont.......................................... 20
(a) Organization, Standing and Corporate
Power........................................... 20
(b) Capital Structure................................. 21
(c) Authority; Noncontravention....................... 22
(d) SEC Documents; Financial Statements............... 24
(e) Transaction Documents............................. 26
(f) Absence of Certain Changes or Events.............. 27
(g) Absence of Changes in Benefit Plans............... 28
(h) Benefit Plans..................................... 28
(i) Voting Requirements............................... 29
(j) Certain Prior Actions............................. 29
(k) Taxes............................................. 29
(l) No Excess Parachute Payments;
Section 162(m) of the Code...................... 30
(m) Compliance with Applicable Laws................... 30
(n) Opinion of Financial Advisor...................... 31
(o) Brokers........................................... 31
(p) Litigation........................................ 31
(q) Intercompany Relationships........................ 31
(r) Piedmont Investees................................ 33
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
PRIOR TO MERGER
SECTION 4.1. Certain Covenants.................................... 34
SECTION 4.2. Dividend of CI Notes................................. 40
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. Preparation of Form S-4, CI Notes Form
S-1, Spin-off Form S-1, Form 10 and
the Proxy Statement............................ 41
SECTION 5.2. Meetings of Stockholders............................. 43
SECTION 5.3. Letter of Chartwell's Accountants.................... 43
SECTION 5.4. Letter of Piedmont's Accountants..................... 43
SECTION 5.5. Access to Information; Confidentiality............... 44
SECTION 5.6. Best Efforts......................................... 45
SECTION 5.7. Benefit Plans........................................ 45
SECTION 5.8. Indemnification and Insurance........................ 46
SECTION 5.9. Public Announcements................................. 47
SECTION 5.10. Acquisition Proposals............................... 47
SECTION 5.11. Fiduciary Duties.................................... 49
SECTION 5.12. Certain Fees and Expenses........................... 50
SECTION 5.13. Consents, Approvals and Filings..................... 51
SECTION 5.14. Spin-Off............................................ 51
SECTION 5.15. Piedmont Bank Debt.................................. 52
SECTION 5.16. Affiliates and Certain Stockholders................. 52
SECTION 5.17. Listing............................................. 53
SECTION 5.18. Stockholder Litigation.............................. 53
SECTION 5.19. Board Action Relating to Stock Option
Plan........................................... 53
SECTION 5.20. Chartwell Warrants.................................. 53
SECTION 5.21. Post-Merger Operations.............................. 54
SECTION 5.22. Stockholders Agreement and Registration
Rights Agreement............................... 54
SECTION 5.23. Noteholder Consent.................................. 54
SECTION 5.24. Additional Reserves.............................. 54
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. Conditions to Each Party's Obligation To Effect the
Merger................................................... 55
(a) Stockholder Approval.......... .................. 55
(b) Governmental and Regulatory Consents............. 55
(c) HSR Act.......................................... 55
(d) No Injunctions or Restraints..................... 55
(e) Form S-4......................................... 56
(f) Third-Party Consents............................. 56
(g) Listing.......................................... 56
(h) CI Notes......................................... 56
(i) Spin-Off......................................... 56
(j) Supplemental Indenture........................... 56
SECTION 6.2. Conditions to Obligations of Piedmont................ 56
(a) Representations and Warranties................... 56
(b) Performance of Obligations of
Chartwell...................................... 57
(c) No Material Adverse Change....................... 57
(d) Tax Opinions..................................... 57
(e) Stockholders Agreement and Registration
Rights Agreement............................... 57
SECTION 6.3. Conditions to Obligation of Chartwell................ 57
(a) Representations and Warranties................... 58
(b) Performance of Obligations of Piedmont........... 58
(c) No Material Adverse Change....................... 58
(d) Affiliates....................................... 58
(e) Tax Opinion...................................... 58
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. Termination.......................................... 59
SECTION 7.2. Effect of Termination................................ 60
SECTION 7.3. Amendment............................................ 60
SECTION 7.4. Extension; Waiver.................................... 60
SECTION 7.5. Procedure for Termination, Amendment,
Extension or Waiver............................. 61
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1. Nonsurvival of Representations and
Warranties..................................... 61
SECTION 8.2. Fees and Expenses................................... 61
SECTION 8.3. Definitions; Certain Calculations and
Related Matters................................ 61
SECTION 8.4. Notices............................................. 64
SECTION 8.5. Interpretation...................................... 65
SECTION 8.6. Counterparts........................................ 65
SECTION 8.7. Entire Agreement; Third-Party
Beneficiaries.................................. 65
SECTION 8.8. Governing Law....................................... 65
SECTION 8.9. Assignment.......................................... 66
SECTION 8.10. Enforcement......................................... 66
SECTION 8.11. Severability........................................ 66
EXHIBITS
Exhibit A CI Indenture
Exhibit B Contribution and Distribution Agreement
Exhibit C Restated Chartwell Charter
Exhibit D Piedmont Charter Amendment
Exhibit E Restated Chartwell By-Laws
Exhibit F Stockholders Agreement
Exhibit G Chartwell Employee Stock Purchase Plan
Exhibit H Form of Affiliate Letter
Exhibit I Registration Rights Agreement
Exhibit J Supplemental Indenture
AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 7, 1995
BETWEEN
PIEDMONT MANAGEMENT COMPANY INC.
A DELAWARE CORPORATION ("PIEDMONT"),
AND
CHARTWELL RE CORPORATION,
A DELAWARE CORPORATION ("CHARTWELL").
WHEREAS, the Board of Directors of each of Piedmont and Chartwell
has adopted resolutions approving this Agreement, pursuant to which Piedmont
shall be merged with and into Chartwell (the "Merger"); and
WHEREAS, concurrently with the execution and delivery of this
Agreement, certain stockholders of Piedmont have entered into a Voting
Agreement with Chartwell pursuant to which they have agreed to vote, subject
to the terms thereof, in favor of the transactions contemplated by this
Agreement, and certain stockholders of Chartwell having the power to vote
substantially all of the outstanding common stock, par value $.01 per share
(the "Common Stock"), of Chartwell have entered into a Voting Agreement with
Piedmont pursuant to which they have agreed to vote, subject to the terms
thereof, in favor of the transactions contemplated by this Agreement; and
WHEREAS, the Board of Directors of Piedmont has approved the
issuance as a dividend by Piedmont, prior to the Merger, of one Contingent
Interest Note (the "CI Notes") to each holder of record of shares of common
stock, par value $.50 per share, of Piedmont (the "Piedmont Common Stock")
prior to such issuance, such CI Notes to be issued pursuant to an Indenture
between Piedmont and a trustee to be determined, which Indenture shall be in
the form of Exhibit A hereto (the "CI Indenture"); and
WHEREAS, the Board of Directors of Piedmont has approved the
formation of a new subsidiary ("LH Corp."), the contribution to LH Corp. of
all the shares of capital stock of certain subsidiaries of Piedmont engaged in
the asset management business and certain other assets and liabilities, certain
related reorganization transactions, and the distribution immediately prior to
the Effective Time (as defined herein) of all the shares of capital stock of
LH Corp. on a pro rata basis to the holders of the Piedmont Common Stock (the
"Spin-off"), all of the foregoing to be effected pursuant to the Contribution
and Distribution Agreement attached hereto as Exhibit B (the "Distribution
Agreement") and the Tax Disaffiliation Agreement and other agreements attached
as annexes to the Distribution Agreement (together with the Distribution
Agreement, the "Spin-Off Agreements"), all of which will be executed and
delivered by Piedmont and the other parties thereto prior to the Effective
Time; and
WHEREAS, immediately following the Effective Time, Chartwell will
contribute or cause to be contributed to its wholly-owned subsidiary,
Chartwell Reinsurance Company ("Chartwell Re"), all of the shares of capital
stock of The Reinsurance Corporation of New York ("RECO" and such
contribution, the "RECO Contribution"); and
WHEREAS, Piedmont and Chartwell desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, the parties
agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Delaware
General Corporation Law (the "DGCL"), Piedmont shall be merged with and into
Chartwell at the Effective Time (as hereinafter defined). Upon the Effective
Time, the separate existence of Piedmont shall cease, and Chartwell shall
continue as the surviving corporation (the "Surviving Corporation").
SECTION 1.2. Closing. Unless this Agreement shall have been
terminated pursuant to Section 7.1 and subject to the satisfaction or waiver
of each of the conditions set forth in Article VI, the closing of the Merger
(the "Closing") will take place at 10:00 a.m. on the date (the "Closing Date")
that is the later of (i) the second business day following the date on which
the last to be fulfilled or waived of the conditions set forth in Sections
6.1(a) through (g) shall be fulfilled or waived in accordance with this
Agreement and (ii) the first business day following the date on which the
condition set forth in Section 6.1(h) shall be fulfilled in accordance with
this Agreement, at the offices of LeBoeuf, Lamb, Greene & MacRae, L.L.P., 125
West 55th Street, New York, New York, unless another date, time or place is
agreed to in writing by the parties hereto.
SECTION 1.3. Effective Time. The parties hereto will file with
the Secretary of State of the State of Delaware (the "Delaware Secretary of
State") on the date of the Closing (or on such other later date as Piedmont
and Chartwell may agree) a certificate of merger or other appropriate
documents, executed in accordance with the relevant provisions of the DGCL,
and make all other filings or recordings required under the DGCL in connection
with the Merger. The Merger shall become effective upon the filing of the
certificate of merger with the Delaware Secretary of State, or at such later
time as is specified in the certificate of merger (the "Effective Time").
SECTION 1.4. Effects of the Merger. The Merger shall have the
effects set forth in Section 259 of the DGCL. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time, all the
properties, rights, privileges, powers and franchises of Piedmont shall vest
in the Surviving Corporation, and all debts, liabilities and duties of Piedmont
shall become the debts, liabilities and duties of the Surviving Corporation,
all as provided under the DGCL.
SECTION 1.5. Certificate of Incorporation. The Restated
Certificate of Incorporation of Chartwell (the "Charter"), as in effect
immediately prior to the Effective Time, shall be amended and restated in its
entirety as of the Effective Time to read as set forth in Exhibit C hereto (as
so amended and restated, the "Restated Chartwell Charter") and, as so amended
and restated, the Restated Chartwell Charter shall, from and after the
Effective Time, be the Certificate of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
ARTICLE II
EFFECT OF THE MERGER ON THE SECURITIES
OF THE CONSTITUENT CORPORATIONS
SECTION 2.1. Effect on Capital Stock. As of the Effective Time,
by virtue of the Merger and without any action on the part of the holders of
any shares of Piedmont Common Stock or any other shares of capital stock of
Piedmont:
(a) Cancellation of Treasury Stock and Chartwell-Owned Stock.
Each share of Piedmont Common Stock issued and outstanding immediately prior
to the Effective Time that is owned by Piedmont or any subsidiary of Piedmont
or by Chartwell or any subsidiary of Chartwell shall automatically be
cancelled and retired and shall cease to exist, and no cash or other
consideration shall be delivered or deliverable in exchange therefor.
(b) Conversion of Piedmont Common Stock. Each share of Piedmont
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares to be cancelled in accordance with Section 2.1(a)) shall be
converted into the right to receive that number of validly issued, fully paid
and nonassessable shares of Common Stock (the "Stock Consideration") which is
equal to the Conversion Number (as defined in Section 2.1(e)). The Stock
Consideration and any cash to be paid in accordance with Section 2.2 in lieu
of fractional shares of Common Stock are referred to collectively as the
"Merger Consideration".
(c) Piedmont Preferred Stock. Immediately prior to the record
date for the payment of the dividend of the CI Notes, (i) Piedmont shall
declare a dividend of $.50 per share on each share of Cumulative Convertible
Series A Preferred Stock of Piedmont (the "Piedmont Preferred Stock")
outstanding as of such time, (ii) thereafter Piedmont shall pay to the holders
of shares of Piedmont Preferred Stock as of such time (A) the dividend
declared pursuant to clause (i) and (B) $6.50 per share representing all
accrued and unpaid dividends on such shares through April 15, 1995; provided,
that the aggregate payment under subclauses (A) and (B) shall not exceed
$1,334,000, and (iii) as of such time, each outstanding share of Piedmont
Preferred Stock shall be automatically converted into two shares of Piedmont
Common Stock.
(d) Piedmont Stock Options. Immediately prior to the record
date for payment of the dividend of CI Notes (the "Option Date"), each
outstanding employee stock option to purchase Piedmont Common Stock granted
under any of the Piedmont Stock Plans (as hereinafter defined) (each, a
"Piedmont Stock Option") shall be canceled, and each holder of any
"in-the-money" Piedmont Stock Option (determined as provided below) as of such
date, whether or not then vested or exercisable, shall receive for such
"in-the-money" Piedmont Stock Options that number of shares of Piedmont Common
Stock obtained by dividing (i) the excess, if any, of the "fair market value"
(determined as provided below) per share of Piedmont Common Stock
multiplied by the number of such "in-the-money" Piedmont Stock Options held
by such holder over the sum of (A) the aggregate option price of such
Options plus (B) the aggregate amount required to be withheld for federal,
state and local taxes (using for this purpose the supplemental wage payment
withholding rate (currently 28% for federal taxes)) by (ii) the "fair
market value" per share of Piedmont Common Stock. No fractional shares of
Piedmont Common Stock shall be issued or delivered in connection therewith
and each holder shall instead receive cash (without interest) in an amount
equal to any fractional part of a share of Piedmont Common Stock derived
from the above formula multiplied by the "fair market value" of a share of
Piedmont Common Stock, less any applicable withholding taxes. Any Piedmont
Stock Option that is not "in-the-money" on such record date shall be
canceled and shall cease to exist, and no cash or other consideration shall
be delivered or deliverable in exchange therefor. Whether a Piedmont Stock
Option is "in-the-money" shall be determined based on the average of the
closing prices for Piedmont Common Stock for the five trading days
preceding such record date (such average, the "fair market value"). Prior
to such record date Piedmont shall (i) use its best efforts to obtain any
consents from holders of Piedmont Stock Options and (ii) make any
amendments to the terms of such Piedmont Stock Options and the Piedmont
Stock Plans that are necessary to give effect to the transactions
contemplated by this Section. Notwithstanding any other provision of this
Section, delivery of Common Stock and any cash in lieu of fractional shares
may be withheld in respect of any employee stock option until such
necessary consents are obtained; provided that in the event that any such
consent with respect to any such option is not obtained, Piedmont Common
Stock shall nevertheless be issued in respect of such option (if "in-the-
money" as determined above) and Common Stock shall be issued in respect of
such Piedmont Common Stock in the Merger in accordance with Section 2.1(b)
and any such Piedmont Common Stock or Common Stock shall be held by
Piedmont or Chartwell, as applicable, for the benefit of the holder of such
option. Prior to the Option Date, Piedmont shall be permitted to amend any
Piedmont Stock Plan or Piedmont Stock Option to extend the date of exercise
or accelerate the vesting of any currently outstanding Piedmont Stock
Option through the earlier of the Option Date and the date of termination
of the Merger Agreement.
(e) Conversion Number. (i) The "Conversion Number" shall be
the number (rounded to the nearest ten-thousandth of a share) determined by
dividing (A) the CWL Shares Issuable by (B) the number of shares of Piedmont
Common Stock outstanding immediately prior to the Effective Time and not to be
cancelled in accordance with Section 2.1(a) (the "Piedmont Shares Number").
The "CWL Shares Issuable" shall be determined by multiplying (A) the number of
shares of Common Stock outstanding immediately prior to the Effective Time
(the "Chartwell Shares Number") by (B) 0.826484. The Conversion Number shall
be subject to adjustment if required in accordance with Section 2.1(e)(ii).
(ii) If either Chartwell or Piedmont (or both of them)
experiences a Financial Adjustment (as defined in Section 8.3), the Conversion
Number shall be automatically adjusted to the number (rounded to the nearest
ten-thousandth of a share) determined by dividing the Piedmont Amount by the
Chartwell Amount (each as defined below). For purposes hereof, the "Piedmont
Amount" shall be determined by dividing (i) the Adjusted Piedmont Base Amount
(as defined in Section 8.3) by (ii) the Piedmont Shares Number, and the
Chartwell Amount shall be determined by dividing (i) the Adjusted Chartwell
Base Amount (as defined in Section 8.3) by (ii) the Chartwell Shares Number.
(f) Cancellation and Retirement of Piedmont Common Stock. As of
the Effective Time, all certificates representing shares of Piedmont Common
Stock, other than certificates representing shares to be cancelled in
accordance with Section 2.1(a), issued and outstanding immediately prior to
the Effective Time, shall no longer be outstanding and shall automatically
be cancelled and retired and shall cease to exist, and each holder of a
certificate representing any such shares of Piedmont Common Stock shall
cease to have any rights with respect thereto, except the right to receive
the Merger Consideration upon surrender of such certificate in accordance
with Section 2.2, without interest.
SECTION 2.2. Exchange of Certificates. (a) Exchange
Agent. As of the Effective Time, Chartwell shall deposit with a bank or trust
company as shall be designated by Chartwell and reasonably satisfactory to
Piedmont (the "Exchange Agent"), for the benefit of the holders of shares of
Piedmont Common Stock, certificates representing the shares of Common Stock
representing the aggregate Stock Consideration (such certificates, together
with any dividends or distributions with respect to such certificates, being
hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedures. As soon as practicable after the
Effective Time, each holder of an outstanding certificate or certificates
which prior thereto represented shares of Piedmont Common Stock (including
certificates which represented shares of Piedmont Preferred Stock prior to the
automatic conversion thereof into shares of Piedmont Common Stock immediately
prior to the record date for the payment of the dividend of CI Notes as
contemplated by this Agreement) shall, upon surrender to the Exchange Agent of
such certificate or certificates and acceptance thereof by the Exchange Agent,
be entitled to a certificate representing that number of whole shares of
Common Stock (and cash in lieu of fractional shares of Common Stock as
contemplated by this Section 2.2) which the aggregate number of shares of
Piedmont Common Stock previously represented by such certificate or
certificates surrendered shall have been converted into the right to receive
pursuant to Section 2.1(b) of this Agreement. The Exchange Agent shall accept
such certificates upon compliance with such reasonable terms and conditions as
the Exchange Agent may impose to effect an orderly exchange thereof in
accordance with normal exchange practices. If the consideration to be paid
in the Merger (or any portion thereof) is to be delivered to any person other
than the person in whose name the certificate representing shares of Piedmont
Common Stock surrendered in exchange therefor is registered, it shall be a
condition to such exchange that the certificate so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
person requesting such exchange shall pay to the Exchange Agent any transfer
or other taxes required by reason of the payment of such consideration to a
person other than the registered holder of the certificate surrendered, or
shall establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not applicable. After the Effective Time, there shall be no
further transfer on the records of Piedmont or its transfer agent of
certificates representing shares of Piedmont Common Stock and if such
certificates are presented to Piedmont for transfer, they shall be cancelled
against delivery of the Merger Consideration as hereinabove provided. Until
surrendered as contemplated by this Section 2.2(b), each certificate
representing shares of Piedmont Common Stock (other than certificates
representing shares to be cancelled in accordance with Section 2.1(a)) shall
be deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration, without any interest
thereon, as contemplated by Section 2.1. No interest will be paid or will
accrue on any cash payable as Merger Consideration.
(c) Letter of Transmittal. Promptly after the Effective Time
(but in no event more than 5 days thereafter), the Surviving Corporation shall
require the Exchange Agent to mail to each record holder of certificates that
immediately prior to the Effective Time represented shares of Piedmont Common
Stock which have been converted pursuant to Section 2.1, a form of letter of
transmittal and instructions for use in surrendering such certificates and
receiving the consideration to which such holder shall be entitled pursuant to
Section 2.1.
(d) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Common Stock with a record
date after the Effective Time shall be paid to the holder of any certificate
that immediately prior to the Effective Time represented shares of Piedmont
Common Stock which have been converted pursuant to Section 2.1, until the
surrender for exchange of such certificate in accordance with this Article II.
Following surrender for exchange of any such certificate, there shall be paid
to the holder of such certificate, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to the number of whole
shares of Common Stock into which the shares of Piedmont Common Stock
represented by such certificate immediately prior to the Effective Time were
converted pursuant to Section 2.1, and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Effective Time, but prior to such surrender, and with a payment date subsequent
to such surrender, payable with respect to such whole shares of Common Stock.
(e) No Further Ownership Rights in Piedmont Common Stock. The
Merger Consideration paid upon the surrender for exchange of certificates
representing shares of Piedmont Common Stock in accordance with the terms of
this Article II shall be deemed to have been issued and paid in full
satisfaction of all rights pertaining to the shares of Piedmont Common Stock
theretofore represented by such certificates, subject, however, to the
Surviving Corporation's obligation (if any) to pay any dividends or make any
other distributions with a record date prior to the Effective Time which may
have been declared by Piedmont on such shares of Piedmont Common Stock in
accordance with the terms of this Agreement or prior to the date of this
Agreement and which remain unpaid at the Effective Time.
(f) No Fractional Shares. (i) No certificates or scrip
representing fractional shares of Common Stock shall be issued upon the
surrender for exchange of certificates that immediately prior to the Effective
Time represented shares of Piedmont Common Stock which have been converted
pursuant to Section 2.1, and such fractional share interests will not entitle
the owner thereof to vote or to any rights as a stockholder of Chartwell. No
Piedmont stockholder shall be entitled to receive cash in lieu of fractional
shares in an amount greater than the value of one full share of Common Stock.
(ii) Notwithstanding any other provisions of this
Agreement, each holder of shares of Piedmont Common Stock who would otherwise
have been entitled to receive a fraction of a share of Common Stock (after
taking into account all certificates delivered by such holder) shall receive,
in lieu thereof, cash (without interest) in an amount equal to (x) such
fractional part of a share of Common Stock multiplied by (y) the amount
determined by dividing (A) the closing price of a share of Piedmont Common
Stock on the trading day immediately preceding the Effective Time by (B) the
Conversion Number (subject to adjustment as provided in Section 2.1(e)(ii)).
Chartwell shall provide the Exchange Agent with the necessary cash for such
payments as and when it is needed.
(g) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of the certificates
representing shares of Piedmont Common Stock for 180 days after the Effective
Time shall be delivered to Chartwell, upon demand, and any holders of shares
of Piedmont Common Stock who have not theretofore complied with this Article
II shall thereafter look only to Chartwell for payment of their claim for any
Merger Consideration and any dividends or distributions with respect to Common
Stock.
(h) No Liability. None of Piedmont, the Surviving Corporation
or the Paying Agent shall be liable to any person in respect of any shares,
cash, dividends or distributions payable from the Exchange Fund delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. If any certificates representing shares of Piedmont Common Stock
shall not have been surrendered prior to five years after the Effective Time
(or immediately prior to such earlier date on which any Merger Consideration
in respect of such certificate would otherwise escheat to or become the
property of any Governmental Entity (as defined in Section 3.1(c))), any such
shares, cash, dividends or distributions payable in respect of such
certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or
interest of any person previously entitled thereto.
SECTION 2.3. Supplemental Indenture. As of the Effective Time,
the Surviving Corporation shall execute a supplemental indenture to the CI
Indenture in substantially the form attached hereto as Exhibit J (the
"Supplemental Indenture") evidencing its obligations as the successor to
Piedmont with respect to the CI Notes.
SECTION 2.4. Tax Consequences of Merger. It is the intent of
Piedmont and Chartwell and the holders of the Common Stock of Chartwell and
the holders of the Piedmont Common Stock that the Merger qualify as a
reorganization described in Section 368(a)(1)(A) of the Internal Revenue Code
of 1986 as amended (the "Code"), pursuant to which none of the holders of the
Common Stock of Chartwell, the holders of the Piedmont Common Stock, Chartwell
or Piedmont will recognize any gain or loss for Federal income tax purposes,
except to the extent of any cash received in lieu of fractional shares and,
with respect to Piedmont, to the extent of any excess loss accounts or
deferred intercompany gains.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of Chartwell.
Chartwell represents and warrants to Piedmont as follows:
(a) Organization, Standing and Corporate Power.
Chartwell and each subsidiary of Chartwell is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate
power and authority to carry on its business as now being conducted.
Chartwell and each subsidiary of Chartwell is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties
makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not have a material adverse
effect on the business, financial condition or results of operations of
Chartwell and its subsidiaries taken as a whole or a material adverse
effect on the consummation of any of the transactions contemplated
hereby (a "Chartwell Material Adverse Effect"). Chartwell has delivered
to Piedmont complete and correct copies of its Charter and By-laws and
the certificates of incorporation and by-laws, or other organizational
documents, of its subsidiaries, in each case as amended to the date of
this Agreement.
(b) Capital Structure. The authorized capital stock of
Chartwell consists of (i) 6,000,000 shares of Common Stock and (ii)
18,000 shares of Series A Convertible Preferred Stock, par value $.01
per share, 5,000 shares of Series B Convertible Preferred Stock, par
value $.01 per share, and 1,000,000 shares of Series C Preferred Stock,
par value $.01 per share. At the close of business on August 4, 1995,
3,755,312 shares of Common Stock were issued and outstanding, 800,000
shares of Common Stock were reserved for issuance pursuant to
outstanding options to purchase shares of Common Stock (each, a
"Chartwell Stock Option") issued under Chartwell's 1993 Stock Option
Plan (the "Chartwell Stock Option Plan"), 375,423 shares of Common Stock
were reserved for issuance upon the exercise of the Warrants (as defined
in Section 5.20) and 8,916 shares of Common Stock were held by Chartwell
in its treasury. Except as set forth above, at the close of business on
August 4, 1995, no shares of capital stock or other equity securities
of Chartwell were issued, reserved for issuance or outstanding. All
outstanding shares of capital stock of Chartwell are, and all shares
which may be issued (i) pursuant to this Agreement or (ii) pursuant to
the Chartwell Stock Option Plan or the Warrants will be, when issued,
duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. No bonds, debentures, notes or other
indebtedness of Chartwell or any subsidiary of Chartwell having the
right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which the stockholders of
Chartwell or any subsidiary of Chartwell may vote are issued or
outstanding. Section 3.1(b) of the Disclosure Schedule lists each
subsidiary of Chartwell and, except for the capital stock of such
subsidiaries and the other ownership interests listed in Section 3.1(b)
of the Disclosure Schedule, Chartwell does not own, directly or
indirectly, any capital stock or other ownership interest in any
corporation, partnership, joint venture or other entity. Except as
disclosed in Section 3.1(b) of the Disclosure Schedule, all the
outstanding shares of capital stock of each subsidiary of Chartwell have
been validly issued and are fully paid and nonassessable and are owned
by Chartwell, by one or more subsidiaries of Chartwell or by
Chartwell and one or more such subsidiaries, free and clear of all
pledges, claims, liens, charges, encumbrances and security interests
of any kind or nature whatsoever (collectively, "Liens"). Except as
set forth above or in Section 3.1(b) of the Disclosure Schedule,
there are not any securities, options, warrants, rights, commitments
or agreements of any kind to which Chartwell or any subsidiary is a
party or by which any of them is bound obligating any of them to
issue, sell or deliver, or repurchase, redeem or otherwise acquire,
shares of capital stock or other equity or voting securities of any
of them, or obligating any of them to issue, sell, deliver, grant,
extend or enter into any such security, option, warrant, right,
commitment or agreement. Except as disclosed in Section 3.1(b) of
the Disclosure Schedule, neither Chartwell nor any subsidiary of
Chartwell is a party to or bound by any agreement, proxy or other
arrangement restricting the transfer of Common Stock or affecting the
voting of any shares of capital stock of Chartwell or any subsidiary.
(c) Authority; Noncontravention. Chartwell has the requisite
corporate power and authority to enter into this Agreement and, subject
to the Chartwell Stockholder Approval (as defined in Section 5.10(a)),
Chartwell and each of its subsidiaries has all requisite corporate power
and authority to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by Chartwell
and the consummation by Chartwell and its subsidiaries of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Chartwell and its
subsidiaries, subject to the Chartwell Stockholder Approval. This
Agreement has been duly executed and delivered by Chartwell and,
assuming this Agreement constitutes the valid and binding agreement of
Piedmont, constitutes a valid and binding obligation of Chartwell,
enforceable against Chartwell in accordance with its terms. Except as
disclosed in Section 3.1(c) of the Disclosure Schedule, the execution
and delivery of this Agreement do not, and the consummation of the
transactions contemplated by this Agreement and compliance with the
provisions hereof will not, (i) subject to the Chartwell Stockholder
Approval, conflict with any of the provisions of the Charter or By-laws
of Chartwell or the comparable documents of any subsidiary of Chartwell,
(ii) subject to the matters referred to in the next sentence and to the
consent of holders of Chartwell's 10 1/4% Senior Notes due 2004 (the
"Notes") as described in Section 5.23, conflict with, result in a breach
of or default (with or without notice or lapse of time, or both) under,
give rise to a right of termination, cancellation or acceleration of any
obligation or loss of a material benefit under, require the consent of
any person under, or result in the creation of any Lien on any property
or asset of Chartwell or any of its subsidiaries under, any indenture or
other agreement, permit, franchise, license or other instrument or
undertaking to which Chartwell or any of its subsidiaries is a party or
by which Chartwell or any of its subsidiaries or any of their assets is
bound or affected, or (iii) subject to the matters referred to in the
next sentence, contravene any statute, law, ordinance, rule, regulation,
order, judgment, injunction, decree, determination or award applicable
to Chartwell or any of its subsidiaries or any of their respective
properties or assets, which, in the case of clauses (ii) and (iii)
above, singly or in the aggregate, could reasonably be expected to have
a Chartwell Material Adverse Effect. No consent, approval or
authorization of, or declaration or filing with, or notice to, any court
or governmental or regulatory authority or agency, domestic or foreign
(a "Governmental Entity"), is required by or with respect to Chartwell
or any of its subsidiaries in connection with the execution and delivery
of this Agreement by Chartwell or the consummation by Chartwell or any
of its subsidiaries of the transactions contemplated hereby, except for
(i) the filing of premerger notification and report forms under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act") with respect to the Merger, (ii) the approvals, filings
and/or notices required under the insurance laws of the jurisdictions
set forth in Section 3.1(c)(i) of the Disclosure Schedule, (iii) the
filing with the Securities and Exchange Commission (the "SEC") of a
registration statement on Form S-4 in connection with the issuance of
Common Stock in the Merger (the "Form S-4") and of such reports or other
filings under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this Agreement
and the transactions contemplated by this Agreement, (iv) the filing of
the certificate of merger with the Delaware Secretary of State and
appropriate documents with the relevant authorities of other states in
which Piedmont is qualified to do business, (v) such other consents,
approvals, authorizations, declarations, filings or notices as are set
forth in Section 3.1(c)(ii) of the Disclosure Schedule, (vi) any
applicable filings under state anti-takeover laws and (vii) such other
consents, approvals, authorizations, declarations, filings or notices
the failure to obtain or make which, in the aggregate, would not have a
Chartwell Material Adverse Effect.
(d) SEC Documents; Financial Statements. (i) Chartwell has
filed all required reports, schedules, forms, statements and other
documents with the SEC since March 10, 1994 (such reports, schedules,
forms, statements and other documents are hereinafter referred to as the
"Chartwell SEC Documents"). As of their respective dates, the Chartwell
SEC Documents 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 the rules and regulations of the
SEC promulgated thereunder applicable to such Chartwell SEC Documents,
and none of the Chartwell SEC Documents as of such dates contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. Except to the extent that information contained
in any Chartwell SEC Document has been revised or superseded by a later
Filed Chartwell SEC Document (as defined in Section 3.1(f)), none of the
Chartwell SEC Documents contains any untrue statement of a material fact
or omits 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. The
consolidated financial statements of Chartwell included in the Chartwell
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
SEC with respect thereto, have been prepared in accordance with
generally accepted accounting principles (except, in the case of
unaudited consolidated quarterly statements, as permitted by Form 10-Q
of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of Chartwell and its consolidated
subsidiaries as of the dates thereof and the consolidated results of
their operations and cash flows for the periods then ended (subject, in
the case of unaudited quarterly statements, to normal year-end audit
adjustments). Except as set forth in the Filed Chartwell SEC Documents,
neither Chartwell nor any of its subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or
otherwise) required by generally accepted accounting principles to be
set forth on a consolidated balance sheet of Chartwell and its
consolidated subsidiaries or in the notes thereto, other than
liabilities and obligations which would not individually or in the
aggregate reasonably be expected to have a Chartwell Material Adverse
Effect.
(ii) The Annual Statement for the year ended December 31,
1994, together with all exhibits and schedules thereto, and any
actuarial opinion, affirmation or certification filed in connection
therewith, and any Quarterly Statements for periods ended after January
1, 1995, together with all exhibits and schedules thereto, with respect
to Chartwell Re, in each case as filed with the applicable Insurance
Regulator (as hereinafter defined) of its jurisdiction of domicile, were
prepared in conformity with statutory accounting practices prescribed or
permitted by such Insurance Regulator applied on a consistent basis
("SAP") and present fairly, to the extent required by and in conformity
with SAP, the statutory financial condition of Chartwell Re at their
respective dates and the results of operations, changes in capital and
surplus and cash flow of Chartwell Re for each of the periods then
ended. No deficiencies or violations material to the financial
condition of Chartwell Re have been asserted in writing by any Insurance
Regulator which have not been cured or otherwise resolved to the
satisfaction of such Insurance Regulator and which have not been
disclosed in writing to Piedmont prior to the date of this Agreement.
(e) Transaction Documents. None of the information supplied or
to be supplied by Chartwell for inclusion or incorporation by reference
in (i) the Form S-4 will at the time the Form S-4 becomes effective
under the Securities Act or at the time any amendment or supplement
thereto becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading, (ii) the registration statement on Form S-1 to be filed by
Piedmont with the SEC in connection with the issuance of the CI Notes
(the "CI Notes Form S-1") will at the time it becomes effective under
the Securities Act or at the time any amendment or supplement thereto
becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading or (iii) the proxy statement relating to the approval by the
stockholders of Piedmont of the matters referred to in the second
sentence of Section 5.2 (the "Proxy Statement") will, at the date it is
first mailed to Piedmont's stockholders or at the time of the Piedmont
Stockholders Meeting (as defined in Section 5.2), contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Form S-4 will comply as to form in all material
respects with the requirements of the Securities Act and the rules and
regulations promulgated thereunder. Notwithstanding the foregoing, no
representation or warranty is made by Chartwell in this Section 3.1(e)
with respect to information supplied by Piedmont specifically for
inclusion or incorporation by reference in the Form S-4, CI Notes Form
S-1 or Proxy Statement.
(f) Absence of Certain Changes or Events. Except as disclosed
in the Chartwell SEC Documents filed and publicly available prior to the
date of this Agreement (the "Filed Chartwell SEC Documents") or in
Section 3.1(f) of the Disclosure Schedule, since the date of the most
recent audited financial statements included in the Filed Chartwell SEC
Documents, Chartwell and each of its subsidiaries has conducted its
business only in the ordinary course, and there has not been (i) any
Chartwell Material Adverse Change (as defined in Section 8.3), or any
event or condition that individually or in the aggregate could
reasonably be expected to result in a Chartwell Material Adverse Change,
(ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of
Chartwell's outstanding capital stock, (iii) any split, combination or
reclassification of any of its outstanding capital stock or any issuance
or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for shares of its outstanding capital
stock, (iv) (x) any granting by Chartwell or any of its subsidiaries to
any executive officer or other employee of Chartwell or any of its
subsidiaries of any increase in compensation, except in the ordinary
course of business consistent with prior practice or as was required
under employment agreements in effect as of the date of the most recent
audited financial statements included in the Filed Chartwell SEC
Documents, (y) any granting by Chartwell or any of its subsidiaries to
any such executive officer or other employee of any increase in
severance or termination pay, except as was required under any
employment, severance or termination agreements in effect as of the date
of this Agreement or (z) any entry by Chartwell or any of its
subsidiaries into any employment, severance or termination agreement
with any such executive officer or other employee, other than in the
ordinary course of business and other than in connection with any hiring
of Piedmont personnel, if any, or other additions to personnel required
for post-Merger operations or (v) any change in accounting methods,
principles or practices by Chartwell or any of its subsidiaries
materially affecting its assets, liabilities or business, including but
not limited to any change with respect to establishment of reserves for
unearned premiums, losses and loss adjustment expenses, except insofar
as may have been required by a change in generally accepted accounting
principles or SAP.
(g) Benefit Plans. (i) Each "employee pension benefit plan"
(as defined in Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) (hereinafter a "Pension Plan"),
"employee welfare benefit plan" (as defined in Section 3(1) of ERISA)
(hereinafter a "Welfare Plan"), and each other plan, arrangement or
policy (written or oral) relating to stock options, stock purchases,
compensation, deferred compensation, severance, fringe benefits or other
employee benefits, in each case maintained or contributed to, or
required to be maintained or contributed to, by Chartwell or any of its
subsidiaries for the benefit of any present or former officer, employee,
agent, director or independent contractor of Chartwell or any of its
subsidiaries (all the foregoing being herein called "Benefit Plans") has
been administered in accordance with its terms except where failure to
administer in accordance with such terms would not have a Chartwell
Material Adverse Effect. Chartwell, its subsidiaries and all the
Benefit Plans are in compliance with the applicable provisions of ERISA,
the Code, all other applicable laws and all applicable collective
bargaining agreements except where failure to comply would not have a
Chartwell Material Adverse Effect.
(ii) None of Chartwell or any other person or entity that
together with Chartwell is treated as a single employer under Section
414(b), (c), (m) or (o) of the Code (each a "Commonly Controlled
Entity") (a) has incurred any material liability under Title IV of ERISA
(other than for the payment of benefits or Pension Benefit Guaranty
Corporation insurance premiums, in either case in the ordinary course)
or under Section 412(f) or 412(n) of the Code.
(iii) No Commonly Controlled Entity is obligated to
contribute to any "multiemployer plan" (as defined in Section 4001(a)(3)
of ERISA) or has withdrawn from or incurred any contractual liability to
any multiemployer plan resulting or which could reasonably be expected
to result in any material "withdrawal liability" (within the meaning of
Section 4201 of ERISA) that has not been fully paid.
(iv) Except as disclosed in the Filed Chartwell SEC
Documents or in Section 3.1(g) of the Disclosure Schedule, since the
date of the most recent audited financial statements included in the
Filed Chartwell SEC Documents, there has not been any adoption or
amendment by Chartwell or any of its subsidiaries of any collective
bargaining agreement or any Benefit Plan. Except as disclosed in the
Filed Chartwell SEC Documents or in Section 3.1(g) of the Disclosure
Schedule, there exist no employment, consulting, severance, termination
or indemnification agreements, arrangements or understandings between
Chartwell or any subsidiary and any current or former employee, officer
or director of Chartwell or any subsidiary, other than those entered
into in the ordinary course of business after the date of this Agreement
or in connection with any hiring of Piedmont personnel, if any, or other
additions to personnel required for post-Merger operations.
(h) Taxes. (i) Each of Chartwell and its subsidiaries has
filed all tax returns and reports required to be filed by it or requests
for extensions to file such returns or reports have been timely filed,
granted and have not expired, except to the extent that such failures to
file or to have extensions granted that remain in effect individually or
in the aggregate would not have a Chartwell Material Adverse Effect.
All tax returns filed by Chartwell and each of its subsidiaries are
complete and accurate except to the extent that such failure to be
complete and accurate would not have a Chartwell Material Adverse
Effect. Chartwell and each of its subsidiaries has paid (or Chartwell
has paid on the subsidiaries' behalf) all taxes shown as due on such
returns, and the most recent financial statements contained in the Filed
Chartwell SEC Documents reflect an adequate reserve for all taxes
payable by Chartwell and its subsidiaries for all taxable periods and
portions thereof accrued through the date of such financial statements.
(ii) No deficiencies for any taxes have been proposed,
asserted or assessed against Chartwell or any of its subsidiaries that
are not adequately reserved for, except for deficiencies that
individually or in the aggregate would not have a Chartwell Material
Adverse Effect, and, except as set forth on Section 3.1(h) of the
Disclosure Schedule, no requests for waivers of the time to assess any
such taxes have been granted or are pending. The Federal and state
income tax returns of Chartwell and each of its subsidiaries
consolidated in such returns have been examined by and settled with the
United States Internal Revenue Service or the appropriate state taxation
authorities, as the case may be, or the statute of limitations on
assessment or collection of any Federal or state income taxes due from
Chartwell or any of its subsidiaries has expired, for all taxable years
of Chartwell or any of its subsidiaries through the taxable year ended
December 31, (a) 1991 for Federal income taxes and (b) 1989 for state
income taxes.
(iii) As used in this Agreement, "taxes" shall include all
Federal, state, local and foreign income, property, sales, excise,
employment, payroll, withholding and other taxes, tariffs or
governmental charges of any nature whatsoever.
(i) No Excess Parachute Payments; Section 162(m) of the Code.
(i) Except as disclosed in Section 3.1(i) of the Disclosure Schedule,
none of the transactions contemplated by this Agreement shall constitute
a triggering event under any employment, severance or termination
agreement or other compensation arrangement or Benefit Plan currently in
effect which (either alone or upon the occurrence of any additional or
subsequent event) could reasonably be expected to result in any payment,
acceleration, vesting or increase in benefits to any current or former
officer, employee or director of Chartwell or any of its subsidiaries
and which would constitute an "excess parachute payment" (as such term
is defined in Section 280G(b)(1) of the Code).
(ii) Except as disclosed in Section 3.1(i) of the
Disclosure Schedule, the disallowance of a deduction under Section
162(m) of the Code for employee remuneration will not apply to any
amount paid or payable by Chartwell or any subsidiary of Chartwell under
any contract, Benefit Plan, program, arrangement or understanding
currently in effect.
(j) Compliance with Applicable Laws. Each of Chartwell and its
subsidiaries has in full force and effect all Federal, state, local and
foreign governmental approvals, authorizations, certificates, consents,
filings, franchises, licenses, notices, permits and rights
(collectively, "Permits") necessary for it to own, lease or operate its
properties and assets and to carry on its business as now conducted, and
there has occurred no default under any such Permit, except for the
failure of Permits to be in full force and effect and for defaults under
Permits which failure or default individually or in the aggregate would
not have a Chartwell Material Adverse Effect. Except as disclosed in
the Filed Chartwell SEC Documents, Chartwell and its subsidiaries are in
compliance with all applicable statutes, laws, ordinances, rules,
regulations and orders of any Governmental Entity, except for such
noncompliance which individually or in the aggregate would not have a
Chartwell Material Adverse Effect. Except as disclosed in the Filed
Chartwell SEC Documents and except for routine examinations by state
Governmental Entities charged with supervision of insurance companies
("Insurance Regulators"), as of the date of this Agreement, to the
knowledge of Chartwell, no investigation by any Governmental Entity with
respect to Chartwell or any of its subsidiaries is pending or
threatened, other than, in each case, those the outcome of which, as far
as reasonably can be foreseen, will not have a Chartwell Material
Adverse Effect. Except as disclosed in Section 3.1(j) of the Disclosure
Schedule, neither Chartwell nor any of its subsidiaries is a party to
any agreement, commitment or understanding, written or oral, with any
Insurance Regulator, except for routine agreements, commitments and
understandings with such Insurance Regulators which could not,
individually or in the aggregate, reasonably be expected to have a
Chartwell Material Adverse Effect.
(k) Voting Requirements. The affirmative vote of holders of
two-thirds of the shares of Common Stock with respect to this Agreement
and the Merger and the other items described in the first sentence of
Section 5.2 is the only vote of the holders of any class or series of
Chartwell's capital stock necessary to approve this Agreement and the
transactions contemplated by this Agreement.
(l) Opinion of Financial Advisor. Chartwell has received the
opinion of Salomon Brothers Inc to the effect that, as of the date of
this Agreement, the exchange ratio in the Merger is fair to Chartwell
and its stockholders from a financial point of view.
(m) Brokers. No broker, investment banker, financial advisor or
other person, other than Salomon Brothers Inc, the fees and expenses of
which will be paid by Chartwell, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Chartwell.
(n) Litigation. There is no suit, action, proceeding or
arbitration pending or, to the knowledge of Chartwell, threatened
against or affecting Chartwell or any of its subsidiaries that,
individually or in the aggregate, could reasonably be expected to (i)
have a Chartwell Material Adverse Effect, (ii) impair the ability of
Chartwell to perform its obligations under this Agreement or (iii)
prevent the consummation of any of the transactions contemplated by this
Agreement, nor is there any judgment, decree, injunction or order of any
Governmental Entity or arbitrator outstanding against Chartwell or any
of its subsidiaries having, or which could reasonably expected to have,
any such effect.
(o) Chartwell Investees. Section 3.1(o) of the Disclosure
Schedule sets forth a list of certain corporations and other entities
(collectively, the "Chartwell Investees") in which Chartwell or a
subsidiary has made an equity investment, and indicates the percentage
of the voting equity interests and total ownership interests in such
Chartwell Investees held by Chartwell and its subsidiaries as of the
date hereof (collectively, the "Chartwell Investee Interests"). Except
as disclosed in Section 3.1(o) of the Disclosure Schedule, to the
knowledge of Chartwell, all the Chartwell Investee Interests are fully
paid and nonassessable and are owned by Chartwell, by one or more
subsidiaries of Chartwell or by Chartwell and one or more subsidiaries,
free and clear of all Liens. Except as disclosed in Section 3.1(o) of
the Disclosure Schedule, to the knowledge of Chartwell, neither
Chartwell nor any subsidiary is a party to or bound by any agreement,
proxy or other arrangement restricting the transfer or affecting the
voting of any Chartwell Investee Interest. Chartwell has delivered to
Piedmont complete and correct copies of each material agreement or other
document with respect to its investment in each Chartwell Investee, in
each case as in effect on the date of this Agreement. Except as
disclosed in Section 3.1(o) of the Disclosure Schedule, Chartwell does
not know of any representation and warranty made with respect to a
subsidiary of Chartwell in Sections 3.1(c), (j) and (n) of this
Agreement which would not be true and correct in all material
respects (or, with respect to those representations and warranties
that are qualified as to materiality, true and correct) if the
Chartwell Investees were each considered a subsidiary of Chartwell
for purposes of such representation and warranty, except for such
failures to be true and correct in all material respects (or true and
correct, as applicable) which would not reasonably be expected to
have a Chartwell Material Adverse Effect.
(p) Tax Consequences of the Merger.
(i) Chartwell has no plan or intention to reacquire any of
its Common Stock to be issued in the Merger.
(ii) Chartwell has no plan or intention to sell or
otherwise dispose of any of the assets of Piedmont or its subsidiaries
acquired in the Merger, except for the RECO Contribution and
dispositions made in the ordinary course of business.
(iii) For a period of three years following the Closing
Date, Chartwell will cause a corporation controlled by it to continue
the active conduct of the historic business of Piedmont's subsidiaries
other than the Asset Management Subs (as defined herein) conducted by
such subsidiaries throughout the five year period prior to the
distribution unless Chartwell first (A) obtains a ruling from the
Internal Revenue Service to the effect that such actions will not result
in the Spin-off being taxable to Piedmont or its stockholders or (B)
obtains an opinion of recognized tax counsel satisfactory to LH Corp.
that such actions will not result in the Spin-off being taxable to
Piedmont or its stockholders.
(iv) Chartwell is not an investment company as defined in
Sections 368(a)(2)(F)(iii) and (iv) of the Code.
(v) The payment of cash in lieu of fractional shares of
Common Stock is solely for the purpose of avoiding the expense and
inconvenience to Chartwell of issuing fractional shares and does not
represent separately bargained-for consideration. The total cash
consideration that will be paid in the transaction to the Piedmont
stockholders instead of issuing fractional shares of Common Stock will
not exceed one percent of the total consideration that will be issued in
the transaction to the Piedmont stockholders in exchange for their
shares of Piedmont Common Stock.
(vi) Immediately prior to the Effective Time, Chartwell
will not own, and has not owned since the date of this Agreement, any
shares of capital stock of Piedmont.
SECTION 3.2. Representations and Warranties of Piedmont.
Piedmont represents and warrants to Chartwell as follows:
(a) Organization, Standing and Corporate Power. Piedmont and
each of its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in
which it is incorporated and has the requisite corporate power and
authority to carry on its business as now being conducted. Piedmont and
each Retained Subsidiary is duly qualified or licensed to do business and
is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed (individually or in the
aggregate) would not have a Piedmont Material Adverse Effect (as
hereinafter defined). Piedmont has delivered to Chartwell complete and
correct copies of its Restated Certificate of Incorporation (the
"Piedmont Charter") and By-laws and of the certificates of incorporation
and by-laws of each of its Retained Subsidiaries, in each case as
amended to the date of this Agreement. For purposes of this Agreement,
(i) a "Retained Subsidiary" of Piedmont means each of RECO and ReCor
Insurance Company and (ii) a "Piedmont Material Adverse Effect" means a
material adverse effect on the business, financial condition or results
of operation of Piedmont and its subsidiaries (other than LH Corp.,
Lexington Management Corporation, Manlex Corporation, Piedmont Capital
Corporation, Lexington Funds Distributor, Inc., Piedmont Funding
Corporation, Lexington Capital Management, Inc., Lexington Capital
Management Associates, LCM Financial Services, Inc., Lexington Plan
Administrators, Inc., MSR Advisors Inc., Market Systems Research Inc.
and Piedmont Asset Advisors (collectively, the "Asset Management
Subs")) taken as a whole or a material adverse effect on the
consummation of any of the transactions contemplated hereby.
(b) Capital Structure. The authorized capital stock of Piedmont
consists of 12,000,000 shares of Piedmont Common Stock, par value $.50
per share, and 2,000,000 shares of preferred stock, par value $1 per
share. At the close of business on August 4, 1995, (i) 4,987,064 shares
of Piedmont Common Stock and 191,954 shares of Piedmont Preferred Stock
were issued and outstanding, (ii) 265,000 shares of Piedmont Common
Stock and 53,000 shares of Piedmont Preferred Stock were held by
subsidiaries of Piedmont or by Piedmont in its treasury, (iii) 1,250,000
shares of Piedmont Common Stock were reserved for issuance pursuant to
outstanding options to purchase shares of Piedmont Common Stock granted
under Piedmont's two stock option plans (the "Piedmont Stock Plans") and
(iv) at least 383,908 shares of Piedmont Common Stock were reserved for
issuance upon conversion of the Piedmont Preferred Stock. Except as set
forth above, at the close of business on August 4, 1995, no shares of
capital stock or other equity securities of Piedmont were issued,
reserved for issuance or outstanding. All outstanding shares of capital
stock of Piedmont are, and all shares which may be issued upon the
exercise of options under the Piedmont Stock Plans or upon conversion of
the Piedmont Preferred Stock will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to
preemptive rights. No bonds, debentures, notes or other indebtedness of
Piedmont or any Retained Subsidiary having the right to vote (or
convertible into, or exchangeable for, securities having the right to
vote) on any matters on which the stockholders of Piedmont or any
Retained Subsidiary may vote are issued or outstanding. Section 3.2(b)
of the Disclosure Schedule lists each subsidiary of Piedmont and, except
for the capital stock of such subsidiaries and the other ownership
interests listed in Section 3.2(b) of the Disclosure Schedule, Piedmont
does not own, directly or indirectly, any capital stock or other
ownership interest in any corporation, partnership, joint venture or
other entity. Except as disclosed in Section 3.2(b) of the Disclosure
Schedule, all the outstanding shares of capital stock of each Retained
Subsidiary of Piedmont have been validly issued and are fully paid and
nonassessable and are owned by Piedmont, by one or more Retained
Subsidiaries of Piedmont or by Piedmont and one or more Retained
Subsidiaries, free and clear of all Liens. Except as set forth above,
there are not any securities, options, warrants, rights, commitments or
agreements of any kind to which Piedmont or any Retained Subsidiary is a
party or by which any of them is bound obligating any of them to issue,
sell or deliver, or repurchase, redeem or otherwise acquire, shares of
capital stock or other equity or voting securities of or other ownership
interests in any of them, or obligating any of them to issue, sell,
deliver, grant, extend or enter into any such security, option, warrant,
right, commitment or agreement. Except as disclosed in Section 3.2(b)
of the Disclosure Schedule, neither Piedmont nor any Retained Subsidiary
is a party to or bound by any agreement, proxy or other arrangement
restricting the transfer of Piedmont Common Stock or affecting the
voting of any shares of capital stock of or other ownership interests in
Piedmont or any Retained Subsidiary.
(c) Authority; Noncontravention. Piedmont has all requisite
corporate power and authority to enter into this Agreement and, subject
to the Piedmont Stockholder Approval (as defined in Section 5.10(b)),
Piedmont and each of its subsidiaries has all requisite corporate power
and authority to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by Piedmont and
the consummation by Piedmont and its subsidiaries of the transactions
contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of Piedmont and its
subsidiaries, subject to the Piedmont Stockholder Approval and any
action that may be required in connection with the Bank Consent (as
defined herein). This Agreement has been duly executed and delivered
by and, assuming this Agreement constitutes the valid and binding
agreement of Chartwell, constitutes a valid and binding obligation of
Piedmont, enforceable against Piedmont in accordance with its terms.
As of the Effective Time, the Spin-off Agreements will have been duly
executed and delivered by Piedmont and each of its subsidiaries which
is a party thereto and will constitute valid and binding obligations
of Piedmont and such subsidiaries, enforceable in accordance with
their respective terms. As of the Effective Time, the CI Indenture
will have been duly executed and delivered by Piedmont and will
constitute a valid and binding obligation of Piedmont. When issued
and delivered pursuant to the CI Indenture, the CI Notes will have
been duly executed, issued and delivered and, when authenticated,
will constitute valid and legally binding obligations of Piedmont.
Except as disclosed in Section 3.2(c) of the Disclosure Schedule, the
execution and delivery of this Agreement do not, and the consummation
of the transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not, (i) subject to the
Piedmont Stockholder Approval, conflict with any of the provisions of
the Piedmont Charter or the By-laws of Piedmont or the comparable
documents of any of its subsidiaries, (ii) subject to the matters
referred to in the next sentence and to the Bank Consent, conflict
with, result in a breach of or default (with or without notice or
lapse of time, or both) under, give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a material
benefit under, require the consent of any person under, or result in
the creation of any Lien on any property or asset of Piedmont or any
subsidiary under, any indenture or other agreement, permit,
franchise, license or other instrument or undertaking to which
Piedmont or any of its subsidiaries is a party or by which Piedmont
or any of its subsidiaries or any of their assets is bound or
affected, or (iii) subject to the matters referred to in the next
sentence, contravene any statute, law, ordinance, rule, regulation,
order, judgment, injunction, decree, determination or award
applicable to Piedmont or any of its subsidiaries or any of their
respective properties or assets, which, in the case of clauses (ii)
and (iii) above, singly or in the aggregate, could reasonably be
expected to have a Piedmont Material Adverse Effect. No consent,
approval or authorization of, or declaration or filing with, or
notice to, any Governmental Entity is required by or with respect to
Piedmont or any of its subsidiaries in connection with the execution
and delivery of this Agreement by Piedmont or the consummation by
Piedmont or any of its subsidiaries, as the case may be, of any of
the transactions contemplated by this Agreement, except for (i) the
filing of premerger notification and report forms under the HSR Act
with respect to the Merger, (ii) the approvals, filings and/or
notices required under the insurance laws of the jurisdictions set
forth in Section 3.2(c)(i) of the Disclosure Schedule, (iii) the
filing with the SEC of (w) the CI Notes Form S-1, (x) the Proxy
Statement relating to the Piedmont Stockholder Approval, (y)
potentially, a registration statement on Form S-1 to be filed with
the SEC by LH Corp. in connection with the issuance of LH Corp.
common stock in the Spin-off (the "Spin-off Form S-1") and (z) a
registration statement with respect to LH Corp. on Form 10 or other
applicable form (the "Form 10") and such reports under the Exchange
Act as may be required in connection with this Agreement and the
transactions contemplated hereby, (iv) the qualification of the CI
Indenture under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), (v) the filing of the certificate of merger
with the Delaware Secretary of State, and appropriate documents with
the relevant authorities of other states in which Piedmont is
qualified to do business, (vi) such other consents, approvals,
authorizations, filings or notices as are set forth in Section
3.2(c)(ii) of the Disclosure Schedule, (vii) any applicable filings
under state anti-takeover laws and (viii) such other consents,
approvals, authorizations, declarations, filings or notices the
failure to obtain or make which, in the aggregate, would not have a
Piedmont Material Adverse Effect.
(d) SEC Documents; Financial Statements. (i) Piedmont has filed
all required reports, schedules, forms, statements and other documents
with the SEC since January 1, 1994 (the "Piedmont SEC Documents"). As
of their respective dates, the Piedmont SEC Documents complied in all
material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such Piedmont SEC Documents,
and none of the Piedmont SEC Documents as of such dates contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading, other than any such untrue statement or omission
with respect to an Asset Management Sub which would not individually or
in the aggregate reasonably be expected to have a Piedmont Material
Adverse Effect. Except to the extent that information contained in any
Piedmont SEC Document has been revised or superseded by a later Filed
Piedmont SEC Document (as defined in Section 3.2(f)), none of the
Piedmont SEC Documents contains any untrue statement of a material fact
or omits 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, other than any
such untrue statement or omission with respect to an Asset Management
Sub which would not individually or in the aggregate reasonably be
expected to have a Piedmont Material Adverse Effect. To the knowledge
of Piedmont as of the date of this Agreement, (i) none of the Piedmont
SEC Documents as of its date contained any such untrue statement or made
any such omission with respect to an Asset Management Sub and (ii)
except as revised or superseded by a later Filed Piedmont SEC Document,
as of the date of this Agreement none of the Piedmont SEC Documents
contains any such untrue statement or makes any such omission with
respect to an Asset Management Sub. The consolidated financial
statements of Piedmont included in the Piedmont SEC Documents comply as
to form in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited consolidated quarterly
statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the consolidated
financial position of Piedmont and its consolidated subsidiaries as
of the dates thereof and the consolidated results of their operations
and cash flows for the periods then ended (subject, in the case of
unaudited quarterly statements, to normal year-end audit
adjustments). Except as set forth in the Filed Piedmont SEC
Documents, neither Piedmont nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by generally accepted accounting
principles to be set forth on a consolidated balance sheet of
Piedmont and its consolidated subsidiaries or in the notes thereto,
other than liabilities and obligations which would not individually
or in the aggregate reasonably be expected to have a Piedmont
Material Adverse Effect.
(ii) The Annual Statements for the year ended December 31,
1994, together with all exhibits and schedules thereto, and any
actuarial opinion, affirmation or certification filed in connection
therewith, and any Quarterly Statements for periods ended after January
1, 1995, together with all exhibits and schedules thereto, with respect
to each Retained Subsidiary of Piedmont that is a regulated insurance
company (an "Insurance Company"), in each case as filed with the
applicable Insurance Regulator of its jurisdiction of domicile, were
prepared in conformity with SAP and present fairly, to the extent
required by and in conformity with SAP, the statutory financial
condition of such Insurance Company at their respective dates and the
results of operations, changes in capital and surplus and cash flow of
such Insurance Company for each of the periods then ended. No
deficiencies or violations material to the financial condition of any
Insurance Company have been asserted in writing by any Insurance
Regulator which have not been cured or otherwise resolved to the
satisfaction of such Insurance Regulator and which have not been
disclosed in writing to Chartwell prior to the date of this Agreement.
(iii) Section 3.2(d) of the Disclosure Schedule contains
the audited and unaudited balance sheets of the Asset Management Subs as
of December 31, 1994 and the unaudited balance sheets of the Asset
Management Subs as of March 31, 1995, together with the related audited
and unaudited statements of income and cash flows of the Asset
Management Subs for the twelve-month period and three-month period,
respectively, then ended (collectively, the "AMS Financials"). The AMS
Financials have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and, as to
each Asset Management Sub or consolidated group of Asset Management Subs
covered by each set of AMS Financials, fairly present the financial
position of such Asset Management Sub or the consolidated financial
position of such group of Asset Management Subs as of the dates thereof
and their results of operations and cash flows or consolidated results
of operations and cash flows, as applicable, for the periods then ended
(subject, in the case of the quarterly statements, to normal year-end
audit adjustments). All amounts representing liabilities owing to or
from Piedmont and its subsidiaries other than the Asset Management Subs
are identified and described in the AMS Financials. Section 3.2(d) of
the Disclosure Schedule does not include any financial statements of
Piedmont Funding Corporation ("PFC"). At March 31, 1995, PFC's
stockholders' equity calculated in accordance with generally accepted
accounting principles was a deficit of approximately $59,000.
(e) Transaction Documents. None of the information supplied or
to be supplied by Piedmont for inclusion or incorporation by reference
in (i) the Form S-4 will, at the time it becomes effective under the
Securities Act, at the time any amendment or supplement thereto becomes
effective under the Securities Act or at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, (ii) the CI Notes Form S-1 will, at the time it
becomes effective under the Securities Act, at the time any amendment or
supplement thereto becomes effective under the Securities Act or at the
Effective Time, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading or (iii) the Proxy Statement
will, at the date the Proxy Statement is first mailed to Piedmont's
stockholders or at the time of the Piedmont Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they are made, not misleading. Neither the Spin-off Form S-1 nor the
Form 10 will, at the time it becomes effective under the Securities Act
(in the case of the Spin-off Form S-1) or the Exchange Act (in the case
of the Form 10), at the time any amendment or supplement thereto becomes
effective, at the time of the Piedmont Stockholders Meeting (as defined
in Section 5.2) or at the time of the Spin-off, contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading. The CI Notes Form S-1 and the Spin-off Form S-1 will each
comply as to form in all material respects with the requirements of the
Securities Act and the rules and regulations promulgated thereunder, the
Form 10 will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations
promulgated thereunder and the Proxy Statement will comply as to form in
all material respects with the requirements of the Exchange Act and the
rules and regulations promulgated thereunder. Notwithstanding the
foregoing, no representation or warranty is made by Piedmont in this
Section 3.2(e) with respect to information supplied by Chartwell
specifically for inclusion or incorporation by reference in the Form
S-4, CI Notes Form S-1 or the Proxy Statement.
(f) Absence of Certain Changes or Events. Except as disclosed
in the Piedmont SEC Documents filed and publicly available prior to the
date of this Agreement (the "Filed Piedmont SEC Documents") or in
Section 3.2(f) of the Disclosure Schedule, since the date of the most
recent audited financial statements included in the Filed Piedmont SEC
Documents, Piedmont and each of its subsidiaries has conducted its
business only in the ordinary course, and there has not been (i) any
Piedmont Material Adverse Change (as defined in Section 8.3), or any
event or condition that individually or in the aggregate could
reasonably be expected to result in a Piedmont Material Adverse Change,
(ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of
Piedmont's outstanding capital stock, other than the declaration and
payment after the date of this Agreement of dividends on the Piedmont
Preferred Stock to the extent permitted by Section 4.1(b)(i), the
issuance of the CI Notes as contemplated by Section 4.2 and the
dividend of the stock of LH Corp. in the Spin-off, (iii) any split,
combination or reclassification of any of its outstanding capital
stock or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for
shares of its outstanding capital stock, (iv) (x) any granting by
Piedmont or any of its Retained Subsidiaries to any executive officer
or other employee of Piedmont or any of its Retained Subsidiaries of
any increase in compensation, except in the ordinary course of
business consistent with prior practice or as was required under
employment agreements in effect as of the date of the most recent
audited financial statements included in the Filed Piedmont SEC
Documents, (y) any granting by Piedmont or any of its Retained
Subsidiaries to any such executive officer or other employee of any
increase in severance or termination pay, except as was required
under any employment, severance or termination agreements in effect
as of the date of this Agreement or (z) any entry by Piedmont or any
of its Retained Subsidiaries into any employment, severance or
termination agreement with any such executive officer or other
employee, other than after the date of this Agreement in accordance
with Section 4.1(b)(xvii), or (v) any change in accounting methods,
principles or practices by Piedmont or any of its subsidiaries
materially affecting its assets, liabilities or business, including
but not limited to any change with respect to establishment of
reserves for unearned premiums, losses and loss adjustment expenses,
except insofar as may have been required by a change in generally
accepted accounting principles or SAP. (g) Absence of Changes in
Benefit Plans. Except as disclosed in the Filed Piedmont SEC
Documents or in Section 3.2(g) of the Disclosure Schedule, since the
date of the most recent audited financial statements included in the
Filed Piedmont SEC Documents, there has not been any adoption or
amendment by Piedmont or any of its subsidiaries of any collective
bargaining agreement or any Piedmont Benefit Plan (as defined in
Section 3.2(h)). Except as disclosed in the Filed Piedmont SEC
Documents or in Section 3.2(g) of the Disclosure Schedule, there
exist no employment, consulting, severance, termination or
indemnification agreements, arrangements or understandings between
Piedmont or any Retained Subsidiary and any current or former
employee, officer or director of Piedmont or any subsidiary.
(h) Benefit Plans. (i) Each Pension Plan, Welfare Plan, and
each other plan, arrangement or policy (written or oral) relating to
stock options, stock purchases, compensation, deferred compensation,
severance, fringe benefits or other employee benefits, in each case
maintained or contributed to, or required to be maintained or
contributed to, by Piedmont or any of its subsidiaries for the benefit
of any present or former officer, employee, agent, director or
independent contractor of Piedmont or any of its subsidiaries (all the
foregoing being herein called "Piedmont Benefit Plans") has been
administered in accordance with its terms except where failure to
administer in accordance with such terms would not have a Piedmont
Material Adverse Effect. Piedmont, its subsidiaries and all the
Piedmont Benefit Plans are in compliance with the applicable provisions
of ERISA, the Code, all other applicable laws and all applicable
collective bargaining agreements except where failure to comply would
not have a Piedmont Material Adverse Effect.
(ii) None of Piedmont or any other person or entity that
together with Piedmont is treated as a single employer under Section
414(b), (c), (m) or (o) of the Code (each a "Piedmont Commonly
Controlled Entity") (a) has incurred any material liability under Title
IV of ERISA (other than for the payment of benefits or Pension Benefit
Guaranty Corporation insurance premiums, in either case in the ordinary
course) or under Section 412(f) or 412(n) of the Code.
(iii) No Piedmont Commonly Controlled Entity is obligated
to contribute to any "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) or has withdrawn from or incurred any contractual
liability to any multiemployer plan resulting or which could reasonably
be expected to result in any material "withdrawal liability" (within the
meaning of Section 4201 of ERISA) that has not been fully paid.
(i) Voting Requirements. The affirmative vote of the holders of
a majority of the shares of Piedmont Common Stock and Piedmont Preferred
Stock, voting as a single class, present, or represented, and entitled
to vote thereon at the Piedmont Stockholders Meeting with respect to
this Agreement and the Merger, and the affirmative vote of the holders
of a majority of the shares of Piedmont Preferred Stock, voting as a
separate class, present, or represented, and entitled to vote thereon at
the Piedmont Stockholders Meeting with respect to the amendment of
certain provisions of the Piedmont Charter relating to the Piedmont
Preferred Stock as set forth in Exhibit D (the "Piedmont Charter
Amendment"), are the only votes of the holders of any class or series of
Piedmont's capital stock necessary to approve this Agreement and the
transactions contemplated by this Agreement.
(j) Certain Prior Actions. Prior to the date of this Agreement,
RECO has purchased certain reinsurance coverage from a reinsurer,
covering risks, with limits and in all other respects acceptable to
Chartwell. RECO has paid the full premium required for such reinsurance
coverage and such coverage is in full force and effect as of the date of
this Agreement.
(k) Taxes. (i) Each of Piedmont and its subsidiaries has filed
all tax returns and reports required to be filed by it or requests for
extensions to file such returns or reports have been timely filed,
granted and have not expired, except to the extent that such failures to
file or to have extensions granted that remain in effect individually or
in the aggregate would not have a Piedmont Material Adverse Effect. All
tax returns filed by Piedmont and each of its subsidiaries are complete
and accurate except to the extent that such failure to be complete and
accurate would not have a Piedmont Material Adverse Effect. Piedmont
and each of its subsidiaries has paid (or Piedmont has paid on its
subsidiaries' behalf) all taxes shown as due on such returns, and the
most recent financial statements contained in the Filed Piedmont SEC
Documents reflect an adequate reserve for all taxes payable by Piedmont
and its subsidiaries for all taxable periods and portions thereof
accrued through the date of such financial statements.
(ii) No deficiencies for any taxes have been proposed,
asserted or assessed against Piedmont or any of its subsidiaries that
are not adequately reserved for, except for deficiencies that
individually or in the aggregate would not have a Piedmont Material
Adverse Effect, and, except as set forth on Section 3.2(k) of the
Disclosure Schedule, no requests for waivers of the time to assess any
such taxes have been granted or are pending. The Federal and state
income tax returns of Piedmont and each of its subsidiaries consolidated
in such returns have been examined by and settled with the United States
Internal Revenue Service or the appropriate state taxation authorities,
as the case may be, or the statute of limitations on assessment or
collection of any Federal or state income taxes due from Piedmont or any
of its subsidiaries has expired, for all taxable years of Piedmont or
any of its subsidiaries through the taxable year ended December 31, (a)
1988, for Federal income taxes and (b) 1990, for state income taxes.
(l) No Excess Parachute Payments; Section 162(m) of the Code.
(i) All amounts that could become payable as severance or termination
pay to any officer, director or employee of Piedmont or any subsidiary
are disclosed in Section 3.2(l) of the Disclosure Schedule. Except as
disclosed in Section 3.2(l) of the Disclosure Schedule, none of the
transactions contemplated by this Agreement shall constitute a
triggering event under any employment, severance or termination
agreement or other compensation arrangement or Piedmont Benefit Plan
currently in effect which (either alone or upon the occurrence of any
additional or subsequent event) could reasonably be expected to result
in any payment, acceleration, vesting or increase in benefits to any
current or former officer, employee or director of Piedmont or any of
its subsidiaries and which would constitute an "excess parachute
payment" (as such term is defined in Section 280G(b)(1) of the Code).
(ii) Except as disclosed in Section 3.2(l) of the
Disclosure Schedule, the disallowance of a deduction under Section
162(m) of the Code for employee remuneration will not apply to any
amount paid or payable by Piedmont or any subsidiary of Piedmont under
any contract, Piedmont Benefit Plan, program, arrangement or
understanding currently in effect.
(m) Compliance with Applicable Laws. Piedmont and each of its
subsidiaries has in full force and effect all Permits necessary for it
to own, lease or operate its properties and assets and to carry on its
business as now conducted, and there has occurred no default under any
such Permit, except for the failure of Permits to be in full force and
effect and for defaults under Permits which failure or default
individually or in the aggregate would not have a Piedmont Material
Adverse Effect. Except as disclosed in the Filed Piedmont SEC
Documents, Piedmont and its subsidiaries are in compliance with all
applicable statutes, laws, ordinances, rules, regulations and orders of
any Governmental Entity, except for such noncompliance which
individually or in the aggregate would not have a Piedmont Material
Adverse Effect. Except as disclosed in the Filed Piedmont SEC Documents
and except for routine examinations by Insurance Regulators, as of the
date of this Agreement, to the knowledge of Piedmont, no investigation
by any Governmental Entity with respect to Piedmont or any of its
subsidiaries is pending or threatened, other than, in each case, those
the outcome of which, as far as reasonably can be foreseen, will not
have a Piedmont Material Adverse Effect. Except as disclosed in Section
3.2(m) of the Disclosure Schedule, neither Piedmont nor any Retained
Subsidiary is a party to any agreement, commitment or understanding,
written or oral, with any Insurance Regulator, except for routine
agreements, commitments and understandings with such Insurance
Regulators which could not, individually or in the aggregate, reasonably
be expected to have a Piedmont Material Adverse Effect.
(n) Opinion of Financial Advisor. Piedmont has received the
opinion of Smith Barney Inc. to the effect that, as of the date of this
Agreement, the Merger consideration is fair to Piedmont's stockholders
from a financial point of view.
(o) Brokers. No broker, investment banker, financial advisor or
other person, other than Smith Barney Inc., the fees and expenses of
which will be paid by Piedmont and LH Corp., is entitled to any
broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Piedmont.
(p) Litigation. There is no suit, action, proceeding or
arbitration pending or, to the knowledge of Piedmont, threatened against
or affecting Piedmont or any of its subsidiaries that, individually or
in the aggregate, could reasonably be expected to (i) have a Piedmont
Material Adverse Effect, (ii) impair the ability of Piedmont to perform
its obligations under this Agreement or (iii) prevent the consummation
of any of the transactions contemplated by this Agreement, nor is there
any judgment, decree, injunction or order of any Governmental Entity or
arbitrator outstanding against Piedmont or any of its subsidiaries
having, or which could reasonably be expected to have, any such effect.
(q) Intercompany Relationships. None of the Asset Management
Subs presently uses in the conduct of its business any assets or
properties, whether tangible, intangible or mixed, which are also
utilized in the conduct of the business of Piedmont and the Retained
Subsidiaries, and except as disclosed in Section 3.2(q) of the
Disclosure Schedule, none of the Asset Management Subs is presently,
directly or indirectly, a party to any agreement, arrangement or
understanding, written or oral, with Piedmont or any of the Retained
Subsidiaries (other than, as of the Effective Time, the Distribution
Agreement and the other Spin-off Agreements), including without
limitation any agreement, arrangement or understanding providing for
the furnishing of services or rental of real or personal property to
or from, or otherwise relating to the business or operations of, any
of Piedmont or any of the Retained Subsidiaries. Section 3.2(q) of
the Disclosure Schedule sets forth all amounts receivable and payable
under the foregoing agreements, arrangements and understandings from
March 31, 1995 through the effective time of the Spin-off. The
termination of all agreements, arrangements and understandings
between the Asset Management Subs on the one hand and Piedmont and
the Retained Subsidiaries on the other contemplated to be terminated
under the Distribution Agreement would not, individually or in the
aggregate, reasonably be expected to have a Piedmont Material Adverse
Effect. After the Effective Time, none of Piedmont, the Surviving
Corporation or any of their respective subsidiaries will have any
liability whatsoever, direct or indirect, contingent or otherwise,
relating to the business, operations, indebtedness, assets or
liabilities of any of the Asset Management Subs. Since March 31,
1995, there have been no direct or indirect transfers of assets or
liabilities or other transactions between the Asset Management Subs
on the one hand and Piedmont and its other subsidiaries on the other,
except as disclosed in Section 3.2(q) of the Disclosure Schedule or
as contemplated by the Distribution Agreement. Except as disclosed
in Section 3.2(q) of the Disclosure Schedule, at the date hereof
there are no payables or receivables outstanding between the Asset
Management Subs on the one hand and Piedmont and its other
subsidiaries on the other, all of which will have been settled as of
the Effective Time in accordance with the Distribution Agreement.
Section 3.2(q) of the Disclosure Schedule sets forth a list of
certain furniture, fixtures and equipment and certain other assets
which are owned by Piedmont or its subsidiaries other than the Asset
Management Subs. Since March 31, 1995, there has not been any
material adverse change, or any event or condition that individually
or in the aggregate would reasonably be expected to result in a
material adverse change, in the business, financial condition or
results of operations of the Asset Management Subs taken as a whole,
in each case other than any such change that individually or in the
aggregate would not reasonably be expected to result in a Piedmont
Material Adverse Change. As of the effective time of the Spin-off,
to the knowledge of Piedmont, (A) the Asset Management Subs (i) will
not be insolvent, and will not become insolvent as a result of the
Spin-off or any of the transactions contemplated hereby, (ii) will
not be engaged, or about to be engaged, in a business or a trans-
action for which they have unreasonably small capital and (iii) will
not intend to incur, or believe that they would incur, debts beyond
their ability to pay as such debts mature and (B) Piedmont's surplus
(as defined under the DGCL) will be sufficient to permit the Spin-off
without violation of Section 170 of the DGCL. Section 3.2(q) of the
Disclosure Schedule sets forth all arrangements under which (i)
Piedmont or any Retained Subsidiary guarantees or is otherwise
directly or indirectly liable for any obligations of, or provides
credit support to, any Asset Management Sub, or (ii) any Asset
Management Sub guarantees or is otherwise directly or indirectly
liable for any obligations of, or provides credit support to,
Piedmont or any Retained Subsidiary, all of which arrangements will
have been terminated as of the effective time of the Spin-off.
(r) Piedmont Investees. Section 3.2(r) of the Disclosure
Schedule sets forth a list of certain corporations and other entities
(collectively, the "Piedmont Investees") in which Piedmont or a
subsidiary has made an equity investment, and indicates the percentage
of the voting equity interests and total ownership interests in such
Piedmont Investees held by Piedmont and the Retained Subsidiaries as of
the date hereof (collectively, the "Piedmont Investee Interests").
Except as disclosed in Section 3.2(r) of the Disclosure Schedule, to the
knowledge of Piedmont, all the Piedmont Investee Interests are fully
paid and nonassessable and are owned by Piedmont, by one or more
Retained Subsidiaries of Piedmont or by Piedmont and one or more
Retained Subsidiaries, free and clear of all Liens. Except as disclosed
in Section 3.2(r) of the Disclosure Schedule, to the knowledge of
Piedmont, neither Piedmont nor any subsidiary is a party to or bound by
any agreement, proxy or other arrangement restricting the transfer or
affecting the voting of any Piedmont Investee Interest. Piedmont has
delivered to Chartwell complete and correct copies of each material
agreement or other document with respect to its investment in each
Piedmont Investee, in each case as in effect on the date of this
Agreement. Except as disclosed in Section 3.2(r) of the Disclosure
Schedule, Piedmont does not know of any representation and warranty made
with respect to a subsidiary or Retained Subsidiary of Piedmont in
Sections 3.2(c), (m) and (p) of this Agreement which would not be true
and correct in all material respects (or, with respect to those
representations and warranties that are qualified as to materiality,
true and correct) if the Piedmont Investees were each considered a
subsidiary or Retained Subsidiary, as applicable, of Piedmont for
purposes of such representation and warranty, except for such
failures to be true and correct in all material respects (or true and
correct, as applicable) which could not reasonably be expected to
have a Piedmont Material Adverse Effect.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
PRIOR TO MERGER
SECTION 4.1. Certain Covenants. (a) Conduct of Business of
Chartwell. Except as specifically contemplated by this Agreement, during the
period from the date of this Agreement to the Effective Time, Chartwell shall,
and shall cause its subsidiaries to, carry on their respective businesses only
in the ordinary course of business consistent with past practice and, to the
extent consistent therewith, use all reasonable efforts to preserve intact
their current business organizations, keep available the services of their
current officers and employees and preserve their relationships with agents,
insureds, reinsureds and others having business dealings with them to the end
that their goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Without limiting the generality of the foregoing, during the
period from the date of this Agreement to the Effective Time, except as
expressly contemplated by this Agreement, Chartwell shall not, and shall not
permit any of its subsidiaries to, without the prior consent of Piedmont:
(i) (x) declare, set aside or pay any dividends on, or
make any other distributions (whether in cash, stock or property) in
respect of, any of Chartwell's outstanding capital stock, (y) split,
combine or reclassify any of its outstanding capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of
or in substitution for shares of its outstanding capital stock or (z)
purchase, redeem or otherwise acquire any shares of outstanding capital
stock or any rights, warrants or options to acquire any such shares,
except for repurchases of shares from any employee leaving employment
pursuant to arrangements in effect on the date of this Agreement;
(ii) except as contemplated by Section 5.7, issue, sell,
grant, pledge or otherwise encumber any shares of its capital stock, any
other voting securities or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting
securities or convertible securities other than upon the exercise of
Chartwell Stock Options or Warrants outstanding on the date of this
Agreement;
(iii) except as contemplated by Sections 1.5 and 5.2, amend
its certificate of incorporation, by-laws or other comparable charter or
organizational documents;
(iv) acquire (x) any business or any corporation,
partnership, joint venture, association or other business organization
or division thereof, or (y) any assets that are material, individually
or in the aggregate, to Chartwell and its subsidiaries taken as a whole,
except purchases of investment assets in the ordinary course of business
consistent with past practice and the acquisition or leasing of assets
or premises in connection with expanding Chartwell's facilities and
equipment in order to prepare for post-Merger operations;
(v) sell, lease, license, mortgage or otherwise encumber
or subject to any Lien or otherwise dispose of any of its properties or
assets that are material to Chartwell and its subsidiaries taken as a
whole, except in the ordinary course of business consistent with past
practice;
(vi) (x) except as contemplated by Section 5.23, incur any
indebtedness for borrowed money or guarantee or otherwise become
responsible for any such indebtedness of another person, other than
indebtedness owing to or guarantees of indebtedness owing to Chartwell
or any direct or indirect wholly-owned subsidiary of Chartwell or (y)
make any loans, advances or capital contributions to, or investments in,
any other person, other than to Chartwell or to any direct or indirect
wholly-owned subsidiary of Chartwell and routine, immaterial advances to
employees and other than purchases of investment assets in the ordinary
course of business consistent with past practice; provided, that
Piedmont will not unreasonably withhold its consent to any transaction
restricted by this subclause (y);
(vii) make any tax election or settle or compromise any
income tax liability that could reasonably be expected to be material to
Chartwell and its subsidiaries taken as a whole;
(viii) pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) of Chartwell included in the
Filed Chartwell SEC Documents or incurred since the date of such
financial statements in the ordinary course of business consistent with
past practice, or waive the benefits of, or agree to modify in any
manner, any confidentiality, standstill or similar agreement to which
Chartwell or any of its subsidiaries is a party;
(ix) make any change in accounting methods, principles or
practices used by Chartwell or any of its subsidiaries materially
affecting its assets, liabilities or business, including but not limited
to any change with respect to establishment of reserves for unearned
premiums, losses and loss adjustment expenses, except insofar as may be
required by a change in generally accepted accounting principles or SAP;
(x) except in the ordinary course of business or as
otherwise contemplated by this Agreement, modify, amend or terminate any
material agreement, Permit or similar instrument to which Chartwell or
any subsidiary is a party or waive, release or assign any material
rights or claims thereunder;
(xi) make or agree to make any new capital expenditure or
expenditures which, in the aggregate, involve payments of in excess of
$60,000, other than the acquisition or leasing of assets or premises
in connection with expanding Chartwell's facilities or equipment in
order to prepare for post-Merger operations; provided, that Piedmont
will not unreasonably withhold its consent to any such expenditure;
(xii) settle or compromise any derivative suit or other
litigation or claim arising out of the transactions contemplated hereby,
or any other litigation or claim if the settlement thereof involves
payment of in excess of $100,000 (other than undisputed claims for
contractual benefits under any insurance or reinsurance contract under
which Chartwell Re is the insurer or reinsurer); provided, that Piedmont
will not unreasonably withhold its consent to any such settlement or
compromise;
(xiii) in each case other than in connection with ordinary
business operations, release any reserves, including reserves for
unearned premiums, losses (including losses incurred but not reported),
loss adjustment expenses, uncollectible reinsurance recoverables or
other receivables or investments, establish any deferred tax assets,
release any valuation allowance in respect of any deferred tax asset or
release any deferred tax liability;
(xiv) except as disclosed in Section 3.1(g) of the
Disclosure Schedule, (A) grant to any executive officer or other
employee of Chartwell or any of its subsidiaries any increase in
compensation, except in the ordinary course of business consistent with
prior practice or as was required under employment agreements in effect
as of the date of the most recent audited financial statements included
in the Filed Chartwell SEC Documents, (B) grant to any such executive
officer or other employee any increase in severance or termination pay,
except as was required under any employment, severance or termination
agreements in effect as of the date of this Agreement or (C) enter into
any employment, severance or termination agreement with any such
executive officer or other employee, other than in the ordinary course
of business and other than in connection with any hiring of Piedmont
personnel, if any, or other additions to personnel required for
post-Merger operations; or
(xv) authorize any of, or commit or agree to take any of,
the foregoing actions.
(b) Conduct of Business by Piedmont. Except as specifically
contemplated by this Agreement, during the period from the date of this
Agreement to the Effective Time, Piedmont shall, and shall cause its
subsidiaries to, carry on their respective businesses only in the ordinary
course of business consistent with past practice and, to the extent consistent
therewith, use all reasonable efforts to preserve intact their current
business organizations, keep available the services of their current officers
and employees and preserve their relationships with agents, insureds,
reinsureds and others having business dealings with them to the end that their
goodwill and ongoing businesses shall be unimpaired at the Effective Time.
Without limiting the generality of the foregoing, during the period from the
date of this Agreement to the Effective Time, except as expressly contemplated
by this Agreement, Piedmont shall not, and shall not permit any of its
subsidiaries to, without the prior consent of Chartwell:
(i) (x) declare, set aside or pay any dividends on, or make
any other distributions (whether in cash, stock or property) in respect
of, any outstanding capital stock of Piedmont, other than (1) the
issuance of the CI Notes in accordance with Section 4.2, (2) the
dividend of the stock of LH Corp. in the Spin-off as contemplated by
Section 5.14 and (3) the payment of dividends on the Piedmont Preferred
Stock as contemplated by Section 2.1(c) in an amount not to exceed an
aggregate of $1,344,000, (y) split, combine or reclassify any of
Piedmont's or a Retained Subsidiary's outstanding capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of Piedmont's or a Retained
Subsidiary's outstanding capital stock or (z) purchase, redeem or
otherwise acquire any shares of outstanding capital stock or any rights,
warrants or options to acquire any such shares, other than the
conversion of the Piedmont Preferred Stock as contemplated by this
Agreement, or make any payment in connection with obtaining the consents
referred to in Section 2.1(d);
(ii) issue, sell, grant, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities,
other than (w) any such issuance by an Asset Management Sub to Piedmont
or to another Asset Management Sub and other than in connection with the
establishment by any Asset Management Sub of stock-based employee
compensation arrangements which take effect as of the Spin-off, (x) upon
the exercise of certain options outstanding under the Piedmont Stock
Plans as contemplated by Section 2.1(d), (y) upon the conversion of
outstanding Piedmont Preferred Stock and (z) in the Spin-off;
(iii) except as contemplated by the second sentence of Section
5.2, amend its certificate of incorporation, by-laws or other comparable
charter or organizational documents, except that any of the foregoing
documents of any Asset Management Sub may be amended unless such
amendment would materially impair its ability to perform its obligations
under any Spin-off Agreement or would otherwise reasonably be expected
to have a Piedmont Material Adverse Effect;
(iv) acquire (x) any business or any corporation, partnership,
joint venture, association or other business organization or division
thereof or (y) any assets that are material, individually or in the
aggregate, to Piedmont and its subsidiaries taken as a whole, except
purchases of investment assets; provided, that no investment assets shall
be purchased by Piedmont or any Insurance Company which are not
consistent with Chartwell Re's investment guidelines, as previously
delivered to Piedmont;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or
assets that are material to Piedmont and its subsidiaries, except in the
ordinary course of business consistent with past practice or in
connection with the Spin-off; provided, that Chartwell will not
unreasonably withhold its consent to any sale of the stock of The
Navigators Group, Inc., held by Piedmont or any Retained Subsidiary;
(vi) (x) incur any indebtedness for borrowed money or
guarantee or otherwise become responsible for any such indebtedness of
another person, other than indebtedness owing to or guarantees owing to
Piedmont or any direct or indirect wholly-owned subsidiary of Piedmont
which is not an Asset Management Sub and other than the issuance of the
CI Notes as contemplated by Section 4.2 or (y) make any loans, advances
or capital contributions to, or investments in, any other person, other
than to Piedmont or to any direct or indirect wholly-owned subsidiary of
Piedmont that is not an Asset Management Sub and routine, immaterial
advances to employees, all of which shall be repaid as of the Effective
Time, and other than purchases of investment assets; provided, that no
investment assets shall be purchased by Piedmont or any Insurance
Company which are not consistent with Chartwell Re's investment
guidelines, as previously delivered to Piedmont;
(vii) make or agree to make any new capital expenditure or
expenditures which, in the aggregate, involve payments of in excess of
$60,000, other than any such expenditure by an Asset Management Sub;
provided, that Chartwell will not unreasonably withhold its consent to
any such expenditure;
(viii) make any tax election or settle or compromise any income
tax liability that could reasonably be expected to be material to
Piedmont or any Retained Subsidiary;
(ix) pay, discharge, settle or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities to the extent reflected or
reserved against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) of Piedmont included in the
Filed Piedmont SEC Documents or incurred since the date of such
financial statements in the ordinary course of business consistent with
past practice, or waive the benefits of, or agree to modify in any
manner, any confidentiality, standstill or similar agreement to which
Piedmont or any of its Retained Subsidiaries is a party or by which
confidential information or other rights of Piedmont or any Retained
Subsidiary are protected;
(x) settle or compromise any derivative suit or other
litigation or claim arising out of the transactions contemplated hereby,
or any other litigation or claim involving Piedmont or any Retained
Subsidiary if the settlement thereof involves payment of in excess of
$100,000 (other than undisputed claims for contractual benefits under
any insurance or reinsurance contract under which any Insurance Company
is the insurer or reinsurer); provided, that Chartwell will not
unreasonably withhold its consent to any such settlement or compromise;
(xi) make any change in accounting methods, principles or
practices used by Piedmont or any of its Retained Subsidiaries
materially affecting its assets, liabilities or business, including but
not limited to any change with respect to establishment of reserves for
unearned premiums, losses and loss adjustment expenses, except insofar
as may be required by a change in generally accepted accounting
principles or SAP;
(xii) except in the ordinary course of business or as otherwise
contemplated by this Agreement, modify, amend or terminate any material
agreement, Permit or similar instrument to which Piedmont or any
Retained Subsidiary is a party or waive, release or assign any material
rights or claims thereunder;
(xiii) except in the ordinary course of business, enter into any
new material agreement or any other agreement or agreements which, in
the aggregate, involve payments of in excess of $100,000, other than any
such agreement entered into by an Asset Management Sub and not by
Piedmont or a Retained Subsidiary;
(xiv) enter into any fronting or similar arrangements, either as
the ceding company or the assuming company;
(xv) enter into any new agreement with any managing general
agent, or materially amend or terminate any existing agreement with a
managing general agent, or any new long-term agreement with any actuary;
(xvi) in each case other than in connection with ordinary
business operations, release any reserves, including reserves for
unearned premiums, losses (including losses incurred but not reported),
loss adjustment expenses, uncollectible reinsurance recoverables or
other receivables or investments, establish any deferred tax asset,
release any valuation allowance in respect of any deferred tax asset or
release any deferred tax liability; provided, that the foregoing will
not prohibit the allocation of approximately $2.3 million of Piedmont's
existing deferred tax asset to LH Corp. effective upon the Spin-off;
(xvii) (A) grant to any executive officer or other employee of
Piedmont or any of the Retained Subsidiaries any increase in
compensation, except in the ordinary course of business consistent with
prior practice or as was required under employment agreements in effect
as of the date of the most recent audited financial statements included
in the Filed Piedmont SEC Documents, (B) grant to any such executive
officer or other employee any increase in severance or termination pay,
except as was required under any employment, severance or termination
agreements in effect as of the date of this Agreement, or (C) enter into
any employment, severance or termination agreement with any such
executive officer or other employee; provided, that Chartwell will not
unreasonably withhold its consent to the hiring by Piedmont or any
Retained Subsidiary of any person necessary to replace any officer or
employee of Piedmont or a Retained Subsidiary who ceases to be an
officer or employee thereof after the date of this Agreement and prior
to the Effective Time, if hiring such person is necessary to the
efficient operation of Piedmont and the Retained Subsidiaries; or
(xviii) authorize any of, or commit or agree to take any of, the
foregoing actions.
SECTION 4.2. Dividend of CI Notes. Piedmont shall, prior to the
Effective Time, issue as a dividend to each Holder of Record one CI Note. The
CI Notes shall be issued pursuant to the CI Indenture, which Indenture shall
be in the form attached hereto as Exhibit A and shall entitle the holders of
the CI Notes to interest and have the other terms set forth in the CI
Indenture. Piedmont will not amend, waive or modify any provision of the CI
Notes or of the CI Indenture without the consent of Chartwell. The aggregate
principal amount of the CI Notes to be issued by Piedmont shall be limited to
$1,000,000 and the amounts (including the Contingent Amount, as defined in the
CI Indenture) payable in respect of each CI Note shall be as set forth in the
CI Indenture. Each CI Note shall be in a principal amount which bears the
same proportion to the aggregate principal amount of the CI Notes as the
number of shares of Piedmont Common Stock held by the Holder of Record to
which such CI Note is issued bears to the aggregate number of shares of
Piedmont Common Stock held by all Holders of Record. As used in this Section
4.2, "Holder of Record" means each holder of record of one or more shares of
Piedmont Common Stock, other than Piedmont or any of its subsidiaries, on the
record date for such distribution, which shall be prior to such distribution.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. Preparation of Form S-4, CI Notes Form
S-1, Spin-off Form S-1, Form 10 and the Proxy Statement. (a) As soon as
practicable following the date of this Agreement, Chartwell shall prepare, in
consultation with Piedmont and its counsel, and file with the SEC the Form
S-4, in which the Proxy Statement will be included as a prospectus. Chartwell
shall use its best efforts to promptly respond after consultation with
Piedmont and its counsel to any comments of the SEC or its staff and to have
the Form S-4 declared effective under the Securities Act as promptly as
practicable after such filing. Chartwell shall also take, in consultation
with Piedmont and its counsel, any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified) required to
be taken under any applicable state securities laws in connection with the
issuance of Common Stock in the Merger. Piedmont shall cooperate with
Chartwell in the preparation of, and furnish such information concerning
Piedmont and its subsidiaries as may be required to be included in, the Form
S-4 (including the Proxy Statement included therein) or otherwise reasonably
requested by Chartwell in connection therewith, and take such actions as may
be reasonably requested by Chartwell in connection with the filing of the Form
S-4 and any related state securities law filings and in causing the same to
become effective. Chartwell will not use the S-4 or any amendment or
supplement thereto without the prior approval of Piedmont of the form and
content thereof, which approval will not be unreasonably withheld.
(b) As soon as practicable following the date of this Agreement,
Piedmont shall prepare, in consultation with Chartwell and its counsel, and
file with the SEC the CI Notes Form S-1, the Spin-off Form S-1 (if required
pursuant to Section 5.1(e)) and the Form 10. Piedmont shall use its best
efforts to promptly respond after consultation with Chartwell and its counsel
to any comments of the SEC or its staff and to have the CI Notes Form S-1 and
the Spin-off Form S-1 declared effective under the Securities Act and the Form
10 declared effective under the Exchange Act as promptly as practicable after
such filing. Piedmont will use its best efforts to cause the Proxy Statement
and the prospectuses included in the CI Notes Form S-1 and the Spin-off Form
S-1 to be mailed to Chartwell's stockholders as promptly as practicable after
the Form S-4, Forms S-1 and Form 10 are declared effective. Piedmont shall
also take, in consultation with Chartwell and its counsel, any action (other
than qualifying to do business in any jurisdiction in which it is not now so
qualified) required to be taken under any applicable state securities laws in
connection with the issuance of the CI Notes and the issuance of common stock
of LH Corp. in the Spin-off. Chartwell shall cooperate with Piedmont in the
preparation of, and furnish such information concerning Chartwell and its
subsidiaries as may be required to be included in, the CI Notes Form S-1,
Spin-off Form S-1 or Form 10 or otherwise reasonably requested by Piedmont in
connection therewith, and take such actions as may be reasonably requested by
Piedmont in connection with the filing of the CI Notes Form S-1, Spin-off Form
S-1 or Form 10 and any related state securities law filings and in causing the
same to become effective. Piedmont will not mail or use the Proxy Statement
or any amendment or supplement thereto or any prospectus included in either
Form S-1 or any amendment or supplement thereto without the prior approval of
Chartwell of the form and content thereof, which approval will not be
unreasonably withheld.
(c) Concurrently with the filing of the CI Notes Form S-1,
Piedmont shall file the CI Indenture with the SEC and shall use its best
efforts to cause the CI Indenture to be qualified under the Trust Indenture
Act.
(d) As soon as practicable after the Form S-4 is declared
effective by the SEC, Chartwell shall prepare, in consultation with Piedmont
and its counsel, proxy or consent solicitation materials based upon and
incorporating the Proxy Statement and shall use its best efforts to cause such
materials to be mailed to Chartwell's stockholders as promptly as practicable
thereafter.
(e) Piedmont shall use its reasonable best efforts to obtain a
"no-action" letter from the staff of the SEC in appropriate form permitting
the distribution of the stock of LH Corp. without registration under the
Securities Act. If, despite such reasonable best efforts, Piedmont is unable
to obtain such a letter within a reasonable period of time, Piedmont will use
its best efforts to cause such stock to be registered under the Spin-off Form
S-1 as described in Section 5.1(b).
SECTION 5.2. Meetings of Stockholders. Chartwell will take all
action necessary in accordance with applicable law and its Charter and By-laws
to convene a meeting of its stockholders (the "Stockholders Meeting") to
consider and vote upon (i) the approval of this Agreement and the Merger,
including the approval of the Restated Chartwell Charter, (ii) the amendment
and restatement of the Chartwell By-laws in their entirety to read as set
forth in Exhibit E hereto and (iii) the adoption of an Employee Stock Purchase
Plan in the form set forth in Exhibit G hereto (collectively, the "Chartwell
Vote Items"). Piedmont will take all action necessary in accordance with
applicable law and the Piedmont Charter and its By-laws to convene a meeting
of its stockholders (the "Piedmont Stockholders Meeting") to consider and vote
upon (i) the approval of this Agreement and the Merger and (ii) the amendment
of the Piedmont Charter set forth in Exhibit D hereto (collectively, the
"Piedmont Vote Items"). Subject to Section 5.11 hereof, Chartwell and
Piedmont will, through their respective Boards of Directors, recommend to
their respective stockholders approval of the foregoing matters. Without
limiting the generality of the foregoing, (x) Chartwell agrees that,
subject to its right to terminate this Agreement pursuant to Section
5.11(a), its obligations pursuant to the first and last sentences of this
Section 5.2 shall not be affected by (i) the commencement, public proposal,
public disclosure or communication to Chartwell of any Chartwell
Acquisition Proposal (as defined in Section 5.10(a)) or (ii) the withdrawal
or modification by the Board of Directors of Chartwell of its approval or
recommendation of this Agreement or the Merger and (y) Piedmont agrees
that, subject to its right to terminate this Agreement pursuant to Section
5.11(b), its obligations pursuant to the second and last sentences of this
Section 5.2 shall not be affected by (i) the commencement, public proposal,
public disclosure or communication to Piedmont of any Piedmont Acquisition
Proposal (as defined in Section 5.10(b)) or (ii) the withdrawal or
modification by the Board of Directors of Piedmont of its approval or
recommendation of any of the Piedmont Vote Items. Piedmont and Chartwell
will use reasonable efforts to hold the Stockholders Meeting and the
Piedmont Stockholders Meeting on the same day and use their best efforts to
hold such Meetings as soon as practicable after the date hereof.
SECTION 5.3. Letter of Chartwell's Accountants. Chartwell shall
use its best efforts to cause to be delivered to Piedmont a letter of Deloitte
& Touche L.L.P., Chartwell's independent public accountants, dated the date on
which the Form S-4 shall become effective and a letter of Deloitte & Touche
L.L.P., dated the Closing Date, each addressed to Piedmont, in form and
substance reasonably satisfactory to Piedmont and customary in scope and
substance for "comfort" letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
SECTION 5.4. Letter of Piedmont's Accountants. Piedmont shall
use its best efforts to cause to be delivered to Chartwell a letter of Coopers
& Lybrand L.L.P., Piedmont's independent public accountants, dated the date on
which the Form S-4 shall become effective and a letter of Coopers & Lybrand
L.L.P., dated the Closing Date, each addressed to Chartwell, in form and
substance reasonably satisfactory to Chartwell and customary in scope and
substance for "comfort" letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
SECTION 5.5. Access to Information; Confidentiality. (a) Each of
Chartwell and Piedmont shall, and shall cause each of its respective
subsidiaries to, and Piedmont shall use its reasonable best efforts to cause
each of the Piedmont Investees to, afford to the other party and to the
officers, employees, counsel, financial advisors, accountants, actuaries and
other representatives of such other party reasonable access during normal
business hours during the period prior to the Effective Time to all its
properties, books, contracts, commitments, personnel and records and, during
such period, each of Chartwell and Piedmont shall, and shall cause each of its
respective subsidiaries to, and Piedmont shall use its reasonable best efforts
to cause each of the Piedmont Investees to, furnish as promptly as practicable
to the other party such information concerning its business, properties,
financial condition, operations and personnel as such other party may from
time to time reasonably request. Except as required by law, each of Chartwell
and Piedmont will hold, and will cause its respective subsidiaries (including,
in the case of Piedmont, LH Corp. and its subsidiaries) and each of their
respective directors, officers, partners, employees, accountants, counsel,
financial advisors and other representatives and affiliates to hold, any
non-public information in confidence to the extent required by, and in
accordance with, the provisions of the letters dated October 31, 1994, between
Piedmont and Chartwell.
(b) Except to the extent inconsistent with applicable law, (i)
Piedmont shall cause the members of the Underwriting Committee (or similar
body) of RECO to consult on a regular basis with the members of the equivalent
committee of Chartwell Re with respect to RECO's decisions to underwrite
(or not underwrite) new business or to renew (or not renew) existing
business, (ii) Piedmont shall cause the members of the Reinsurance
Security Committee (or similar body) of RECO to consult on a regular basis
with the members of the equivalent committee of Chartwell Re with respect
to RECO's decisions to cede (or not cede) business to reinsurers and
retrocessionaires and (iii) Piedmont shall cause the appropriate officers
of RECO to consult on a regular basis with the appropriate officers of
Chartwell Re with respect to commutations by RECO of existing insurance and
reinsurance contracts.
(c) Except to the extent inconsistent with applicable law, in
each case under procedures to be agreed, (i) Chartwell shall cause the members
of the Underwriting Committee (or similar body) of Chartwell Re to consult on
a regular basis with the members of the equivalent committee of RECO with
respect to Chartwell Re's decisions to underwrite (or not underwrite) new
business or to renew (or not renew) existing business, (ii) Chartwell shall
cause the members of the Reinsurance Security Committee (or similar body) of
Chartwell Re to consult on a regular basis with the members of the equivalent
committee of RECO with respect to Chartwell Re's decisions to cede (or not
cede) business to reinsurers and retrocessionaires and (iii) Chartwell shall
cause the appropriate officers of Chartwell Re to consult on a regular basis
with the appropriate officers of RECO with respect to commutations by
Chartwell Re of existing insurance and reinsurance contracts.
SECTION 5.6. Best Efforts. Upon the terms and subject to the
conditions and other agreements set forth in this Agreement, each of the
parties agrees to use its best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with
the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable,
the Merger and the other transactions contemplated by this Agreement.
SECTION 5.7. Benefit Plans. (a) Chartwell will cause the
Surviving Corporation and each of its subsidiaries to provide any employees of
Piedmont or its subsidiaries who continue to be employed after the Effective
Time by the Surviving Corporation or its subsidiaries (the "Continuing
Employees") with employee benefits which are substantially comparable in the
aggregate to those provided to other employees of the Surviving Corporation
and its subsidiaries. For purposes of the employee benefits to be provided to
the Continuing Employees by the Surviving Corporation, solely to the extent
permissible pursuant to applicable law, Chartwell will cause the Continuing
Employees to receive full credit for purposes of eligibility, vesting and
benefit accrual for such Continuing Employees' service with Piedmont prior
to the Effective Time; provided, however, that in any circumstance under
which the granting of such credit for benefit accrual purposes would result
in a duplication of benefits for the Continuing Employees under any
Piedmont Benefit Plan and a similar plan, arrangement or policy of the
Surviving Corporation, no such benefit accrual service shall be credited
under the applicable plan, arrangement or policy of the Surviving
Corporation. Without limiting the generality of the foregoing, Chartwell
will cause the Surviving Corporation to provide coverage or continuation of
coverage for all Continuing Employees under a group health plan fulfilling
the requirements of Section 4980B(f)(2)(B)(iv)(I) of the Code.
(b) Contingent upon the Merger, as of or immediately prior to
the Effective Time, Piedmont shall (i) cause to be contributed approximately
$378,000 to the Piedmont Retirement Plan (defined benefit plan), (ii) amend
the Piedmont Supplemental Benefits Plan to cause the automatic vesting and
distribution of benefits accrued thereunder of the Piedmont employees in full
satisfaction of its obligations and liabilities to the Piedmont employees
under such Plan, (iii) purchase annuities in the Surviving Corporation's name
in full satisfaction of its obligations and liabilities under certain Piedmont
supplemental retirement agreements covering former Piedmont employees, (iv)
pay employees of Piedmont and its subsidiaries (other than any Asset
Management Sub) severance or stay bonuses, as the case may be, in the
aggregate amount of approximately $6,300,000, and (v) take any actions
contemplated to be taken by Piedmont at such time under the Distribution
Agreement.
SECTION 5.8. Indemnification and Insurance. (a) Chartwell shall
indemnify and hold harmless each person who is, or has been at any time prior
to the date hereof or who becomes prior to the Effective Time, an officer or
director of Piedmont (the "Indemnified Parties"), in respect of acts or
omissions occurring prior to the Effective Time (including but not limited to
the transactions contemplated by this Agreement), to the extent provided under
the Piedmont Charter and Piedmont By-laws as in effect on the date hereof;
provided that such indemnification shall be subject to any limitation imposed
from time to time under applicable law. Any determination to be made as to
whether any Indemnified Party has met any standard of conduct imposed by law
shall be made by legal counsel reasonably acceptable to such Indemnified Party
and the Surviving Corporation, retained at the Surviving Corporation's
expense.
(b) Chartwell will cause to be maintained for a period of not
less than six years from the Effective Time Piedmont's current directors' and
officers' insurance and indemnification policy to the extent that it provides
coverage for events occurring prior to the Effective Time (the "D&O
Insurance") for all persons who are directors or officers of Piedmont or any
subsidiary (other than the Asset Management Subs) on the date of this
Agreement, so long as the annual premium therefor would not be in excess of
200% of the last annual premium paid prior to the date of this Agreement (200%
of such premium, the "Maximum Premium"); provided, however, that Chartwell
may, in lieu of maintaining such existing D&O Insurance as provided above,
cause comparable coverage to be provided under any policy maintained for the
benefit of the directors and officers of Chartwell or any of its subsidiaries,
so long as (i) the issuer thereof has an A.M. Best Company rating of A or
better and (ii) the material terms thereof are no less advantageous than the
existing D&O Insurance. If the existing D&O Insurance expires, is terminated
or cancelled or if the annual premium would exceed the Maximum Premium during
such six-year period, Chartwell will use its best efforts to cause to be
obtained as much D&O Insurance as can be obtained for the remainder of such
period for an annualized premium not in excess of the Maximum Premium, on
terms and conditions no less advantageous than the existing D&O Insurance to
the extent commercially available. Section 5.8(b) of the Disclosure Schedule
sets forth the amount of the Maximum Premium.
SECTION 5.9. Public Announcements. Piedmont, on the one hand,
and Chartwell, on the other hand, will consult with each other before issuing,
and provide each other the opportunity to review and comment upon, any press
release or other public statements with respect to the transactions
contemplated by this Agreement, including the Merger, and shall not issue any
such press release or make any such public statement without the consent of
the other party (such consent not to be unreasonably withheld), except as may
be required by applicable law, court process or by obligations pursuant to any
listing agreement with any national securities exchange.
SECTION 5.10. Acquisition Proposals. (a) Chartwell shall not,
nor shall it permit any of its subsidiaries to, nor shall it authorize or
permit any officer, director or employee of, or any investment banker,
attorney or other advisor, representative or agent of, Chartwell or any of its
subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage
the submission of any Chartwell Acquisition Proposal (as hereinafter defined)
or (ii) participate in any discussions or negotiations regarding, or furnish
to any person any information with respect to, any Chartwell Acquisition
Proposal; provided, however, that, at any time prior to the approval by
Chartwell's stockholders at the Stockholders Meeting of the Chartwell Vote
Items (the "Chartwell Stockholder Approval"), Chartwell, any of its
subsidiaries or any officer, director or employee of, or any investment
banker, attorney or other advisor, representative or agent of, Chartwell or
any of its subsidiaries may, following the receipt of an unsolicited Chartwell
Acquisition Proposal, if the Board of Directors of Chartwell determines in
good faith, following consultation with outside counsel, that it is necessary
to do so in order to comply with its fiduciary duties to stockholders under
applicable law, participate in negotiations regarding such Chartwell
Acquisition Proposal or furnish information regarding Chartwell and its
business pursuant to an appropriate confidentiality agreement to the person
making such Chartwell Acquisition Proposal. Notwithstanding anything in this
Agreement to the contrary, Chartwell shall promptly advise Piedmont orally and
in writing of the receipt by it (or any of the other entities or persons
referred to above) after the date hereof of any Chartwell Acquisition
Proposal. Without limiting the foregoing, it is understood that any violation
of the restrictions set forth in the first sentence of this Section 5.10(a) by
any officer, director or employee of Chartwell or any of its subsidiaries or
any investment banker, attorney or other advisor, representative or agent of
Chartwell or any of its subsidiaries, whether or not such person is purporting
to act on behalf of Chartwell or any of its subsidiaries or otherwise, shall
be deemed to be a breach of this Section 5.10(a) by Chartwell. For purposes
of this Agreement, "Chartwell Acquisition Proposal" means any proposal or
offer for a merger, consolidation or other business combination involving
Chartwell or any subsidiary or any proposal or offer to acquire or cause to
be acquired in any manner, directly or indirectly, including, without
limitation, through any reinsurance transaction not in the ordinary course of
business, all or substantially all of the business, assets or capital stock of
Chartwell or any subsidiary, other than the transactions contemplated by this
Agreement.
(b) Piedmont shall not, nor shall it permit any of its
subsidiaries to, nor shall it authorize or permit any officer, director or
employee of, or any investment banker, attorney or other advisor,
representative or agent of, Piedmont or any of its subsidiaries to, directly
or indirectly, (i) solicit, initiate or encourage the submission of any
Piedmont Acquisition Proposal (as hereinafter defined) or (ii) participate in
any discussions or negotiations regarding, or furnish to any person any
information with respect to, any Piedmont Acquisition Proposal; provided,
however, that, at any time prior to the approval by the Piedmont's
stockholders at the Piedmont Stockholders Meeting of the Piedmont Vote Items
(the "Piedmont Stockholder Approval"), Piedmont, any of its subsidiaries or
any officer, director or employee of, or any investment banker, attorney or
other advisor, representative or agent of, Piedmont or any of its subsidiaries
may, following the receipt of an unsolicited Piedmont Acquisition Proposal, if
the Board of Directors of Piedmont determines in good faith, following
consultation with outside counsel, that it is necessary to do so in order to
comply with its fiduciary duties to stockholders under applicable law,
participate in negotiations regarding such Piedmont Acquisition Proposal or
furnish information regarding Piedmont and its business pursuant to an
appropriate confidentiality agreement to the person making such Piedmont
Acquisition Proposal. Notwithstanding anything in this Agreement to the
contrary, Piedmont shall promptly advise Chartwell orally and in writing of
the receipt by it (or any of the other entities or persons referred to above)
after the date hereof of any Piedmont Acquisition Proposal. Without limiting
the foregoing, it is understood that any violation of the restrictions set
forth in the first sentence of this Section 5.10(b) by any officer, director
or employee of Piedmont or any of its subsidiaries or any investment banker,
attorney or other advisor, representative or agent of Piedmont or any of its
subsidiaries, whether or not such person is purporting to act on behalf of
Piedmont or any of its subsidiaries or otherwise, shall be deemed to be a
breach of this Section 5.10(b) by Piedmont. For purposes of this Agreement,
"Piedmont Acquisition Proposal" means any proposal or offer for a merger,
consolidation or other business combination involving Piedmont or any
subsidiary or any proposal or offer to acquire or cause to be acquired in any
manner, directly or indirectly, including, without limitation, through any
reinsurance transaction not in the ordinary course of business, all or
substantially all of the business, assets or capital stock of Piedmont or any
subsidiary, other than the transactions contemplated by this Agreement.
SECTION 5.11. Fiduciary Duties. (a) The Board of Directors of
Chartwell shall not (i) withdraw or modify in a manner adverse to Piedmont,
the approval or recommendation by such Board of Directors of any of the
Chartwell Vote Items, (ii) approve or recommend any Chartwell Acquisition
Proposal or (iii) cause Chartwell to enter into any agreement with respect to
any Chartwell Acquisition Proposal. Notwithstanding the foregoing, if
Chartwell receives an unsolicited Chartwell Acquisition Proposal and the Board
of Directors of Chartwell determines in good faith, following consultation
with outside counsel, that it is necessary to do so in order to comply with
its fiduciary duties to stockholders under applicable law, prior to the
Chartwell Stockholder Approval the Board of Directors may (w) withdraw or
modify its approval or recommendation of any of the Chartwell Vote Items, (x)
approve or recommend such Chartwell Acquisition Proposal, (y) cause Chartwell
to enter into an agreement with respect to such Chartwell Acquisition Proposal
or (z) terminate this Agreement pursuant to this Section. In the event the
Board of Directors of Chartwell takes any action described in clause (y) or
(z) of the preceding sentence or Piedmont exercises its right to terminate
this Agreement under Section 7.1(b)(iv) based on the Board of Directors of
Chartwell having taken any action described in clause (w) or (x) of the
preceding sentence, Chartwell shall, concurrently with the taking of such
action or such termination, as applicable, pay to Piedmont the Section 5.12(a)
Fee (as hereinafter defined), plus all Expenses of Piedmont payable pursuant
to Section 5.12(a). Nothing contained in this Section 5.11(a) shall prohibit
Chartwell from taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from
making any disclosure to Chartwell's stockholders which, in the good faith
reasonable judgment of the Board of Directors of Chartwell based on the advice
of outside counsel, is required under applicable law; provided that, except
as permitted in accordance with this Section 5.11(a), Chartwell does not
withdraw or modify its position with respect to any of the Chartwell Vote
Items or approve or recommend a Chartwell Acquisition Proposal.
Notwithstanding anything contained in this Agreement to the contrary, any
action by the Board of Directors of Chartwell permitted by this Section
5.11(a) shall not constitute a breach of this Agreement by Chartwell.
(b) The Board of Directors of Piedmont shall not (i) withdraw or
modify, in a manner adverse to Chartwell, the approval or recommendation by
such Board of Directors of any of the Piedmont Vote Items, (ii) approve or
recommend any Piedmont Acquisition Proposal or (iii) cause Piedmont to enter
into any agreement with respect to any Piedmont Acquisition Proposal.
Notwithstanding the foregoing, if Piedmont receives an unsolicited Piedmont
Acquisition Proposal and the Board of Directors of Piedmont determines in good
faith, following consultation with outside counsel, that it is necessary to do
so in order to comply with its fiduciary duties to stockholders under
applicable law, prior to the Piedmont Stockholder Approval the Board of
Directors may (w) withdraw or modify its approval or recommendation of any of
the Piedmont Vote Items, (x) approve or recommend such Piedmont Acquisition
Proposal, (y) cause Piedmont to enter into an agreement with respect to such
Piedmont Acquisition Proposal or (z) terminate this Agreement pursuant to this
Section. In the event the Board of Directors of Piedmont takes any action
described in clause (y) or (z) of the preceding sentence or Chartwell
exercises its right to terminate this Agreement under Section 7.1(b)(v) based
on the Board of Directors of Piedmont having taken any action described in
clause (w) or (x) of the preceding sentence, Piedmont shall, concurrently with
the taking of such action or such termination, as applicable, pay to Chartwell
the Section 5.12(b) Fee (as hereinafter defined), plus all Expenses of
Chartwell payable pursuant to Section 5.12(b). Nothing contained in this
Section 5.11(b) shall prohibit Piedmont from taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) promulgated under the
Exchange Act or from making any disclosure to Piedmont's stockholders which,
in the good faith reasonable judgment of the Board of Directors of Piedmont
based on the advice of outside counsel, is required under applicable law;
provided that, except as permitted in accordance with this Section 5.11(b),
Piedmont does not withdraw or modify its position with respect to any of the
Piedmont Vote Items or approve or recommend a Piedmont Acquisition Proposal.
Notwithstanding anything contained in this Agreement to the contrary, any
action by the Board of Directors of Piedmont permitted by this Section 5.11(b)
shall not constitute a breach of this Agreement by Piedmont.
SECTION 5.12. Certain Fees and Expenses. (a) Chartwell shall pay
to Piedmont upon demand $3 million (the "Section 5.12(a) Fee"), payable in
same-day funds, plus up to $1 million in reimbursement of Expenses (as defined
below) of Piedmont, as liquidated damages and not as a penalty, if (i) the
Section 5.12(a) Fee is payable pursuant to Section 5.11(a) or (ii) the
requisite approval of Chartwell's stockholders of any of the Chartwell Vote
Items is not obtained at the Stockholders Meeting.
(b) Piedmont shall pay to Chartwell upon demand $3 million (the
"Section 5.12(b) Fee"), payable in same-day funds, plus up to $1 million in
reimbursement of Expenses of Chartwell, as liquidated damages and not as a
penalty, if (i) the Section 5.12(b) Fee is payable pursuant to Section 5.11(b)
or (ii) the requisite approval of Piedmont's stockholders of any of the
Piedmont Vote Items is not obtained at the Piedmont Stockholders Meeting.
(c) For purposes of this section, with respect to any person
"Expenses" shall mean all documented reasonable out-of-pocket fees and
expenses incurred or paid by or on behalf of such person in connection with
the Merger or the consummation of any of the transactions contemplated by this
Agreement, including but not limited to all printing costs and fees and
expenses of counsel, investment banking firms, accountants, actuaries, experts
and consultants.
SECTION 5.13. Consents, Approvals and Filings. (a) Chartwell
and Piedmont will make and cause their respective subsidiaries to make all
necessary filings, as soon as practicable, including, without limitation,
those required under the HSR Act, the Securities Act, the Exchange Act, state
securities laws and state insurance laws in order to facilitate prompt
consummation of the Merger and the other transactions contemplated by this
Agreement. In addition, Chartwell and Piedmont will each use their best
efforts, and will cooperate fully with each other (i) to comply as promptly as
practicable with all governmental requirements applicable to the Merger and
the other transactions contemplated by this Agreement and (ii) to obtain as
promptly as practicable all necessary permits, orders or other consents,
approvals or authorizations of Governmental Entities and consents or waivers
of all third parties necessary or advisable for the consummation of the Merger
and the other transactions contemplated by this Agreement. Each of Chartwell
and Piedmont shall use its best efforts to provide such information and
communications to Governmental Entities as such Governmental Entities may
reasonably request.
(b) Each of the parties shall provide to the other party copies
of all applications in advance of filing or submission of such applications to
Governmental Entities in connection with this Agreement.
(c) Chartwell shall give prompt notice to Piedmont, and Piedmont
shall give prompt notice to Chartwell, of (i) any representation or warranty
made by it contained in this Agreement that is qualified as to materiality
becoming untrue or inaccurate in any respect or any such representation or
warranty that is not so qualified becoming untrue or inaccurate in any
material respect or (ii) the failure by it to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement; provided, however, that, except as
set forth in Section 7.1(d), no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
SECTION 5.14. Spin-Off. (a) Piedmont will, and will cause
each of its subsidiaries to, use its best efforts to take all actions
necessary or desirable to effect the Spin-off in accordance with the terms of
the Spin-off Agreements. Prior to the Effective Time, Piedmont will, and will
cause its subsidiaries to, enter into each of the Spin-off Agreements to which
it is a party in the form attached hereto as Exhibit B, with such changes
therein (if any) as may be consented to by Chartwell. Piedmont will, and will
cause its subsidiaries to, (i) comply with its respective obligations under
each of the Spin-off Agreements and (ii) not terminate or amend any Spin-off
Agreement.
(b) Between the date of this Agreement and the effective time of
the Spin-off, LH Corp. or one or more of the other Asset Management Subs shall
declare and pay to Piedmont in cash (i) a dividend in the amount of $500,000
and (ii) an additional dividend in an amount equal to 40% of all of the costs
of Piedmont and its subsidiaries (including the Asset Management Subs) in
connection with the transactions contemplated by this Agreement. Piedmont
will provide Chartwell with an accounting for all of the foregoing costs and
expenses as of the Effective Time.
(c) The Spin-off is designed and intended by Piedmont and the
holders of Piedmont Common Stock to qualify as a distribution of stock
described in Section 355(a) of the Code pursuant to which no gain or loss is
recognized by Piedmont or such holders, except with respect to Piedmont to the
extent of any excess loss accounts or deferred intercompany gains. Piedmont
and its subsidiaries will not take or cause to be taken any action which would
reasonably be expected to disqualify the Spin-off as a tax-free spin-off
within the meaning of Section 355 of the Code.
SECTION 5.15. Piedmont Bank Debt. As disclosed in the Filed
Piedmont SEC Documents, Piedmont is presently the borrower under a $20 million
credit facility with a commercial bank (the "Bank Debt"). Piedmont and
Chartwell shall use their reasonable best efforts to negotiate with the lender
under such Bank Debt and to negotiate with other bank lenders or other sources
of capital to refinance or replace such Bank Debt in order to obtain all
necessary consents, waivers and releases of the lender under the Bank Debt
(collectively, the "Bank Consent") to the transactions contemplated by this
Agreement. Any amendment or modification of the Bank Debt and any agreement
with respect to any debt or other third party investment that refinances or
replaces the Bank Debt shall be subject to the approval of both Chartwell and
Piedmont, which approval in each case shall not be unreasonably withheld.
SECTION 5.16. Affiliates and Certain Stockholders. Prior to the
Closing Date, Piedmont shall deliver to Chartwell a letter identifying all
persons who are, at the time the Merger is submitted for approval to the
stockholders of Piedmont, "affiliates" of Piedmont for purposes of Rule 145
under the Securities Act. Piedmont shall use its best efforts to cause each
such person to deliver to Chartwell on or prior to the Closing Date a written
agreement substantially in the form attached as Exhibit H hereto. Chartwell
shall not be required to maintain the effectiveness of the Form S-4 for the
purposes of resale of Common Stock by such affiliates and the certificates
representing Common Stock received by such affiliates in the Merger shall bear
a customary legend regarding applicable Securities Act restrictions and the
provisions of this Section 5.16.
SECTION 5.17. Listing. Chartwell shall use its best efforts to
cause the shares of Common Stock to be issued in the Merger to be approved for
listing on the New York Stock Exchange ("NYSE") or American Stock Exchange
("AMEX") or approved for trading on The Nasdaq National Market ("NASDAQ"), in
each case subject to official notice of issuance, prior to the Effective Time.
SECTION 5.18. Stockholder Litigation. Piedmont shall give
Chartwell the opportunity to participate in the defense or settlement of any
stockholder litigation against Piedmont and its directors relating to the
transactions contemplated by this Agreement; provided, however, that no such
settlement shall be agreed to without Chartwell's consent, which shall not be
unreasonably withheld. Chartwell shall give Piedmont the opportunity to
participate in the defense or settlement of any stockholder litigation against
Chartwell and its directors relating to the transactions contemplated by this
Agreement; provided, however, that no such settlement shall be agreed to
without Piedmont's consent, which shall not be unreasonably withheld.
SECTION 5.19. Board Action Relating to Stock Option Plan.
Section 5.19 of the Disclosure Schedule sets forth a list of all Chartwell
Stock Options which are outstanding as of the date hereof. As soon as
practicable following the date of this Agreement, the Board of Directors of
Chartwell (or, if appropriate, any committee administering a Chartwell Stock
Option Plan) shall adopt such resolutions or take such actions as may be
required to reset the exercise price of all outstanding Chartwell Stock
Options to $21 per share, including entering into such amendments to the
related option agreements as shall be necessary in connection therewith.
SECTION 5.20. Chartwell Warrants. Section 5.20 of the Disclosure
Schedule sets forth a list of all warrants issued by Chartwell to purchase
shares of Common Stock which are outstanding as of the date hereof (the
"Warrants"). Prior to the Effective Time, Chartwell shall use its best
efforts to cause each of the holders of the Warrants to agree to amend such
Warrants as of the Effective Time (as so amended, the "Amended Warrants").
The Amended Warrants will be in substantially the same form as the existing
Warrants but (i) those Warrants so indicated on the Disclosure Schedule will
have an exercise price adjusted to $21 per share, and the exercise price of
the other Warrants will not be adjusted, (ii) all the Warrants will be amended
to include a cashless exercise feature and (iii) the Warrants will otherwise
be amended as described in Section 5.20 of the Disclosure Schedule.
SECTION 5.21. Post-Merger Operations. (a) As of the Effective
Time, Chartwell shall cause its Board of Directors to be comprised of six
individuals who were members of such Board of Directors prior to the Effective
Time, as well as the Chief Executive Officer, President and Executive Vice
President/Chief Underwriting Officer of Chartwell (or, if any of such
individuals is unable or unwilling to serve, such other senior officer of
Chartwell as it shall designate) and an additional four individuals who were
members of the Board of Directors of Piedmont prior to the Effective Time.
The foregoing thirteen individuals shall be apportioned among the classes of
the Board of Directors of Chartwell as set forth in Section 5.21(a) of the
Disclosure Schedule.
(b) The officers of Chartwell at the Effective Time shall, from
and after the Effective Time, be the officers of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
SECTION 5.22. Stockholders Agreement and Registration Rights
Agreement. Prior to the Effective Time, Chartwell shall execute and deliver,
and Chartwell and Piedmont shall use their best efforts to cause their
respective stockholders named therein to execute and deliver, a Stockholders
Agreement substantially in the form attached hereto as Exhibit F (the
"Stockholders Agreement") and a Registration Rights Agreement (the
"Registration Rights Agreement") substantially in the form attached hereto as
Exhibit I.
SECTION 5.23. Noteholder Consent. Chartwell shall use its best
efforts to obtain all necessary consents of the holders of the Notes to the
consummation of the transactions contemplated by this Agreement (the
"Noteholder Consent"). In connection with obtaining the Noteholder Consent,
Chartwell shall be permitted to establish a new wholly-owned subsidiary
("Newsub"), to which Chartwell may contribute all of the shares of capital
stock of Chartwell Re and to assign to Newsub, and to cause Newsub to assume,
in accordance with the terms of the Indenture under which the Notes were
issued, all obligations of Chartwell under the Notes. Alternatively,
Chartwell at its option may cause Newsub to provide its guarantee, in form and
substance satisfactory to the holders of Notes, of the obligations of
Chartwell under the Notes. Notwithstanding any other provision of this
Agreement to the contrary, unless consented to by both Chartwell and Piedmont,
Chartwell shall not obtain the Noteholder Consent if, despite Chartwell's
using its best efforts to obtain the consent, the cost of obtaining such
consent would be prohibitive. Newsub will also be the obligor following the
Effective Time under the Bank Debt or any debt agreement that refinances or
replaces the Bank Debt in connection with obtaining the Bank Consent.
SECTION 5.24. Additional Reserves. Prior to the Effective
Time, RECO will increase by an aggregate of $25 million its reserves for
losses incurred but not reported under SAP with respect to the Protected
Business, and Piedmont will correspondingly increase by an aggregate of $25
million its reserves for losses incurred but not reported under generally
accepted accounting principles (such increase, the "Acquisition Reserve").
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. 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 waiver on or prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. The Chartwell Vote Items shall have
been approved and adopted by the affirmative vote of the stockholders of
Chartwell by the requisite vote in accordance with applicable law and
the Charter and the Piedmont Vote Items shall have been approved and
adopted by the stockholders of Piedmont by the requisite vote in
accordance with applicable law and the Piedmont Charter.
(b) Governmental and Regulatory Consents. All filings required
to be made prior to the Effective Time with, and all consents,
approvals, permits and authorizations required to be obtained prior to
the Effective Time from, Governmental Entities, including, without
limitation, those set forth in Sections 3.1(c) and 3.2(c) of the
Disclosure Schedule, in connection with the execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby by Chartwell and Piedmont will have been made or obtained (as the
case may be), and such consents, approvals, permits and authorizations
shall be subject to no conditions other than (i) conditions customarily
imposed by insurance regulatory authorities or (ii) other conditions
that would not reasonably be expected to have a Chartwell Material
Adverse Effect or a Piedmont Material Adverse Effect.
(c) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or
shall have otherwise expired.
(d) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger or any of the other
transactions contemplated hereby shall be in effect; provided, however,
that the party invoking this condition shall have used reasonable
efforts to have any such order or injunction vacated.
(e) Form S-4, etc. The Form S-4, CI Notes Form S-1 and (if
required) the Spin-off Form S-1 shall each have become effective under
the Securities Act and the Form 10 shall have become effective under the
Exchange Act and none of the foregoing shall be the subject of any stop
order or proceedings seeking a stop order, and the CI Indenture shall
have been qualified under the Trust Indenture Act.
(f) Third-Party Consents. Chartwell shall have obtained the
Noteholder Consent and the parties shall have obtained the Bank Consent.
All other consents and waivers of third parties to the consummation
of the Merger and the other transactions contemplated hereby shall
have been obtained, other than those which, if not obtained, would
not have a material adverse effect on the business, financial
condition or results of operations of Chartwell and its subsidiaries
taken as a whole or a Piedmont Material Adverse Effect.
(g) Listing. The shares of Common Stock issuable to
Piedmont's stockholders pursuant to this Agreement shall have been
approved for listing on the NYSE or the AMEX or approved for trading on
NASDAQ, subject to official notice of issuance.
(h) CI Notes. The issuance of the CI Notes shall have occurred
in accordance with the CI Indenture.
(i) Spin-Off. Piedmont shall have received an opinion of its
special tax counsel, Davis Polk & Wardwell, in form and substance
satisfactory to Piedmont dated the date of the Spin-off prior to the
Effective Time, to the effect that Piedmont and its stockholders will
recognize no gain or loss for Federal income tax purposes as a result of
the Spin-off except, with respect to Piedmont, to the extent of any
excess loss accounts or deferred intercompany gains. The Spin-off shall
have occurred in accordance with the terms of this Agreement and the
Spin-off Agreements.
(j) Supplemental Indenture. The Supplemental Indenture shall
have been executed and delivered by all parties thereto.
SECTION 6.2. Conditions to Obligations of Piedmont. The
obligations of Piedmont to effect the Merger are further subject to the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Chartwell set forth in this Agreement that are qualified
as to materiality shall be true and correct and the representations and
warranties of Chartwell set forth in this Agreement that are not so
qualified shall be true and correct in all material respects, in each
case as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date, except to the extent any such
representation and warranty speaks as of an earlier date, in which event
such representation and warranty shall be true and correct, or true and
correct in all material respects, as applicable, as of such date, and
Piedmont shall have received a certificate signed on behalf of Chartwell
by the chief executive officer and the chief financial officer of
Chartwell to the effect set forth in this paragraph.
(b) Performance of Obligations of Chartwell. Chartwell shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date,
and Piedmont shall have received a certificate signed on behalf of
Chartwell by the chief executive officer and the chief financial officer
of Chartwell to such effect.
(c) No Material Adverse Change. Since December 31, 1994, there
shall have been no Chartwell Material Adverse Change, and no event or
condition which individually or in the aggregate could reasonably be
expected to result in a Chartwell Material Adverse Change, other than
any such Chartwell Material Adverse Change deemed to have been waived
by Piedmont pursuant to Section 7.1(d).
(d) Tax Opinions. Piedmont shall have received an opinion of
its special tax counsel, Davis Polk & Wardwell, in form and substance
satisfactory to Piedmont, dated the Effective Time, to the effect that
Piedmont (except to the extent of any excess loss accounts or deferred
intercompany gains) and its stockholders (except to the extent such
stockholders receive cash in lieu of fractional shares) will recognize
no gain or loss for federal income tax purposes as a result of
consummation of the Merger and in connection with the delivery of its
opinion pursuant to this Section 6.2(d), Davis Polk & Wardwell may
request certificates of officers of Piedmont. In addition, Chartwell
shall have received the opinion described in Section 6.3(e).
(e) Stockholders Agreement and Registration Rights Agreement.
The Stockholders Agreement shall have been executed and delivered by
Chartwell and the stockholders of Chartwell prior to the Effective Time
designated therein as parties thereto. The Registration Rights
Agreement shall have been executed and delivered by Chartwell.
SECTION 6.3. Conditions to Obligation of Chartwell. The
obligation of Chartwell to effect the Merger is further subject to the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Piedmont set forth in this Agreement that are qualified as
to materiality shall be true and correct and the representations and
warranties of Piedmont set forth in this Agreement that are not so
qualified shall be true and correct in all material respects, in each
case as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date, except to the extent any such
representation and warranty speaks as of an earlier date, in which event
such representation and warranty shall be true and correct, or true and
correct in all material respects, as applicable, as of such date, and
Chartwell shall have received a certificate signed on behalf of Piedmont
by the chief executive officer and the chief financial officer of
Piedmont to the effect set forth in this paragraph.
(b) Performance of Obligations of Piedmont. Piedmont shall have
performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date,
and Chartwell shall have received a certificate signed on behalf of
Piedmont by the chief executive officer and the chief financial officer
of Piedmont to such effect.
(c) No Material Adverse Change. Since December 31, 1994, there
shall have been no Piedmont Material Adverse Change, and no event or
condition which individually or in the aggregate could reasonably be
expected to result in a Piedmont Material Adverse Change, other than any
such Piedmont Material Adverse Change deemed to have been waived by
Chartwell pursuant to Section 7.1(d).
(d) Affiliates. Chartwell shall have received from each
affiliate named in the letter referred to in Section 5.16 an executed
copy of an agreement substantially in the form of Exhibit H hereto.
(e) Tax Opinions. Chartwell shall have received an opinion of
its special tax counsel, LeBoeuf, Lamb, Greene & MacRae, L.L.P., in form
and substance satisfactory to Chartwell, dated the Effective Time, to
the effect that Chartwell and its stockholders will recognize no gain or
loss for federal income tax purposes as a result of consummation of the
Merger and in connection with the delivery of its opinion pursuant to
this Section 6.3(e), LeBoeuf, Lamb, Greene & MacRae, L.L.P., may request
certificates of officers of Chartwell. In addition, Piedmont shall have
received the opinion described in Section 6.2(d).
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. Termination. This Agreement may be terminated and
abandoned at any time prior to the Effective Time:
(a) by mutual written consent of Piedmont and Chartwell;
(b) by either Piedmont or Chartwell:
(i) if, upon a vote at a duly held Stockholders Meeting or
Piedmont Stockholders Meeting or any adjournment thereof, any
required approval of the stockholders of Chartwell or Piedmont, as
the case may be, shall not have been obtained;
(ii) if the Merger shall not have been consummated on or
before March 31, 1996, unless the failure to consummate the Merger
is the result of a willful and material breach of this Agreement
by the party seeking to terminate this Agreement;
(iii) if any Governmental Entity shall have issued an
order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have become final
and nonappealable;
(iv) if the Board of Directors of Chartwell shall have
exercised any of its rights set forth in Section 5.11(a) of this
Agreement;
(v) if the Board of Directors of Piedmont shall have
exercised any of its rights set forth in Section 5.11(b) of this
Agreement; or
(c) by Piedmont if the Noteholder Consent shall not have been
obtained on or before December 31, 1995, unless the failure to obtain
the Noteholder Consent is the result of a willful and material breach of
this Agreement by the party seeking to terminate this Agreement;
provided, that the effectiveness of the Noteholder Consent may be
subject to completion of the Merger and the concurrent payment of the
cost, if any, of obtaining the consent and to the provisions of
Section 9.04 of the Indenture under which the Notes were issued.
(d) In the event that either Chartwell or Piedmont (the
"Notifying Party") shall notify the other in writing that such Notifying
Party has experienced a Chartwell Material Adverse Change (in the case
of a notice given by Chartwell) or a Piedmont Material Adverse Change
(in the case of a notice given by Piedmont) (a Chartwell Material
Adverse Change and a Piedmont Material Adverse Change each being
hereinafter referred to in this Section 7.1(d) as a "Material Adverse
Change"), which notice shall refer to this Section 7.1(d), state that it
is a "Notice of Material Adverse Change" and describe the Material
Adverse Change, the party so notified shall have 30 days from its
receipt of such notice to elect to terminate this Agreement pursuant to
this Section 7.1(d). In the event that such party does not so elect to
terminate this Agreement, it shall be deemed to have waived its right to
refuse to consummate the Merger and the other transactions contemplated
by this Agreement on the basis of the Material Adverse Change identified
in the Notifying Party's notice, without prejudice to its rights with
respect to any subsequent Material Adverse Change with respect to the
Notifying Party. Notwithstanding any contrary implication of this
Section 7.1(d), whether a party has experienced a Material Adverse
Change shall not be a matter for determination solely by one party.
(e) Any termination pursuant to this Section 7.1 may occur
before or after the Chartwell Stockholder Approval or the Piedmont
Stockholder Approval, except that (i) Chartwell shall have no right to
terminate this Agreement pursuant to Sections 5.11(a) and 7.1(b)(iv)
following the Chartwell Stockholder Approval and (ii) Piedmont shall
have no right to terminate this Agreement pursuant to Sections 5.11(b)
and 7.1(b)(v) following the Piedmont Stockholder Approval.
SECTION 7.2. Effect of Termination. In the event of termination
of this Agreement by either Chartwell or Piedmont as provided in Section 7.1,
this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Piedmont or Chartwell, other than the
last sentence of Section 5.5(a) and Sections 3.1(m), 3.2(o), 5.12 and 7.2 and
Article VIII. Nothing contained in this section shall relieve any party from
any liability resulting from any wilful and material breach of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
SECTION 7.3. Amendment. Subject to the applicable provisions of
the DGCL, at any time prior to the Effective Time, the parties hereto may
amend this Agreement; provided, however, that after approval of the Merger by
the stockholders of Piedmont, no amendment shall be made that by law requires
the approval of Piedmont's stockholders without the approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
SECTION 7.4. Extension; Waiver. At any time prior to the
Effective Time, the parties may (a) extend the time for the performance of any
of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties of the other parties
contained in this Agreement or in any document delivered pursuant to this
Agreement or (c) subject to Section 7.3, waive compliance with any of the
agreements or conditions of the other parties contained in this Agreement.
Any agreement on the part of a party to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party to this Agreement to assert any of
its rights under this Agreement or otherwise shall not constitute a waiver
of such rights.
SECTION 7.5. Procedure for Termination, Amendment, Extension or
Waiver. A termination of this Agreement pursuant to Section 7.1, an
amendment of this Agreement pursuant to Section 7.3 or an extension or
waiver pursuant to Section 7.4 shall, in order to be effective, require in
the case of Piedmont or Chartwell, action by its Board of Directors or the
duly authorized designee of its Board of Directors.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1. Nonsurvival of Representations and Warranties. None
of the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time, other
than the representations and warranties set forth in Section 3.1(p) which
shall survive until the third anniversary of the Effective Time. This Section
8.1 shall not limit any covenant or agreement of the parties which by its
terms contemplates performance after the Effective Time, including but not
limited to Section 5.8.
SECTION 8.2. Fees and Expenses. Except as provided otherwise in
Sections 5.12 and 5.14, whether or not the Merger is consummated, each party
hereto shall pay its own fees and expenses incident to preparing for, entering
into and carrying out this Agreement and the consummation of the transactions
contemplated hereby.
SECTION 8.3. Definitions; Certain Calculations and Related
Matters. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person;
(b) "person" means an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other
entity;
(c) a "subsidiary" of any person means another person 50% or
more of the total combined voting power of all classes of capital stock
or other voting interests of which, or 50% of more of the equity
securities of which, is owned directly or indirectly by such first
person;
(d) the "transactions contemplated by this Agreement" and
"transactions contemplated hereby" shall include, without limitation,
the Merger, the Spin-off, the execution, delivery and performance by the
parties thereto of the Spin-off Agreements and the other agreements
contemplated hereby and the RECO Contribution;
(e) with respect to each of Chartwell and Piedmont, a "Financial
Adjustment" shall mean any decrease, as of the date which is the fifth
business day prior to the Closing Date, in the consolidated
stockholders' equity of such company and its subsidiaries (other than,
in the case of Piedmont, the Asset Management Subs) as determined in
accordance with generally accepted accounting principles of more than
$2.5 million on an after-tax basis from the amount thereof as of March
31, 1995, and as used herein with respect to either Chartwell or
Piedmont, "Adjustment Amount" shall mean the amount by which such
decrease exceeds $2.5 million, up to a maximum of $2.5 million;
(f) a "Chartwell Material Adverse Change" shall mean any
material adverse change in the business, financial condition or results
of operations of Chartwell and its subsidiaries taken as a whole,
including without limitation (i) any decrease in the consolidated
stockholders equity of Chartwell and its subsidiaries as determined in
accordance with generally accepted accounting principles of $5 million
or more on an after-tax basis from the amount thereof as of March 31,
1995, or (ii) the incurrence by Chartwell Re of pre-tax losses and loss
expenses in the amount of $5 million or more, net of collectible amounts
recoverable from reinsurers (less any related reinstatement premiums),
from any insured or reinsured event or related events occurring after
the date of this Agreement;
(g) a "Piedmont Material Adverse Change" shall mean any material
adverse change in the business, financial condition or results of
operations of Piedmont and its subsidiaries (other than the Asset
Management Subs) taken as a whole, including without limitation (i) any
decrease in the consolidated stockholders equity of Piedmont and its
subsidiaries (other than the Asset Management Subs) as determined in
accordance with generally accepted accounting principles of $5 million
or more on an after-tax basis from the amount thereof as of March 31,
1995, (ii) the incurrence by RECO of pre-tax losses and loss expenses in
the amount of $5 million or more, net of collectible amounts recoverable
from reinsurers (less any related reinstatement premiums), from any
insured or reinsured event or related events occurring after the date of
this Agreement and (iii) the occurrence of Adverse Development (as
defined below) with respect to the Protected Business (as defined in the
CI Indenture), whether due to events or circumstances occurring before
or after March 31, 1995. "Adverse Development" shall be deemed to have
occurred if the amount equal to (x) the sum of (i) paid losses in
respect of the Protected Business after March 31, 1995 and (ii) the
amount of any increase necessary, consistent with past practice, in
Piedmont's case reserves with respect to Protected Business from the
amount thereof at March 31, 1995, minus (y) the sum of (i) any decrease
necessary, consistent with past practice, in the ordinary course of
business in RECO's case reserves with respect to Protected Business from
the amounts thereof at March 31, 1995, and (ii) any collectible amounts
recoverable from reinsurers recorded by RECO after March 31, 1995 (less
any related reinstatement premiums) as a result of any increase in case
reserves described in clause (x)(ii) above, equals or exceeds $7.5
million pre-tax. The establishment of any reserves constituting the
Acquisition Reserve shall not be deemed to constitute a Piedmont
Material Adverse Change;
(h) the "Adjusted Chartwell Base Amount" shall be equal to (i)
the consolidated stockholders equity of Chartwell and its subsidiaries
as determined in accordance with generally accepted accounting
principles as of March 31, 1995 less (ii) the amount of any payments to
Noteholders in exchange for the Noteholder Consent and (iii) in the
event there has been a Financial Adjustment with respect to Chartwell,
less the sum of (A) $2.5 million and (B) the Adjustment Amount with
respect to Chartwell;
(i) the "Adjusted Piedmont Base Amount" shall be equal to (i)
the consolidated stockholders equity of Piedmont and its subsidiaries as
determined in accordance with generally accepted accounting principles
as of March 31, 1995 less (ii) $58.2 million and (iii) in the event
there has been a Financial Adjustment with respect to Piedmont, less the
sum of (A) $2.5 million and (B) the Adjustment Amount with respect to
Piedmont; and
(j) "Excluded Cause" shall mean (i) any change in insurance laws
or regulations, (ii) any change in generally accepted accounting
principles, (iii) any change in prevailing interest rates to the extent
that such change affects the market value of fixed income investment
securities and (iv) in the case of Piedmont, any limitation on RECO's
ability to quote and participate on certain lines of new and renewal
business as a result of the reduction in April 1995 of its rating by
A.M. Best Company from "A-" to "B++".
In making any determination of whether a Chartwell Material Adverse Change has
occurred or of whether a Financial Adjustment has occurred with respect to
Chartwell, there shall be excluded (i) all transaction costs incurred by
Chartwell and its subsidiaries in connection with the transactions
contemplated by this Agreement, including but not limited to all costs of
obtaining the Noteholder Consent and all Expenses and (ii) the effects of all
Excluded Causes. In making any determination of whether a Piedmont Material
Adverse Change has occurred or of whether a Financial Adjustment has occurred
with respect to Piedmont, there shall be excluded (i) the amount of the
Acquisition Reserve, (ii) any reduction in stockholders equity resulting from
the distribution of the CI Notes, (iii) up to $5 million post-tax in
restructuring charges (including severance costs, costs of certain
reinsurance, certain employee benefit costs and certain other costs as
previously agreed), (iv) all transaction costs incurred by Piedmont and its
subsidiaries (other than the Asset Management Subs' 40% share) in connection
with the transactions contemplated by this Agreement, including but not
limited to all Expenses and (v) the effects of all Excluded Causes.
Not later than the fourth business day prior to the Closing Date,
each party shall provide the other with a certificate of such party, in a
form to be agreed, signed by its Chief Financial Officer, which certificate
shall state whether, in the best judgment of such officer, a Financial
Adjustment has occurred with respect to such party and, if so, such
officer's best estimate of the amount of such Financial Adjustment. Such
certificate shall be accompanied by such supporting documentation in
reasonable detail as the party receiving the certificate shall request. In
the event of postponement of the Closing Date, the foregoing certificates
and information will be updated as necessary.
SECTION 8.4. Notices. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by overnight courier (providing
proof of delivery) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Piedmont, to
Piedmont Management Company Inc.
80 Maiden Lane
New York, NY 10038
Attention: Robert M. DeMichele
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: David W. Ferguson
(b) if to Chartwell, to
Chartwell Re Corporation
300 Atlantic Street
Suite 400
Stamford, CT 06901
with a copy to:
LeBoeuf, Lamb, Greene
& MacRae, L.L.P.
125 West 55th Street
New York, NY 10019
Attention: Peter R. O'Flinn
SECTION 8.5. Interpretation. When a reference is made in this
Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation".
SECTION 8.6. Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
SECTION 8.7. Entire Agreement; Third-Party Beneficiaries. This
Agreement and the other agreements referred to herein constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of this
Agreement. This Agreement is not intended to confer upon any person other
than the parties hereto and the third party beneficiaries referred to in the
following sentence any rights or remedies. The parties hereto expressly
intend the provisions of Sections 5.7 and 5.8 to confer a benefit upon and be
enforceable by, as third party beneficiaries of this Agreement, the third
persons referred to in, or intended to be benefitted by, such provisions.
SECTION 8.8. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
SECTION 8.9. Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties
without the prior written consent of the other parties, and any such
assignment that is not consented to shall be null and void. 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.
SECTION 8.10. Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the State of Delaware or any state court sitting in
the City of Wilmington, Delaware (any such federal or state court, a "Delaware
Court"), in addition to any other remedy to which they are entitled at law or
in equity. In addition, each of the parties hereto (a) consents to submit
itself to the personal jurisdiction of any Delaware Court in the event any
dispute arises out of this Agreement or any of the transactions contemplated
by this Agreement and (b) agrees that it will not attempt to deny or defeat
such personal jurisdiction or venue by motion or other request for leave from
any such Delaware Court.
SECTION 8.11. Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law but if any provision or
portion of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision
had never been contained herein.
IN WITNESS WHEREOF, Piedmont and Chartwell have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
PIEDMONT MANAGEMENT COMPANY INC.
/s/ Robert M. DeMichele
-----------------------
Name: Robert M. DeMichele
Title: President & Chief
Executive Officer
CHARTWELL RE CORPORATION
/s/ Richard E. Cole
-----------------------
Name: Richard E. Cole
Title: Chairman & Chief
Executive Officer
Exhibit A
____________________________________________________________________________
PIEDMONT MANAGEMENT COMPANY INC.
as the Company
and
[TRUSTEE]
as Trustee
___________________________________
Indenture
Dated as of ________ __, 1995
___________________________________
____________________________________________________________________________
TABLE OF CONTENTS(*)
Page
RECITALS OF THE COMPANY
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions............................. 1
SECTION 1.2 Other Definitions....................... 16
SECTION 1.3 Incorporation by Reference of Trust
Indenture Act......................... 17
SECTION 1.4 Rules of Construction................... 17
ARTICLE 2
THE SECURITIES
SECTION 2.1 Form and Dating......................... 18
SECTION 2.2 Execution and Authentication............ 18
SECTION 2.3 Amount Limited.......................... 19
SECTION 2.4 Denomination and Date of Securities;
Payments of Interest.................. 19
SECTION 2.5 Registrar and Paying Agent; Agents
Generally............................. 19
SECTION 2.6 Paying Agent to Hold Money in Trust..... 20
SECTION 2.7 Transfer Restrictions; Transfer and
Exchange......................... 21
SECTION 2.8 Replacement Securities.................. 22
SECTION 2.9 Outstanding Securities.................. 23
SECTION 2.10 Temporary Securities.................... 24
SECTION 2.11 Cancellation............................ 24
SECTION 2.12 CUSIP Numbers........................... 24
SECTION 2.13 Limited Extension of Settlement Date.... 25
____________
(*)Note: The Table of Contents shall not for any
purposes be deemed to be a part of the
Indenture.
ARTICLE 3
REDEMPTION
SECTION 3.1 Notices................................. 26
SECTION 3.2 Notice of Redemption.................... 26
SECTION 3.3 Effect of Notice of Redemption.......... 27
SECTION 3.4 Deposit of Redemption or Purchase Price. 27
SECTION 3.5 No Securities Redeemed or Purchased in
Part.................................. 28
SECTION 3.6 Optional Redemption..................... 28
SECTION 3.7 Mandatory Redemption.................... 28
ARTICLE 4
COVENANTS
SECTION 4.1 Payment of Securities................... 28
SECTION 4.2 Maintenance of Records; Compliance with
Laws; Access and Cooperation.......... 29
SECTION 4.3 Reports by the Company.................. 30
SECTION 4.4 Maintenance of Office or Agency......... 30
SECTION 4.5 Negative Pledge......................... 31
SECTION 4.6 Purchase of Securities upon a Change of
Control............................... 31
SECTION 4.7 Limitation on Indebtedness.............. 33
SECTION 4.8 Certificate to Trustee.................. 33
ARTICLE 5
CONSOLIDATION, MERGER, CONVEYANCE,
SECTION 5.1 When Company May Merge, Etc............. 34
SECTION 5.2 Successor Substituted................... 35
ARTICLE 6
DEFAULT AND REMEDIES
SECTION 6.1 Events of Default....................... 36
SECTION 6.2 Acceleration............................ 38
SECTION 6.3 Other Remedies.......................... 38
SECTION 6.4 Waiver of Past Defaults................. 38
SECTION 6.5 Control by Majority..................... 39
SECTION 6.6 Limitation on Suits..................... 39
SECTION 6.7 Rights of Holders of Securities to Receive
Payment............................... 40
SECTION 6.8 Collection Suit by Trustee.............. 40
SECTION 6.9 Trustee May File Proofs of Claim........ 40
SECTION 6.10 Priorities............................. 41
SECTION 6.11 Undertaking for Costs................... 41
ARTICLE 7
TRUSTEE
SECTION 7.1 General................................. 42
SECTION 7.2 Certain Rights of Trustee............... 42
SECTION 7.3 Individual Rights of Trustee............ 44
SECTION 7.4 Trustee's Disclaimer.................... 44
SECTION 7.5 Notice of Default....................... 45
SECTION 7.6 Reports by Trustee to Holders........... 45
SECTION 7.7 Compensation and Indemnity.............. 45
SECTION 7.8 Replacement of Trustee.................. 46
SECTION 7.9 Successor Trustee by Merger, Etc. ...... 48
SECTION 7.10 Eligibility............................. 48
SECTION 7.11 Money Held in Trust..................... 48
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.1 Satisfaction and Discharge of Indenture. 48
SECTION 8.2 Application by Trustee of Funds Deposited
for Payment of Securities............. 49
SECTION 8.3 Repayment of Moneys Held by Paying
Agent................................. 49
SECTION 8.4 Return of Moneys Held by Trustee and Paying
Agent Unclaimed for Three Years....... 49
ARTICLE 9
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1 Without Consent of Holders of Securities 50
SECTION 9.2 With Consent of Holders of Securities... 50
SECTION 9.3 Compliance with Trust Indenture Act..... 52
SECTION 9.4 Revocation and Effect of Consents....... 52
SECTION 9.5 Notation on or Exchange of Securities... 53
SECTION 9.6 Trustee to Sign Amendments, etc......... 53
ARTICLE 10
DETERMINATION OF THE PAYMENT AMOUNT
SECTION 10.1 Determination of the Contingent Amount. 53
SECTION 10.2 Holder Actuary; Compensation and
Indemnity............................ 53
SECTION 10.3 Company Actuary........................ 55
SECTION 10.4 Preparation of Reserve Reports......... 55
SECTION 10.5 Resolution of Disputes; Arbitration.... 56
SECTION 10.6 Annual Review of Reserves And Claims... 57
SECTION 10.7 Settlement in Stock.................... 58
ARTICLE 11
MISCELLANEOUS
SECTION 11.1 Trust Indenture Act of 1939............ 59
SECTION 11.2 Notices................................ 59
SECTION 11.3 Certificate and Opinion as to Conditions
Precedent............................ 60
SECTION 11.4 Statements Required in Certificate or
Opinion.............................. 60
SECTION 11.5 Rules by Trustee, Paying Agent or
Registrar............................ 61
SECTION 11.6 Payment Date Other Than a Business Day. 61
SECTION 11.7 Governing Law.......................... 61
SECTION 11.8 No Adverse Interpretation of Other
Agreements........................... 61
SECTION 11.9 Successors............................. 61
SECTION 11.10 Duplicate Originals.................... 62
SECTION 11.11 Separability........................... 62
SECTION 11.12 Table of Contents, Headings, Etc....... 62
SECTION 11.13 Incorporators, Stockholders, Officers and
Directors of Company Exempt from
Individual Liability................. 62
SECTION 11.14 Judgment Currency...................... 62
SIGNATURES........................................... 63
Exhibit A Form of Security........................... 64
Exhibit B Calculation of Contingent Amount........... 75
Exhibit C Registration Rights Agreement.............. 82
INDENTURE, dated as of ________ __, 1995, between Piedmont
Management Company Inc., a Delaware corporation, as the Company, and
[Trustee], a national association, as Trustee.
RECITALS OF THE COMPANY
WHEREAS, the Company has duly authorized the issue of its
Contingent Interest Notes Due June 30, 2006 (collectively, the "Securities"),
which Securities consist of (i) an aggregate principal amount of $1,000,000
plus interest accreting thereon from the date of issuance as provided herein
at a rate of 8.0% per annum, compounded annually, and (ii) aggregate
contingent interest of up to $55,000,000 as determined pursuant to Article 10,
and, to provide, among other things, for the authentication, delivery and
administration thereof, the Company has duly authorized the execution and
delivery of this Indenture; and
WHEREAS, all things necessary to make this Indenture a valid
indenture and agreement according to its terms have been done;
NOW, THEREFORE:
In consideration of the premises, the Company and the Trustee
mutually covenant and agree for the equal and proportionate benefit of the
respective holders from time to time of the Securities as follows:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions.
"Acquired Indebtedness" means Indebtedness of a Person: (i)
existing at the time such Person becomes a Subsidiary (or any renewal,
extension, substitution, refinancing or replacement thereof at such time) or
(ii) assumed in connection with the acquisition of assets from another Person,
other than Indebtedness incurred in connection with, or in contemplation of,
such Person becoming a Subsidiary or such acquisition, as the case may be.
"Adverse Reserve Development" has the meaning set forth in
Exhibit B.
"Affiliate" means, with respect to any specified Person, any
other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person (except in cases
where substantially all of the control that would ordinarily be exercisable by
virtue of ownership of stock, other than the election of directors, has been
eliminated by applicable regulatory authorities). For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting stock, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Average Life" means, as of the date of determination, with
respect to any Indebtedness, the quotient obtained by dividing: (i) the sum
of the products of (A) the number of years (or portion thereof) from the date
of determination to the dates of each successive scheduled principal payment
of such Indebtedness multiplied by (B) the amount of such principal payment by
(ii) the sum of all such principal payments.
"Board of Directors" means either the Board of Directors of the
Company or any committee of such Board duly authorized to act hereunder.
"Board Resolution" means one or more resolutions of the board
of directors of the Company or any authorized committee thereof, certified by
the secretary or an assistant secretary to have been duly adopted and to be in
full force and effect on the date of certification, and delivered to the
Trustee.
"Business Day" means any day, other than a Saturday or Sunday,
that is neither a legal holiday nor a day on which banking institutions are
authorized or required by law or regulation to close in The City of New York.
"Capital Lease Obligation" of any Person means any obligations
of such Person and its Subsidiaries on a consolidated basis under any capital
lease of real or personal property which, in accordance with GAAP, has been
recorded as a capitalized lease obligation; and the amount of Indebtedness
represented by such obligation will be the capitalized amount of such
obligation determined in accordance with GAAP; and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under
such lease prior to the first date upon which such lease may be terminated by
the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares,
interests, participation, or other equivalent (however designated) of such
Person's capital stock and any rights (other than debt securities convertible
into or exchangeable for capital stock), warrants or options to purchase the
foregoing whether now outstanding or issued after the date hereof.
"Change of Control" means (A) either (i) any transaction or
series of transactions occurring after the Merger in which any "person" or
"group" (within the meaning of Rule 13d-5 under the Exchange Act and
Sections 13(d) and 14(d) of the Exchange Act) (x) consisting of one or
more of the holders (or their Affiliates) of the Common Stock of Chartwell
immediately prior to the Merger becomes the direct or indirect "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), by way of merger,
consolidation, other business combination or otherwise, of greater than 66-
2/3% of the total voting power (on a fully-diluted basis as if all
convertible securities had been converted) entitled to vote in the election
of directors of the Company or the Surviving Entity (if other than the
Company) or (y) other than the initial holders (or their Affiliates) of the
Common Stock of the Company immediately after the Merger, becomes the
direct or indirect "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), by way of merger, consolidation, other business combination
or otherwise, of greater than 50% of the total voting power (as defined
above) entitled to vote in the election of directors of the Company or the
Surviving Entity (if other than the Company); provided that this subclause
(y) shall not include any transaction in which the Company or the Surviving
Entity becomes or is a direct or indirect Wholly-Owned Restricted
Subsidiary of another entity (the "Parent") if immediately following such
transaction no "person" or "group" would be the "beneficial owner" of
greater than 50% of such total voting power of the Parent or (ii) the
Common Stock of the Company shall cease to be listed on any national
securities exchange or on The NASDAQ Stock Market; and (B) within one year
after the occurrence of any of the events described in clause (A) above,
(i) the individuals who immediately prior to the occurrence of such event
or events constituted the board of directors of the Company cease for any
reason to constitute a majority of the directors of the Company then in
office or (ii) the Chief Executive Officer and President of the Company (or
an individual or individuals holding positions of equivalent
responsibility) at the time of such event or events cease for any reason to
hold such positions at the Company, or if the Company is controlled by
another Person, such officers do not hold positions of equivalent
responsibility at such other Person. In addition, a Change of Control
shall be deemed to have occurred if (a) the Company or any Subsidiary
sells, conveys, transfers, leases or otherwise disposes of all or
substantially all of the assets of the Company and its Subsidiaries,
considered as a whole, or (b) the Company or any Subsidiary of the Company
sells, conveys, transfers, leases or otherwise disposes of all or
substantially all of the common stock of, or sells, conveys, transfers,
leases or otherwise disposes of all or substantially all of the assets of,
RECO or Chartwell Reinsurance to another Person or Persons in one
transaction or a series of transactions, including through a bulk
reinsurance transaction or transactions, in each case with respect to
clauses (a) and (b) above, other than any transaction which is specifically
contemplated by the Merger Agreement or any sale, conveyance, transfer,
lease or other disposition to the Company or any Wholly-Owned Restricted
Subsidiary.
"Chartwell" means Chartwell Re Corporation, a Delaware
corporation.
"Chartwell Reinsurance" means Chartwell Reinsurance Company, a
Minnesota corporation.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act or, if at any
time after the execution of this instrument such Commission is not existing
and performing the duties now assigned to it under the Trust Indenture Act,
then the body performing such duties at such time.
"Common Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's common stock, whether now
outstanding or issued after the date of this Indenture, including, without
limitation, all series and classes of such common stock.
"Company" means Piedmont Management Company Inc., a Delaware
corporation, and its successors and assigns. Chartwell shall be deemed to be
the successor to Piedmont Management Company Inc. after the Merger, and from
and after the Merger, "Company" shall mean Chartwell and its successors and
assigns.
"Company Actuary" means the actuary appointed by the Company
pursuant to Section 10.3.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person and its Restricted Subsidiaries as
determined in accordance with GAAP consistently applied.
"Contingent Amount" has the meaning set forth in Exhibit B.
"Corporate Trust Office" means the office of the Trustee at
which the corporate trust business of the Trustee shall, at any particular
time, be principally administered, which office is, at the date as of which
this Indenture is dated, located at New York, New York.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect such Person or any of its Restricted Subsidiaries against fluctuations
in currency values or exchange rates.
"Determination Date" has the meaning set forth in Exhibit B.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" means, with respect to any asset or
property, the sale value that would be obtained in an arm's-length transaction
between an informed and willing seller under no compulsion to sell and an
informed and willing buyer.
"Fixed Amount" means the aggregate Principal Amount plus
accreted interest thereon from the Issue Date through the Settlement Date (not
including any period of extension pursuant to Section 2.13) at a rate of 8.0%
per annum, compounded annually.
"GAAP" means generally accepted accounting principles in the
United States of America at the date of any computation required or permitted
hereunder; provided that for purposes of calculation of the Contingent Amount
GAAP means generally accepted accounting principles in the United States of
America as in effect on the Determination Date.
"Guaranteed Debt" of any Person means, without duplication,
all Indebtedness of any other Person to the extent guaranteed directly or
indirectly in any manner by such Person, or in effect guaranteed directly
or indirectly by such Person through an agreement: (i) to pay or purchase
such Indebtedness or to advance or supply funds for the payment or purchase
of such Indebtedness; (ii) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the
purpose of enabling such other Person to make payment of such Indebtedness
or to assure the holder of such Indebtedness against loss; (iii) to supply
funds to, or in any other manner invest in, such other Person (including
any agreement to pay for property or services to be acquired by such other
Person irrespective of whether such property is received or such services
are rendered); (iv) to maintain working capital or equity capital of such
other Person, or otherwise to maintain the net worth, solvency or other
financial condition of the debtor; or (v) otherwise to assure the holder of
such Indebtedness of such other Person against loss; provided that the term
"guarantee" shall not include endorsements for collection or deposit, in
either case in the ordinary course of business, or any obligation or
liability of such other Person in respect of leasehold interests assigned
by such other Person to any other Person.
"Holder", "holder of Securities", "Securityholder" or other
similar terms means the registered holder of any Security.
"Holder Actuary" means the actuary appointed to represent the
interests of the Holders of the Securities pursuant to the Holder Actuary
Agreement dated the date hereof between the Holder Actuary and the Company.
"Indebtedness" means, with respect to any Person, without
duplication: (i) all obligations of such Person for borrowed money and all
obligations of such Person for the deferred purchase price of property or
services, excluding any trade payables and other accrued current
liabilities incurred in the ordinary course of business, in each case, if,
and to the extent, any of the foregoing would appear as a liability upon a
balance sheet of such Person prepared in accordance with GAAP; (ii) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, if, and to the extent, any of the foregoing would
appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP; (iii) all obligations created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person (even if the rights and remedies of the
seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), but excluding trade accounts
payable arising in the ordinary course of business and software license
agreements or other software acquisition agreements entered into in the
ordinary course of business; (iv) all Capital Lease Obligations of such
Person; (v) all obligations referred to in (but not excluded from) clause
(i), (ii), (iii) or (iv) above of other Persons and all dividends of other
Persons, to the extent that the payment thereof is secured by (or to the
extent that the holder of such obligations has an existing right,
contingent or otherwise, to be secured by) any Lien, upon or in property
(including, without limitation, accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the
payment of such obligations; (vi) all Guaranteed Debt of such Person;
(vii) all Redeemable Capital Stock issued by such Person valued at the
greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued and unpaid dividends; (viii) the net amount of all obligations
under Currency Agreements or Interest Swap Obligations of such Person;
(ix) all obligations for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit transaction (other than
obligations with respect to letters of credit entered into in the ordinary
course of the insurance or reinsurance business of such Person to the
extent that such letters of credit are not drawn upon, or if and to the
extent drawn upon, such drawing is reimbursed not later than the 30th
Business Day following a demand for reimbursement following payment on the
letter of credit) and (x) any amendment, supplement, modification,
deferral, renewal, extension or refunding of any liability of the types
referred to in clauses (i) through (ix) above. Indebtedness shall not
include obligations under insurance, reinsurance or retrocession contracts
entered into in the ordinary course of business. For purposes hereof, the
"maximum fixed repurchase price" of any Redeemable Capital Stock which does
not have a fixed repurchase price shall be calculated in accordance with
the terms of such Redeemable Capital Stock as if such Redeemable Capital
Stock were purchased on any date on which Indebtedness shall be required to
be determined pursuant to the Indenture, and if such price is based upon,
or measured by, the Fair Market Value of such Redeemable Capital Stock,
such Fair Market Value shall be determined in good faith by the board of
directors of the issuer of such Redeemable Capital Stock.
"Indenture" means this instrument as originally executed and
delivered or, if amended or supplemented as herein provided, as so amended or
supplemented.
"Interest Swap Obligations" means the obligations of any Person
pursuant to any interest rate swap agreement, interest rate collar agreement
or other similar agreement or arrangement designed to protect such Person or
any of its subsidiaries against fluctuations in interest rates.
"Issue Date" means the date on which Securities are originally
issued under the Indenture.
"Lien" means any mortgage, charge, pledge, lien, security
interest or encumbrance of any kind.
"Maturity Date" means June 30, 2006 (subject to any extension
pursuant to Section 2.13).
"Merger" means the merger of the Company with and into
Chartwell pursuant to an Agreement and Plan of Merger dated as of August 7,
1995 between the Company and Chartwell (the "Merger Agreement").
"Non-Recourse Indebtedness" means Indebtedness as to which
neither the Company nor any of its Restricted Subsidiaries (a) provides credit
support (including any undertaking, agreement or instrument that would
constitute Indebtedness), unless the incurrence of such Indebtedness would
have otherwise been permitted hereunder, (b) is directly or indirectly liable,
unless the incurrence of such Indebtedness would have otherwise been permitted
hereunder, or (c) constitutes the lender.
"Officer" means, with respect to the Company, the chairman of
the board of directors, the president or chief executive officer, any vice
president, the chief financial officer, the treasurer or any assistant
treasurer, or the secretary or any assistant secretary.
"Officers' Certificate" means a certificate signed in the name
of the Company by the Chairman of the Board of Directors or the President or
any Vice President and by the Chief Financial Officer, Treasurer or the
Secretary or any Assistant Secretary of the Company and delivered to the
Trustee. Each such certificate shall comply with Section 314 of the Trust
Indenture Act of 1939 to the extent applicable and include the statements
provided for in Section 11.4, if and to the extent required thereby.
"Opinion of Counsel" means an opinion in writing signed by
legal counsel who may be an employee of or counsel to the Company or who may
be other counsel satisfactory to the Trustee. Each such opinion shall comply
with Section 314 of the Trust Indenture Act and include the statements
provided for in Section 11.4, if and to the extent required thereby.
"Payment Amount" means the sum of (i) the Fixed Amount, (ii)
the Contingent Amount and (iii) to the extent applicable, any Extension
Interest.
"Permitted Liens" means:
(a) Liens securing Indebtedness of the Company with respect to
any revolving credit facility not exceeding $10.0 million in
principal amount in the aggregate at any one time outstanding
(exclusive of any Lien permitted by any other clause of this
definition); provided that such $10.0 million shall be reduced to the
extent that any Indebtedness shall have been incurred and shall be
outstanding under clause (ix) of the definition of "Permitted
Subsidiary Indebtedness";
(b) Liens in favor of the Company or any Restricted Subsidiary;
(c) Liens on shares of capital stock or property of a Person
existing at the time such Person is acquired by or merged into or
consolidated with the Company or any Restricted Subsidiary of the
Company, provided that such Liens were not incurred in connection
with, or in contemplation of, such merger or consolidation and such
Liens do not extend to any assets of the Company or any of its
Restricted Subsidiaries other than the shares or assets of the Person
so acquired by, merged into or consolidated with the Company or such
Restricted Subsidiary;
(d) Liens on property existing at the time of acquisition
thereof by the Company or any Restricted Subsidiary of the Company;
provided that such Liens were not incurred in connection with, or in
contemplation of, such acquisition and do not extend to any assets of
the Company or any of its Restricted Subsidiaries other than the
property so acquired;
(e) Liens to secure the performance of statutory obligations,
surety or appeal bonds or performance bonds, or landlords',
carriers', warehousemen's, mechanics', suppliers', materialmen's or
other like Liens, in any case incurred in the ordinary course of
business and with respect to amounts not yet delinquent or being
contested in good faith by appropriate process of law, if a reserve
or other appropriate provision, if any, as is required by GAAP shall
have been made therefor;
(f) Liens existing on the date of the Merger;
(g) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and
diligently concluded; provided that any reserve or other appropriate
provision as shall be required in conformity with GAAP shall have
been made therefor;
(h) Liens with respect to obligations under Currency Agreements
or Interest Swap Obligations permitted under the Indenture;
(i) Liens to secure any extension, renewal, substitution,
refinancing or replacement (or successive extensions, renewal,
substitution, refinancing or replacements), in whole or in part, of
any Indebtedness secured by Liens referred to in any of clauses (a),
(c), (d), (f), (j), (k) and (l); provided that any such Lien shall be
limited to the same property that secured the original Lien and the
aggregate principal amount of Indebtedness that is secured by such
Lien shall not be increased to an amount greater than the outstanding
aggregate principal amount of the Indebtedness being so extended,
renewed, substituted, refinanced or replaced (plus any premium and
expenses incurred in connection therewith);
(j) Liens securing Indebtedness incurred to finance the
construction or purchase of, or repairs, improvements or additions
to, property of the Company; provided that (i) any such Lien may not
extend to any other property owned by the Company or any of its
Restricted Subsidiaries, (ii) such Lien is created prior to, at the
time of or within 90 days after such construction, purchase, repair,
improvement or addition is completed and (iii) the principal amount
of the Indebtedness secured by such Lien does not exceed 100% of the
fair market cost of such construction, purchase, repair, improvement
or addition;
(k) Liens securing Indebtedness of a Restricted Subsidiary
permitted to be incurred under this Indenture or any guarantee by the
Company thereof; and
(l) Liens securing Indebtedness of the Company provided, that
at the date that any such Lien is created or incurred (on a pro forma
basis), the ratio of (x) Senior Indebtedness to (y) Consolidated Net
Worth of the Company does not exceed 0.9 to 1.
"Permitted Subsidiary Indebtedness" means:
(i) Indebtedness of any Restricted Subsidiary outstanding on
the date of the Merger;
(ii) Acquired Indebtedness of any Restricted Subsidiary;
(iii) Indebtedness of any Restricted Subsidiary issued to or
held by the Company or a Wholly-Owned Restricted Subsidiary of the
Company;
(iv) (A) Interest Swap Obligations of any Restricted
Subsidiary, the notional amount of which obligations do not exceed
the aggregate principal amount of the Indebtedness they are designed
to protect and (B) obligations pursuant to Currency Agreements
entered into by any Restricted Subsidiary in respect of its (x)
assets or (y) obligations, as the case may be, that are denominated
in a currency other than U.S. dollars;
(v) Guaranteed Debt of a Restricted Subsidiary in respect of
Indebtedness of any other Restricted Subsidiary permitted to be
incurred by such other Subsidiary under this Indenture;
(vi) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar
obligations, or from Guaranteed Debt or letters of credit, surety
bonds or performance bonds securing any obligations of the Company
or any Restricted Subsidiary pursuant to such agreements, in any
case Incurred in connection with the disposition of any business,
assets or Restricted Subsidiary of the Company, other than
guarantees of Indebtedness incurred by any Person acquiring all or
any portion of such business, assets or Restricted Subsidiary for
the purpose of financing such acquisition; provided that the
maximum aggregate liability in respect of all such Indebtedness in
the nature of such guarantee shall at no time exceed the gross
proceeds actually received from the sale of such business, assets
or Restricted Subsidiary;
(vii) Indebtedness under performance, surety or appeal bonds;
provided that such performance, surety or appeal bonds are furnished
in the ordinary course of any Restricted Subsidiary's insurance or
reinsurance business;
(viii) Any renewals, extensions, substitutions, refinancings
or replacements by any Restricted Subsidiary of any Indebtedness of a
Restricted Subsidiary permitted under this Indenture, including any
successive renewals, extensions, substitutions, refinancings or
replacements thereof so long as any such new Indebtedness (A) shall
be in a principal amount that does not exceed the principal amount so
refinanced, plus the amount of any premium required to be paid in
connection with such refinancing pursuant to the terms of the
Indebtedness refinanced or the amount of any premium reasonably
determined by the Company as necessary to accomplish such
refinancing, plus the amount of expenses incurred in connection with
such refinancing and (B) (x) in the case of Indebtedness being
refinanced which has an Average Life shorter than the Securities,
such renewal, extension, substitution, refinancing or replacement
does not reduce the Average Life or the final Stated Maturity of the
principal of such Indebtedness and (y) in all other cases, any such
new Indebtedness has an Average Life and final Stated Maturity that
exceeds the Average Life and final Stated Maturity of the Securities;
provided that for purposes of this clause (viii), the principal
amount of any Indebtedness shall be deemed to mean the principal
amount thereof or, if such Indebtedness provides for an amount less
than the principal amount thereof to be due and payable upon a
declaration of acceleration thereof, such lesser amount as of the
date of determination; and
(ix) Indebtedness under any revolving credit facility of up to
but not in excess of an aggregate principal amount outstanding at any
one time of $10.0 million; provided that there is a period of 30
consecutive days in each calendar year during which no such
Indebtedness is outstanding; and provided further that such $10.0
million shall be reduced to the extent of any Indebtedness secured by
Liens created or incurred under clause (a) of the definition of
"Permitted Liens".
"Person" means any individual, corporation, limited or general
partnership, limited liability company, joint venture, association, joint
stock company, trust, fund, unincorporated organization or government or any
agency or political subdivision thereof.
"Principal Amount" means, with respect to the Securities, in
the aggregate, $1,000,000.
"Principal Restricted Insurance Subsidiary" means (i) Chartwell
Reinsurance; (ii) RECO; (iii) any other insurance company Restricted
Subsidiary of the Company that becomes a "significant subsidiary" as defined
in Regulation S-X, as promulgated by the Commission; and (iv) any other
Subsidiary of the Company that may succeed, by merger, consolidation or
otherwise, to all or substantially all of the business of one or more of such
persons specified in (i), (ii) and (iii) above.
"pro rata" means, with respect to any Security, the ratio of
the principal amount of such Security to the aggregate principal amount of the
Securities.
"Protected Business" has the meaning set forth in Exhibit B.
"RECO" means The Reinsurance Corporation of New York, a New
York corporation.
"Redeemable Capital Stock" means any Capital Stock that, either
by its terms, by the terms of any security into which it is convertible or
exchangeable or otherwise, is or upon the happening of an event or passage of
time would be required to be redeemed on or prior to the final Stated Maturity
of the Securities or is redeemable at the option of the holder thereof at any
time prior to such final Stated Maturity, or is convertible into or
exchangeable for debt securities at any time prior to such final Stated
Maturity.
"Redemption Date" means the date fixed for optional redemption
of the Securities in accordance with Article 3 of the Indenture; provided that
such date shall be extended if and to the extent required by Section 2.13.
"Registered Common Stock" means Common Stock of the Company
registered under the Securities Act of 1933, as amended (or other Common Stock
of the Company that is freely tradeable (other than by affiliates (within the
meaning of Rule 144 under the Securities Act) of the Company) without such
registration; provided that in connection with the settlement of the Payment
Amount due under the Securities in Common Stock without such registration, an
unqualified opinion of a nationally recognized law firm experienced in
securities law matters is delivered by the Company to the Trustee to such
effect).
"Responsible Officer" when used with respect to the Trustee
means the chairman of the board of directors, any vice chairman of the board
of directors, the chairman of the trust committee, the chairman of the
executive committee, any vice chairman of the executive committee, the
president, any vice president (whether or not designated by numbers or words
added before or after the title "vice president"), the cashier, the secretary,
the treasurer, any trust officer, any assistant trust officer, any assistant
vice president, any assistant cashier, any assistant secretary, any assistant
treasurer, or any other officer or assistant officer of the Trustee
customarily performing functions similar to those performed by the persons who
at the time shall be such officers, respectively, or to whom any corporate
trust matter is referred because of his knowledge of and familiarity with the
particular subject.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Securities Act" means the Securities Act of 1933, as amended.
"Security" or "Securities" means any Contingent Interest Note
Due June 30, 2006 authenticated and delivered under this Indenture.
"Senior Indebtedness" means, without duplication, Indebtedness
of all Restricted Subsidiaries of the Company plus any Indebtedness of the
Company to the extent secured by Liens created or incurred under clauses (a),
(c), (d), (f), (i), (j) and (l) of the definition of "Permitted Liens".
"Settlement Date" means each of the Maturity Date; the
Redemption Date; a Change of Control Purchase Date; 165 days after the date of
any acceleration of the Securities pursuant to Section 6.2 (unless an earlier
Settlement Date shall occur within such 165 day period, in which case, such
Settlement Date shall be such earlier Settlement Date or if such acceleration
occurs as a result of an Event of Default specified in clause (c) or (d) of
Section 6.1, such Settlement Date shall be the date of such Event of Default);
and in the case of an Event of Default pursuant to Section 6.1(a), other than
any acceleration as a result of an Event of Default specified in clause (c) or
(d) of Section 6.1(a), the Settlement Date relating to the Trigger Date next
preceding such Event of Default.
"Stated Maturity" means, when used with respect to any
Indebtedness or any installment of principal or of interest thereon, the date
specified in such Indebtedness as the fixed date on which the principal of
such Indebtedness or such installment of principal or of interest is due and
payable.
"Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which more than 50% of
the outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
"Tax Benefit" has the meaning set forth in Exhibit B.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as
in force at the date as of which this Indenture was originally executed.
"Trustee" means the entity identified as "Trustee" in the first
paragraph hereof and shall also include any successor trustee.
"Unrestricted Subsidiary" means (i) any Subsidiary that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant
to a Board Resolution; but only to the extent that such Subsidiary: (a) is
designated an Unrestricted Subsidiary prior to formation, creation or
acquisition; (b) except in the case of any newly acquired Subsidiary, has
total assets at the time of formation or creation with a fair market value
not exceeding $1,000; (c) has no Indebtedness other than Non-Recourse
Indebtedness; (d) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted
Subsidiary than those that might be obtained at the time from Persons who
are not Affiliates of the Company; and (e) is a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any
direct or indirect obligation (x) to subscribe for additional Capital Stock
or (y) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results.
Any such designation by the Board of Directors shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the Board Resolution
giving effect to such designation and an Officers' Certificate certifying
that such designation complied with the foregoing conditions. If, at any
time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be
an Unrestricted Subsidiary for purposes of the Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a
Restricted Subsidiary of the Company as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under the
covenant entitled "Limitation on Indebtedness," the Company shall be in
default of such covenant). The Board of Directors of the Company may at
any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that such designation shall be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of the Company of any
outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted
under the covenant entitled "Limitation on Indebtedness," and (ii) no
default or Event of Default would be in existence following such
designation.
"Voting Stock" means stock of the class or classes pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of a corporation (irrespective of whether or not at the time stock
of any other class or classes shall have or might have voting power by reason
of the happening of any contingency).
"Wholly-Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other equity ownership interests of which (other than directors' qualifying
shares) shall at the time be owned by such Person or by one or more
Wholly-Owned Restricted Subsidiaries of such Person.
SECTION 1.2 Other Definitions. Each of the following
terms is defined in the section set forth opposite such term:
Term Section
____ _______
Arbitration Cost 10.5
Authenticating Agent 2.2
cash transaction 7.3
Change of Control Offer 4.6
Change of Control Purchase Date 4.6
Change of Control Purchase Notice 4.6
Change of Control Purchase Price 4.6
Event of Default 6.1
Existing Records 4.2
Extension Interest 2.13
Fair Value 10.7
finally determined 2.13
Holder Actuary Cost 10.2
Independent Actuary 10.5
Judgment Currency 11.14
Paying Agent 2.5
record date 2.4
Registrar 2.5
Registration Rights 10.7
Report Date 10.6
Required Currency 11.14
Reserve Report 10.4
Security Register 2.5
self-liquidating paper 7.3
Surviving Entity 5.1
Trigger Date 10.4.
In addition, certain terms relating to the definition and
calculation of the Contingent Amount are defined in Exhibit B attached to the
Indenture.
SECTION 1.3 Incorporation by Reference of Trust Indenture
Act. Whenever this Indenture or any supplemental indenture refers to a
provision of the Trust Indenture Act, the provision is incorporated by
reference in and made a part of this Indenture or such supplemental indenture.
The following terms used in this Indenture or any supplemental indenture that
are defined by the Trust Indenture Act have the following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder or a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the indenture securities means the Company or any
other obligor on the Securities.
All other terms used in this Indenture or any supplemental
indenture that are defined by the Trust Indenture Act, defined by reference in
the Trust Indenture Act to another statute or defined by a rule of the
Commission and not otherwise defined herein have the meanings assigned to them
therein unless the context otherwise requires.
SECTION 1.4 Rules of Construction. Unless the context
otherwise requires in this Indenture or any supplemental indenture:
(i) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(ii) words in the singular include the plural, and words in
the plural include the singular;
(iii) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision;
(iv) all references to Sections or Articles refer to Sections
or Articles of this Indenture unless otherwise indicated; and
(v) use of masculine, feminine or neuter pronouns should not
be deemed a limitation, and the use of any such pronouns should be
construed to include, where appropriate, the other pronouns.
ARTICLE 2
THE SECURITIES
SECTION 2.1 Form and Dating. The Securities and
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A, which is hereby incorporated in and expressly made a part of this
Indenture, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture and may have
imprinted or otherwise reproduced thereon such legend or legends or
endorsements, not inconsistent with the provisions of this Indenture, as may
be required to comply with any law, or with any rules of any securities
exchange or usage, all as may be determined by the officers executing such
Securities as evidenced by their execution of the Securities.
SECTION 2.2 Execution and Authentication. Two Officers
shall execute the Securities for the Company by facsimile or manual signature
in the name and on behalf of the Company. The seal of the Company, if any,
shall be reproduced on the Securities. If an Officer whose signature is on a
Security no longer holds that office at the time the Security is
authenticated, the Security shall nevertheless be valid.
The Trustee, at the expense of the Company, may appoint an
authenticating agent (the "Authenticating Agent") to authenticate Securities.
The Authenticating Agent may authenticate Securities whenever the Trustee may
do so. Each reference in this Indenture to authentication by the Trustee
includes authentication by such Authenticating Agent.
A Security shall not be valid until the Trustee or
Authenticating Agent manually signs the certificate of authentication on the
Security. The signature shall be conclusive evidence that the Security has
been authenticated under this Indenture.
SECTION 2.3 Amount Limited. Subject to Section 2.8, the
aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is limited to $1,000,000 plus interest
accreting thereon from the Issue Date as provided herein at a rate of 8.0% per
annum, compounded annually. The Securities are general unsecured obligations
of the Company and shall rank equally and pari passu with all other unsecured
and unsubordinated debt of the Company.
SECTION 2.4 Denomination and Date of Securities; Payments
of Interest. The Securities shall be issuable as registered Securities in
denominations as the Company and the Trustee shall from time to time
determine; provided that in no event shall the minimum denomination exceed
$1,000.
Each Security shall be dated the date of its authentication.
The principal amount of the Securities shall bear interest from the date, and
such interest shall be payable on the date, as set forth herein or in the
Security.
SECTION 2.5 Registrar and Paying Agent; Agents Generally.
The Company shall maintain an office or agency where Securities may be
presented for registration, registration of transfer or for exchange (the
"Registrar") and an office or agency where Securities may be presented for
payment (the "Paying Agent"), which shall be in the Borough of Manhattan,
The City of New York. The Company shall cause the Registrar to keep a
register of the Securities and of their registration, transfer and exchange
(the "Security Register"). No transfer of a Security shall be registered
unless such transfer was permitted under Section 2.7. The Company or the
Trustee may require any Person requesting such registration to present
appropriate evidence establishing the compliance of such transfer with
Section 2.7 before permitting such registration of transfer. The Company
may have one or more additional Paying Agents or transfer agents with
respect to the Securities.
The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture. The agreement shall implement
the provisions of this Indenture and the Trust Indenture Act that relate to
such Agent. The Company shall give prompt written notice to the Trustee of
the name and address of any Agent and any change in the name or address of an
Agent. If the Company fails to maintain a Registrar or Paying Agent, the
Trustee shall act as such. The Company may remove any Agent upon written
notice to such Agent and the Trustee; provided that no such removal shall
become effective until (i) the acceptance of an appointment by a successor
Agent to such Agent as evidenced by an appropriate agency agreement entered
into by the Company and such successor Agent and delivered to the Trustee or
(ii) notification to the Trustee that the Trustee shall serve as such Agent
until the appointment of a successor Agent in accordance with clause (i) of
this proviso. The Company or any affiliate of the Company may act as Paying
Agent or Registrar.
The Company initially appoints the Trustee as Registrar, Paying
Agent and Authenticating Agent. If, at any time, the Trustee is not the
Registrar, the Registrar shall make available to the Trustee ten days prior to
each Settlement Date and at such other times as the Trustee may reasonably
request the names and addresses of the Holders as they appear in the Security
Register.
SECTION 2.6 Paying Agent to Hold Money in Trust. Not
later than 10:00 a.m. New York City time on each due date of any amount due
with respect to the Securities, the Company shall deposit with the Paying
Agent money in immediately available funds (or as provided in Section 10.7,
shares of Registered Common Stock and cash in lieu of fractional shares)
sufficient to pay or satisfy such amount. The Company shall require each
Paying Agent other than the Trustee to agree in writing that such Paying Agent
shall hold in trust for the benefit of the Holders of such Securities or the
Trustee all money or securities held by the Paying Agent for the payment of
any amount due with respect to the Securities and shall promptly notify the
Trustee of any default by the Company in making any such payment. The Company
at any time may require a Paying Agent to pay all money or securities held by
it to the Trustee and account for any funds or securities disbursed, and the
Trustee may at any time during the continuance of any payment default, upon
written request to a Paying Agent, require such Paying Agent to pay all money
or securities held by it to the Trustee and to account for any funds or
securities disbursed. Upon doing so, the Paying Agent shall have no further
liability for the money or securities so paid over to the Trustee. If the
Company or any affiliate of the Company acts as Paying Agent, it will, on or
before each due date of any amount due with respect to the Securities,
segregate and hold in a separate trust fund for the benefit of the Holders
thereof a sum of money (or Registered Common Stock and cash in lieu of any
fractional shares) sufficient to pay such amount so becoming due until such
sum of money (or Registered Common Stock and cash in lieu of fractional
shares) shall be paid to such Holders or otherwise disposed of as provided in
this Indenture, and will promptly notify the Trustee in writing of its action
or failure to act as required by this Section.
SECTION 2.7 Transfer Restrictions; Transfer and Exchange.
Subject to compliance with the Securities Act, any Security may be transferred
without restriction of any kind during the period beginning on the Issue Date
and ending ninety (90) days from the Issue Date. After such ninety (90) day
period, none of the Securities shall be transferred or assigned, except that
Securities may be transferred, subject to compliance with the Securities Act,
and any other applicable law, by a Holder at any time:
(a) to any Affiliate of such Holder;
(b) to a trust, the beneficiaries of which, or a corporation,
limited liability company or partnership, at least 80% of
the stockholders, members or general or limited partners
of which, are such Holder or his or her issue, adopted
issue, stepchild, parent, spouse or other lineal
descendants;
(c) by will or the laws of descent and distribution;
(d) to the heirs, executors, administrators, testamentary
trustees, legatees or beneficiaries of such Holder;
(e) by gift without consideration of any kind;
(f) to any entity owning, at the time of transfer, any of the
Securities;
(g) to any entity offering to acquire, by tender offer or
otherwise, at least 25% of the Securities then
outstanding; or
(h) to the Company;
provided that in the case of any transfer pursuant to subsection (f) or (g)
above, any such transfer shall only be permitted during the period of (i) 60
days commencing April 1, 1999; (ii) 90 days prior to any Settlement Date; and
(iii) at any time after an acceleration of the Securities pursuant to Section
6.2.
At the option of the Holder thereof, Securities may be
exchanged for a Security or Securities having authorized denominations and an
equal aggregate Principal Amount as such Securities to be exchanged. Any such
exchange shall occur by the surrender of such Securities to be exchanged at
the agency of the Company that shall be maintained for such purpose in
accordance with Section 2.5 and upon payment, if the Company shall so require,
of the charges hereinafter provided. Whenever any Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange
is entitled to receive.
All Securities presented for registration of transfer,
exchange, redemption or payment shall be duly endorsed by, or be accompanied
by a written instrument or instruments of transfer in form satisfactory to the
Company and the Trustee duly executed by, the holder or his attorney duly
authorized in writing.
The Company may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with
any exchange or registration of transfer of Securities. No service charge
shall be made for any such transaction.
All Securities issued upon any transfer or exchange of
Securities shall be valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such transfer or exchange.
SECTION 2.8 Replacement Securities. If a defaced or
mutilated Security is surrendered to the Trustee or if a Holder claims that
its Security has been lost, destroyed or wrongfully taken, the Company shall
issue and the Trustee shall authenticate a replacement Security bearing a
number not contemporaneously outstanding. If required by the Trustee or the
Company, an indemnity bond must be furnished that is sufficient in the
judgment of both the Trustee and the Company to protect the Company, the
Trustee and any Agent from any loss that any of them may suffer if a Security
is replaced. The Company may charge such Holder for its reasonable expenses
and the reasonable expenses of the Trustee (including without limitation
attorneys' fees and expenses) in replacing a Security. In case any such
mutilated, defaced, lost, destroyed or wrongfully taken Security has become or
is about to become due and payable, the Company in its discretion may pay such
Security instead of issuing a new Security in replacement thereof.
Every replacement Security is an additional obligation of the
Company and shall be entitled to the benefits of this Indenture.
To the extent permitted by law, the foregoing provisions of
this Section are exclusive with respect to the replacement or payment of
mutilated, destroyed, lost or wrongfully taken Securities.
SECTION 2.9 Outstanding Securities. Securities
outstanding at any time are all Securities that have been authenticated by the
Trustee except for those canceled by it, those delivered to it for
cancellation and those described in this Section as not outstanding.
If a Security is replaced pursuant to Section 2.8, it ceases to
be outstanding unless and until the Trustee and the Company receive proof
satisfactory to them that the replaced Security is held by a holder in due
course.
If the Paying Agent (other than the Company or an affiliate of
the Company) holds on the maturity date or any redemption date or date for
repurchase of the Securities money sufficient (or Registered Common Stock and
cash in lieu of any fractional shares) to pay Securities payable or to be
redeemed or repurchased on that date, then on and after that date such
Securities cease to be outstanding and interest on them shall cease to accrue.
A Security does not cease to be outstanding because the Company
or one of its affiliates holds such Security, provided that, in determining
whether the Holders of the requisite Principal Amount of the outstanding
Securities have given any request, demand, authorization, direction, notice,
consent or waiver hereunder, Securities owned by the Company or any affiliate
of the Company shall be disregarded and deemed not to be outstanding, except
that, in determining whether the Trustee shall be protected in relying upon
any such request, demand, authorization, direction, notice, consent or waiver,
only Securities as to which a Responsible Officer of the Trustee has received
written notice to be so owned shall be so disregarded. Any Securities so
owned which are pledged by the Company, or by any affiliate of the Company, as
security for loans or other obligations, otherwise than to another such
affiliate of the Company, shall be deemed to be outstanding, if the pledgee
is entitled pursuant to the terms of its pledge agreement and is free to
exercise in its or his discretion the right to vote such Securities,
uncontrolled by the Company or by any such affiliate.
SECTION 2.10 Temporary Securities. Until definitive
Securities are ready for delivery, the Company may prepare and the Trustee
shall authenticate temporary Securities. Temporary Securities shall be
substantially in the form of definitive Securities but may have insertions,
substitutions, omissions and other variations determined to be appropriate by
the Officers executing the temporary Securities, as evidenced by their
execution of such temporary Securities. If temporary Securities are issued,
the Company will cause definitive Securities to be prepared without
unreasonable delay. After the preparation of definitive Securities, the
temporary Securities shall be exchangeable for definitive Securities upon
surrender of such temporary Securities at the office or agency of the Company
designated for such purpose pursuant to Section 4.2, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like Principal Amount of definitive Securities.
Until so exchanged, the temporary Securities shall be entitled to the same
benefits under this Indenture as definitive Securities.
SECTION 2.11 Cancellation. The Company at any time may
deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company may have acquired in
any manner whatsoever, and may deliver to the Trustee for cancellation any
Securities previously authenticated hereunder which the Company has not issued
and sold. The Registrar, any transfer agent and the Paying Agent shall
forward to the Trustee any Securities surrendered to them for transfer,
exchange or payment. The Trustee shall cancel and destroy all Securities
surrendered for transfer, exchange, payment or cancellation and shall deliver
a certificate of destruction to the Company. The Company may not issue new
Securities to replace Securities it has paid in full or delivered to the
Trustee for cancellation.
SECTION 2.12 CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" and "CINS" numbers (if then generally in use), and
the Trustee shall use CUSIP numbers or CINS numbers, as the case may be, in
notices of redemption or exchange as a convenience to Holders and no
representation shall be made as to the correctness of such numbers either as
printed on the Securities or as contained in any notice of redemption or
exchange.
SECTION 2.13 Limited Extension of Settlement Date. Except
in the event of acceleration of the Securities pursuant to Section 6.2, in the
event that, despite the best efforts of the Company, (i) any of the Company,
the Holder Actuary, the Independent Actuary or any accounting firm is unable
to perform in a timely manner its responsibilities hereunder with respect to
the calculation of the Contingent Amount, and as a result such amount has not
been finally determined as of any Settlement Date, or (ii) the Commission or
any other regulatory authority has not provided any consent or approval needed
in connection with the settlement of the Securities on or prior to the
Settlement Date (including any such consent or approval necessary in order to
permit the Company to settle the Securities in Registered Common Stock
pursuant to Section 10.7), then, in any such case, the Settlement Date shall
be automatically extended until the earlier of (x) the second Business Day
after the date on which the Contingent Amount has been finally determined or
such consent or approval has been obtained, as applicable, and (y) 180 days
from the Settlement Date. For these purposes, the Contingent Amount shall be
"finally determined" on the date that the Contingent Amount has been
determined pursuant to either Subsection 10.4(d) or Subsection 10.5(b) of this
Indenture. The Holders of the Securities shall be entitled to receive
interest ("Extension Interest") on the sum of the Fixed Amount and the
Contingent Amount in respect of any such extension at an interest rate per
annum, compounded annually, equal to (i) 8% for the first 60 days of any such
extension; (ii) 10% for 61 to 120 days of any such extension; and (iii) 12%
for 121 to 180 days of any such extension. Extension Interest may be settled
in Registered Common Stock to the extent permitted by Section 10.7. In the
event that payment of amounts due with respect to the Securities shall not
have been made within 180 days from the Settlement Date or following
acceleration of the Securities upon any Event of Default, Extension Interest
on the sum of the Fixed Amount and the Contingent Amount shall accrue at the
rate of 12% per annum, compounded annually.
ARTICLE 3
REDEMPTION
SECTION 3.1 Notices. If the Company elects to redeem
Securities pursuant to the optional redemption provisions of Section 3.6
hereof, it shall furnish to the Trustee and the Holder Actuary, at least 180
days but not more than 190 days before a Redemption Date, an Officers'
Certificate setting forth (i) the Section of this Indenture pursuant to which
the redemption shall occur and (ii) the Redemption Date. In addition,
promptly following determination of the Contingent Amount pursuant to Article
10, the Company shall notify the Holder Actuary and Trustee of the redemption
price.
SECTION 3.2 Notice of Redemption. At least 140 days but
not more than 150 days before a Redemption Date, the Company shall mail or
cause to be mailed, by first class mail, a notice of redemption to each Holder
whose Securities are to be redeemed at its registered address.
The notice shall identify the Securities to be redeemed and
shall state:
(a) the Redemption Date;
(b) the redemption price (including accrued interest to the
Redemption Date); provided that if at the time of such
notice the Contingent Amount has not yet been determined,
the Company shall separately mail or cause to be mailed a
notice to each Holder of the redemption price promptly
following determination of the Contingent Amount;
(c) if Securities are to be settled in Registered Common
Stock pursuant to Section 10.7, that delivery of such
Stock will occur in lieu of payment in cash; provided
that such notice may state that such delivery is subject
to obtaining all necessary regulatory consents and
approvals;
(d) the name and address of the Paying Agent;
(e) that Securities called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such
redemption payment, interest on Securities called for
redemption ceases to accrue on and after the Redemption
Date;
(g) the paragraph of the Securities and/or Section of this
Indenture pursuant to which the Securities called for
redemption are being redeemed; and
(h) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such
notice or printed on the Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided that the Company
shall have delivered to the Trustee, at least 165 days prior to the Redemption
Date, an Officers' Certificate requesting that the Trustee give such notice
and setting forth the information to be stated in such notice as provided in
the preceding paragraph.
SECTION 3.3 Effect of Notice of Redemption. Once the
Officers' Certificate is furnished to the Trustee and Holder Actuary pursuant
to Section 3.1 of the Indenture, Securities called for redemption become
irrevocably due and payable on the Redemption Date at the redemption price. A
notice of redemption may not be conditional.
SECTION 3.4 Deposit of Redemption or Purchase Price.
With respect to any Redemption Date or Change of Control Purchase Date (as
defined in Section 4.6), the Company shall deposit with the Paying Agent money
(or Registered Common Stock and cash in lieu of any fractional shares) in
accordance with Section 2.6 of the Indenture. The Trustee or the Paying Agent
shall promptly return to the Company any money (or Registered Common Stock)
deposited with the Trustee or the Paying Agent by the Company in excess of the
amounts necessary to pay the redemption or purchase price of, and accrued
interest on, all Securities to be redeemed or purchased.
If Securities called for redemption or tendered in a Change of
Control Offer are paid or if the Company has deposited with the Paying Agent
money (or Registered Common Stock) sufficient to pay the redemption or
purchase price of, and unpaid and accrued interest, if any, on all Securities
to be redeemed or purchased on the Redemption Date or Change of Control
Purchase Date, interest shall cease to accrue on the Securities or the
portions of Securities called for redemption or tendered and not withdrawn in
a Change of Control Offer (regardless of whether certificates for such
securities are actually surrendered), and the only remaining right of the
Holder with respect to such Security or portion thereof shall be to receive
such payment upon proper presentation and surrender of the Securities. If any
Security called for redemption or subject to a Change of Control Offer shall
not be so paid upon surrender for redemption or purchase because of the
failure of the Company to comply with the preceding paragraph, interest shall
be paid from the Redemption Date or Change of Control Purchase Date until paid
at the rate provided in Section 2.13 hereof.
SECTION 3.5 No Securities Redeemed or Purchased in Part.
The Company shall not redeem or purchase less than all of any Security.
SECTION 3.6 Optional Redemption. The Securities shall
not be redeemable at the Company's option prior to the third anniversary of
the Issue Date. Thereafter, the Securities shall be subject to redemption at
the option of the Company, in whole but not in part, upon notice given
pursuant to Section 3.1 of the Indenture, at 100% of the Payment Amount.
SECTION 3.7 Mandatory Redemption. Except as set forth
below under Section 4.6, the Company shall not be required to make mandatory
redemption or sinking fund payments with respect to the Securities.
ARTICLE 4
COVENANTS
SECTION 4.1 Payment of Securities. The Company will duly
and punctually pay any and all amounts due under the Securities in accordance
with the terms of the Securities and this Indenture. Amounts due under this
Indenture shall be considered paid on the date due if the Paying Agent holds
on that date money sufficient, or subject to Section 10.7, Registered Common
Stock and cash in lieu of any fractional shares sufficient, to pay or satisfy
all amounts then due.
The Company shall pay interest on overdue amounts, including,
to the extent lawful, interest on overdue interest, at the applicable rate per
annum set forth in Section 2.13.
SECTION 4.2 Maintenance of Records; Compliance with Laws;
Access and Cooperation. (a) The Company shall and shall cause each
Subsidiary to keep proper and true books of record and account, in which full
and correct entries shall be made of all financial transactions and the assets
and business of the Company and each Subsidiary.
(b) The Company shall and shall cause each of its Subsidiaries
to comply with all statutes, laws, ordinances or government rules and
regulations to which it is subject, except where a failure to do so, singly or
in the aggregate is not likely to have a materially adverse effect upon the
business, prospects, assets or condition (financial or otherwise) or results
of operations of the Company and its Subsidiaries taken as a whole.
(c) The Company shall cause RECO to maintain the books and
records with respect to Protected Business in sufficient detail and consistent
with the level of detail contained in the books and records of RECO in
existence on the Issue Date (the "Existing Records"). In preparing such books
and records, the Company shall cause RECO to maintain records by class of
business consistent with the Existing Records. The Company agrees to allow
the Holder Actuary and Independent Actuary, if any, (and associated agents and
accounting firms) reasonable access, during normal business hours, to the
books and records (including tax returns, statements, reports, forms, claim
files, and related documentation) and personnel of the Company, including
Chartwell Reinsurance and RECO, during the period that the Securities are
outstanding. With respect to the Holder Actuary, prior to its review in
connection with preparing the Holder Actuary's Reserve Report, such access
shall be provided only during a limited period during each year as shall be
reasonable and adequate to review the annual reports referred to in Section
10.6 and to review the Company's compliance during the previous year with the
matters referred to under Section 10.6. The Company agrees that such access
will be designed to assure that the Holder Actuary will obtain full and
adequate information regarding the adjustment, settlement and/or defense of
any claims, disputes or other matters arising out of the Protected Business.
(d) The Company agrees to act, and to cause RECO to act, in a
commercially reasonable manner (i) in the investigation, adjustment,
settlement or defense of any claims, disputes or other matters arising out of
Protected Business and (ii) in deciding whether or not, and on what terms, any
insurance or reinsurance contracts to the extent constituting Protected
Business should be commuted. Protected Business may be commuted by the
Company and its Subsidiaries in the ordinary course of business; provided that
the Company shall not permit RECO to commute any treaty or group of treaties
with a single issuer involving a payment of $1,500,000 or more unless such
commutation has been approved in writing by the Holder Actuary, such approval
not to be unreasonably withheld. The Holder Actuary shall respond to any
commutation request within a reasonable period of time taking into account the
facts and circumstances involved. If the Holder Actuary fails to so respond,
the Holder Actuary shall be deemed to have consented to such commutation.
SECTION 4.3 Reports by the Company. The Company
covenants to file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual reports
and of the information, documents, and other reports which the Company may be
required to file with the Commission pursuant to Section 13 or Section 15(d)
of the Exchange Act.
SECTION 4.4 Maintenance of Office or Agency. The Company
will maintain in the Borough of Manhattan, The City of New York, an office or
agency where Securities may be surrendered for registration of transfer or
exchange or for presentation for payment and where notices and demands to or
upon the Company in respect of the Securities and this Indenture may be
served. The Company hereby initially designates the Corporate Trust Office of
the Trustee, located in the Borough of Manhattan, The City of New York, as
such office or agency of the Company. The Company will give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be
made or served at the address of the Trustee set forth in Section 11.2.
The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; provided that no such designation or rescission shall in any
manner relieve the Company of its obligation to maintain an office or agency
in the Borough of Manhattan, The City of New York for such purposes. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
SECTION 4.5 Negative Pledge. The Company shall not, and
shall not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume or suffer to exist any Lien securing
Indebtedness of the Company (other than Permitted Liens) on any property or
asset now owned or hereafter acquired, or on any income or profits therefrom,
or assign or convey any right to receive income therefrom, unless all amounts
due under the Indenture and the Securities are secured on an equal and ratable
basis with (or prior to) the obligations so secured until such time as such
obligations are no longer secured by a Lien.
SECTION 4.6 Purchase of Securities upon a Change of
Control. (a) If there shall have occurred a Change of Control, the Company
shall make an offer (a "Change of Control Offer") to each Holder of Securities
to repurchase all, but not less than all, of such Holder's Securities at a
purchase price equal to 100% of the Payment Amount, on a pro rata basis (the
"Change of Control Purchase Price").
(b) Within 15 days following the date on which the Change of
Control occurs, the Company shall mail a notice to each Holder of Securities
stating:
(1) that a Change of Control Offer is being made pursuant to
Section 4.6 of the Indenture and that all Securities properly
tendered will be accepted for payment;
(2) the purchase price (if then determined) and the purchase
date, which shall be (i) no earlier than 180 days nor later than 190
days from the date of such Change of Control or (ii) such later date
as may be necessary for the Company or to comply with requirements
under the Exchange Act (such date, or such later date, a "Change of
Control Purchase Date"; provided that any such date shall be extended
if and to the extent required by Section 2.13);
(3) that any Securities not properly tendered will continue to
remain outstanding in accordance with the terms of the Indenture;
(4) that, unless the Company defaults in the payment of the
Change of Control Purchase Price, all Securities accepted for payment
pursuant to a Change of Control Offer shall cease to accrue interest
after a Change of Control Purchase Date;
(5) the procedures a Holder of Securities must follow to
exercise rights under this Section 4.6 and a brief description of
those rights;
(6) if Securities are to be settled in Registered Common Stock
pursuant to Section 10.7, that delivery of such Stock will occur in
lieu of payment in cash; provided that such notice may state that
such delivery is subject to obtaining all necessary regulatory
consents and approvals; and
(7) that Holders of Securities will be entitled to withdraw
their election if the Paying Agent receives, not later than the close
of business on the third Business Day preceding the Change of Control
Purchase Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder and a statement that such Holder
is withdrawing his election to have such Securities purchased.
(c) A Holder may exercise its rights specified in Section
4.6(a) upon (1) delivery to any Paying Agent of a written notice (a "Change of
Control Purchase Notice") at any time prior to the close of business on the
third Business Day before the Change of Control Purchase Date, stating that
such Holder accepts the Company's offer to repurchase all of such Holder's
Securities and (2) delivery of such Securities to such Paying Agent at such
office prior to, on or after the Change of Control Purchase Date (together
with all necessary endorsements), such delivery being a condition to receipt
by the Holder of the Change of Control Purchase Price therefor. Each Paying
Agent shall promptly notify the Company of the receipt by the former of any
and all Change of Control Purchase Notices and any and all written notices of
withdrawal thereof.
(d) Upon receipt by any Paying Agent of a Change of Control
Purchase Notice, the Holder of the Security in respect of which such Change in
Control Purchase Notice was given shall thereafter be entitled to receive
solely the Change of Control Purchase Price with respect to such Security
(unless such Change of Control Purchase Notice is withdrawn pursuant to
Section 4.6(g)). Such Change of Control Purchase Price shall be paid to such
Holder promptly following the later of the Business Day following the Change
of Control Purchase Date (provided the conditions in Section 4.6(c) have been
satisfied) and the time of delivery of such Security to the relevant Paying
Agent at the office of such Paying Agent by the Holder thereof in the manner
required by Section 4.6(c).
(e) On or prior to the Change of Control Purchase Date, the
Company shall, to the extent lawful, (i) accept for payment all Securities
properly tendered pursuant to a Change of Control Offer and (ii) deposit with
the Trustee or with the Paying Agent money (or Registered Common Stock and
cash in lieu of any fractional shares) in accordance with Section 3.4 of this
Indenture.
(f) The Company shall comply with applicable tender offer
rules, including Rule 14e-1 under the Exchange Act, in connection with a
Change of Control Offer and may modify a Change of Control Offer to so comply.
The provisions of this Section 4.6 shall be deemed modified to the extent in
conflict with any applicable laws or regulations.
(g) A Change of Control Purchase Notice may be withdrawn
before or after delivery by the Holder to the relevant Paying Agent at the
office of such Paying Agent of the Security to which such Change of Control
Purchase Notice relates, by means of a written notice of withdrawal (by
telegram, telex, facsimile transmission or letter) received by such Paying
Agent at such office not later than three Business Days prior to the Change of
Control Purchase Date, specifying, as applicable:
(1) the name of such Holder and
(2) a statement that such Holder is withdrawing his election
to have such Securities purchased.
Each Paying Agent will promptly return to the prospective
Holders thereof any Securities with respect to which a Change of Control
Purchase Notice has been withdrawn in compliance with this Indenture.
SECTION 4.7 Limitation on Indebtedness. The Company
shall not permit any of its Restricted Subsidiaries to incur, assume,
guarantee or otherwise become directly or indirectly liable for the payment of
(collectively, "incur") any Indebtedness (including any Acquired Indebtedness)
other than Permitted Subsidiary Indebtedness; provided that the Company may
permit any Restricted Subsidiary to incur Indebtedness if at the date of such
incurrence (on a pro forma basis) the ratio of (x) Senior Indebtedness to (y)
Consolidated Net Worth of the Company does not exceed 0.9 to 1.
SECTION 4.8 Certificate to Trustee. The Company will
furnish to the Trustee annually, on or before a date not more than four months
after the end of its fiscal year (which, on the date hereof, is a calendar
year), a certificate (which need not contain the statements required by
Section 11.4) from its principal executive, financial or accounting officer as
to his or her knowledge of the compliance of the Company with all conditions
and covenants under this Indenture (such compliance to be determined without
regard to any period of grace or requirement of notice provided under this
Indenture) which certificate shall comply with the requirements of the Trust
Indenture Act.
ARTICLE 5
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 5.1 When Company May Merge, Etc. (a) The Company
shall not and shall not permit any Restricted Subsidiary to, in any
transaction or series of transactions, consolidate with or merge with or into
any other Person (other than the Merger and other than any such transaction
with a Wholly-Owned Restricted Subsidiary of the Company with a positive
Consolidated Net Worth) or, directly or indirectly, sell, assign, convey,
transfer, lease or otherwise dispose of all or substantially all of its assets
(determined on a consolidated basis for the Company and its subsidiaries taken
as a whole) in one or more related transactions, including through a bulk
reinsurance arrangement, to any Person (other than a Wholly-Owned Restricted
Subsidiary of the Company with a positive Consolidated Net Worth) or group of
affiliated Persons unless, at the time and after giving effect thereto:
(i) (A) the Company shall be the continuing corporation (or,
in the case of any consolidation or merger of a Restricted
Subsidiary, the Company shall continue to have all of the obligations
under this Indenture, including the obligation to make due and
punctual payment of the Payment Amount and the performance of every
covenant, agreement and obligation on the part of the Company under
this Indenture); or (B) the Person (if other than the Company) formed
by such consolidation, or into which the Company is merged or the
Person that acquires by sale or other disposition the assets of the
Company, substantially as an entirety (the "Surviving Entity"), is a
corporation duly organized and validly existing under the laws of the
United States or any state thereof and shall, in the case of clause
(B), expressly assume, by supplemental indenture, executed and
delivered to the Trustee, in form reasonably satisfactory to the
Trustee, all the obligations of the Company under the Indenture;
(ii) immediately before and after such transaction, giving
effect to such transaction on a pro forma basis, no default or Event
of Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction on a
pro forma basis, the Consolidated Net Worth (after giving pro forma
effect to such transaction but not including the accrual of deferred
tax liabilities resulting from the transaction) of the Company (or
the Surviving Entity if the Company is not the continuing obligor
under the Indenture) is at least equal to the Consolidated Net Worth
of the Company immediately before such transaction; provided that in
the case of the merger or consolidation of any Restricted Subsidiary
with Consolidated Net Worth of less than 5% of the Consolidated Net
Worth of the Company with any other Person, clause (iii) of this
Section 5.1(a) shall not apply; and
(iv) if any of the property or assets of the Company or any
Restricted Subsidiary prior to such transaction would thereupon
become subject to any Lien securing Indebtedness of the Company, the
outstanding Securities shall be secured equally and ratably with (or
prior to) the obligation or liability secured by such Lien, unless
the Company or such Restricted Subsidiary could create such Lien
without equally and ratably securing the Securities.
(b) Notwithstanding anything in this Section 5.1(a) to the
contrary, the Company may consummate the Merger subsequent to the issuance of
the Securities, and in the event of such Merger, Chartwell shall expressly
assume, by supplemental indenture, executed and delivered to the Trustee, in
form reasonably satisfactory to the Trustee, all of the obligations of the
Company under the Indenture.
(c) In connection with the Merger or any consolidation,
merger, transfer or lease contemplated hereby, the Company shall deliver to
the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that the Merger or such consolidation, merger, transfer or lease and the
supplemental indenture in respect thereto comply with the provisions described
herein and that all conditions precedent provided for in the Indenture
relating to such transaction have been complied with.
SECTION 5.2 Successor Substituted. Upon the Merger or
any consolidation or merger or any sale, assignment, transfer, lease or
conveyance or other disposition of all or substantially all of the assets of
the Company in accordance with the provisions described in Section 5.1, the
successor Person formed by such consolidation or into which the Company is
merged or to which such sale, assignment, conveyance, transfer, lease or other
disposition is made shall succeed to, and be substituted for, and may exercise
every right and power of the Company under the Indenture with the same effect
as if such successor Person had been named as the Company therein. When a
successor assumes all the obligations of its predecessor under the Indenture
and the Securities, the predecessor will be released from those obligations;
provided that, in the case of a transfer by lease, the predecessor corporation
shall not be released from the payment of any amount under the Securities.
ARTICLE 6
DEFAULT AND REMEDIES
SECTION 6.1 Events of Default. An "Event of Default"
shall occur with respect to the Securities if:
(a) the Company defaults in the payment of any amount due with
respect to any Security when the same becomes due and payable at
maturity, upon acceleration, redemption or mandatory repurchase
(giving effect to any period of extension under Section 2.13);
(b) the Company defaults in the performance of or breaches any
other covenant or agreement of the Company in this Indenture with
respect to any Security and such default or breach continues for a
period of 60 consecutive days after written notice to the Company by
the Trustee or to the Company and the Trustee by the Holders of 25%
or more in aggregate Principal Amount of the Securities;
(c) an involuntary case or other proceeding shall be commenced
against the Company or any Principal Restricted Insurance Subsidiary
with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be
entered against the Company or any Principal Restricted Insurance
Subsidiary under the federal bankruptcy laws as now or hereafter in
effect;
(d) the Company or any Principal Restricted Insurance
Subsidiary (A) commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, or consents to the entry of an order for relief in an
involuntary case under any such law, (B) consents to the appointment
of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company
or any Principal Restricted Insurance Subsidiary or for all or
substantially all of the property and assets of the Company or any
Principal Restricted Insurance Subsidiary or (C) effects any general
assignment for the benefit of creditors;
(e) a default occurs under any mortgage, indenture or
instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Restricted Subsidiaries whether such
Indebtedness now exists, or is created after the date of this
Indenture which default results in the acceleration of such
Indebtedness prior to its express maturity and the principal amount
of any such Indebtedness, together with the principal amount of any
other such Indebtedness the maturity of which has been so
accelerated, aggregates $10.0 million or more;
(f) a default occurs in the payment of any amount in excess
of $1.0 million under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries whether such Indebtedness now exists,
or is created after the date of this Indenture which default extends
beyond the grace period applicable to such default, if any; or
(g) a final judgment or final judgments for the payment of
money are entered by a court or courts of competent jurisdiction
against the Company or any of its Restricted Subsidiaries and such
judgments are not paid, discharged or stayed for a period of 30 days
after their entry, provided that the aggregate of all such unpaid,
undischarged or unstayed judgments exceeds $1.0 million (net of any
amount as to which a reputable insurance company has accepted
liability).
SECTION 6.2 Acceleration. If an Event of Default (other
than an Event of Default specified in clauses (c) and (d) of Section 6.1
hereof) occurs and is continuing, the Trustee by written notice to the
Company, or the Holders of at least 25% in aggregate Principal Amount of the
then outstanding Securities by written notice to the Company and the Trustee
may declare the unpaid principal of and accrued and unpaid interest on all the
Securities to be due and payable. Upon such declaration the principal and
interest shall be due and payable immediately. If an Event of Default
specified in clause (c) or (d) of Section 6.1 hereof occurs, all outstanding
Securities shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder. The
Holders of a majority in aggregate Principal Amount of the then outstanding
Securities, by written notice to the Trustee, may rescind an acceleration and
its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default (except nonpayment of principal
or interest that has become due solely because of the acceleration) have been
cured or waived.
SECTION 6.3 Other Remedies. If an Event of Default
occurs and is continuing, the Trustee may pursue any available remedy to
collect the payment of principal and interest on the Securities or to enforce
the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Holder of a Security in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. All remedies are cumulative to the extent permitted by law.
SECTION 6.4 Waiver of Past Defaults. Holders of a
majority in aggregate Principal Amount of the Securities then outstanding by
notice to the Trustee may on behalf of the Holders of all of the Securities
waive any existing default or Event of Default and its consequences under this
Indenture, except a continuing default or Event of Default in the payment of
the principal of or interest on, the Securities (including in connection with
an offer to purchase) (provided that the Holders of a majority in aggregate
Principal Amount of the then outstanding Securities may rescind an
acceleration and its consequences, including any related payment default that
resulted from such acceleration). Upon any such waiver, such default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon.
SECTION 6.5 Control by Majority. Holders of a majority
in aggregate Principal Amount of the then outstanding Securities may direct
the time, method and place of conducting any proceeding for exercising any
remedy available to the Trustee or exercising any trust or power conferred on
it. However, the Trustee may refuse to follow any direction that conflicts
with law or this Indenture or that the Trustee determines may be unduly
prejudicial to the rights of other Holders or that may involve the Trustee in
personal liability. The Trustee may take any other action which it deems
proper which is not inconsistent with any such direction.
SECTION 6.6 Limitation on Suits. A Holder of a Security
may pursue a remedy with respect to this Indenture or the Securities if:
(a) the Holder gives to the Trustee written notice of a
continuing Event of Default or the Trustee receives such notice from the
Company;
(b) the Holders of at least 25% in aggregate Principal Amount
of the then outstanding Securities make a written request to the Trustee to
pursue the remedy;
(c) such Holder or Holders offer and, if requested, provide
to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in
aggregate Principal Amount of the then outstanding Securities do not give the
Trustee a direction inconsistent with the request.
A Holder of a Security may not use this Indenture to prejudice the rights of
another Holder of a Security or to obtain a preference or priority over
another Holder of a Security.
SECTION 6.7 Rights of Holders of Securities to Receive
Payment. Notwithstanding any other provision of this Indenture, the right
of any Holder of a Security to receive payment of principal of and interest
on the Security, on or after the respective due dates expressed in the
Security (including in connection with an offer to purchase), or to bring
suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such
Holder.
SECTION 6.8 Collection Suit by Trustee. If an Event of
Default specified in Section 6.1(a) hereof occurs and is continuing, the
Trustee is authorized to recover judgment in its own name and as trustee of an
express trust against the Company or any other obligor for the whole amount of
principal of and interest remaining unpaid on the Securities and interest on
overdue principal and, to the extent lawful, interest and such further amount
as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
SECTION 6.9 Trustee May File Proofs of Claim. The
Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to the Company (or any
other obligor upon the Securities), its creditors or its property and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any
such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee, and in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof
out of the estate in any such proceeding, shall be denied for any reason,
payment of the same shall be secured by a Lien on, and shall be paid out of,
any and all distributions, dividends, money, securities and other properties
that the Holders may be entitled to receive in such proceeding whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10 Priorities. If the Trustee collects any
money pursuant to this Article, it shall pay out the money in the following
order:
First: to the Trustee, its agents and attorneys for
amounts due under Section 7.7 hereof, including payment of all
compensation, expense and liabilities incurred, and all advances
made, by the Trustee and the costs and expenses of collection, and
to the Holder Actuary, its agents and attorneys for amounts due under
Section 10.2 hereof, including payment of all compensation, expense
and liabilities incurred by the Holder Actuary and the costs and
expenses of collection;
Second: to Holders for amounts due and unpaid on the
Securities, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities; and
Third: to the Company or to such party as a court of
competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders pursuant to this Section 6.10.
SECTION 6.11 Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as a Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any
party litigant in the suit, having due regard to the merits and good faith of
the claims or defenses made by the party litigant. This Section does not
apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7
hereof, or a suit by Holders of more than 10% in aggregate Principal Amount of
the then outstanding Securities.
ARTICLE 7
TRUSTEE
SECTION 7.1 General. The duties and responsibilities of
the Trustee shall be as provided by the Trust Indenture Act and as set forth
herein. Notwithstanding the foregoing, no provision of this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder, or in
the exercise of any of its rights or powers, unless it receives indemnity
satisfactory to it against any loss, liability or expense. Whether or not
therein expressly so provided, every provision of this Indenture relating to
the conduct or affecting the liability of or affording protection to the
Trustee shall be subject to the provisions of this Article 7.
SECTION 7.2 Certain Rights of Trustee. Subject to Trust
Indenture Act Sections 315(a) through (d):
(i) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, Officers'
Certificate, Opinion of Counsel (or both), statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or
presented by the proper person or persons. The Trustee need not
investigate any fact or matter stated in the document, but the
Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit;
(ii) before the Trustee acts or refrains from acting, it may
require an Officers' Certificate and/or an Opinion of Counsel, which
shall conform to Section 11.4. The Trustee shall not be liable for
any action it takes or omits to take in good faith in reliance on
such certificate or opinion. Subject to Sections 7.1 and 7.2,
whenever in the administration of the trusts of this Indenture the
Trustee shall deem it necessary or desirable that a matter be proved
or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be
herein specifically prescribed) may, in the absence of negligence or
bad faith on the part of the Trustee, be deemed to be conclusively
proved and established by an Officers' Certificate delivered to the
Trustee, and such certificate, in the absence of negligence or bad
faith on the part of the Trustee, shall be full warrant to the
Trustee for any action taken, suffered or omitted by it under the
provisions of this Indenture upon the faith thereof;
(iii) the Trustee may act through its attorneys and agents not
regularly in its employ and shall not be responsible for the
misconduct or negligence of any agent or attorney appointed with due
care;
(iv) any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by an Officers'
Certificate (unless other evidence in respect thereof be herein
specifically prescribed); and any Board Resolution may be evidenced
to the Trustee by a copy thereof certified by the Secretary or an
Assistant Secretary of the Company;
(v) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the
request, order or direction of any of the Holders, unless such
Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction;
(vi) the Trustee shall not be liable for any action it takes
or omits to take in good faith that it believes to be authorized or
within its rights or powers or for any action it takes or omits to
take in accordance with the direction of the Holders in accordance
with Section 6.5 relating to the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee, under this Indenture;
(vii) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon; and
(viii) prior to the occurrence of an Event of Default hereunder
and after the curing or waiving of all Events of Default, the
Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, Officers'
Certificate, Opinion of Counsel, Board Resolution, statement,
instrument, opinion, report, notice, request, consent, order,
approval, appraisal, bond, debenture, note, coupon, security, or
other paper or document unless requested in writing so to do by
the Holders of not less than a majority in aggregate Principal
Amount of the Securities then outstanding; provided that, if the
payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making
of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it
by the terms of this Indenture, the Trustee may require reasonable
indemnity against such expenses or liabilities as a condition to
proceeding.
SECTION 7.3 Individual Rights of Trustee. The Trustee,
in its individual or any other capacity, may become the owner or pledgee of
Securities and may otherwise deal with the Company or its Affiliates with the
same rights it would have if it were not the Trustee. Any Agent may do the
same with like rights. However, the Trustee is subject to Trust Indenture Act
Sections 310(b) and 311. For purposes of Trust Indenture Act Section
311(b)(4) and (6), the following terms shall mean:
(a) "cash transaction" means any transaction in which full
payment for goods or securities sold is made within seven days after delivery
of the goods or securities in currency or in checks or other orders drawn upon
banks or bankers and payable upon demand; and
(b) "self-liquidating paper" means any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by the Company for the purpose of financing the purchase, processing,
manufacturing, shipment, storage or sale of goods, wares or merchandise and
which is secured by documents evidencing title to, possession of, or a lien
upon, the goods, wares or merchandise or the receivables or proceeds arising
from the sale of the goods, wares or merchandise previously constituting the
security, provided the security is received by the Trustee simultaneously with
the creation of the creditor relationship with the Company arising from the
making, drawing, negotiating or incurring of the draft, bill of exchange,
acceptance or obligation.
SECTION 7.4 Trustee's Disclaimer. The recitals contained
herein and in the Securities (except the Trustee's certificate of
authentication) shall be taken as statements of the Company and not of the
Trustee and the Trustee assumes no responsibility for the correctness of the
same. Neither the Trustee nor any of its agents (i) makes any representation
as to the validity or adequacy of this Indenture or the Securities or (ii)
shall be accountable for the Company's use or application of the proceeds from
the Securities.
SECTION 7.5 Notice of Default. If any default or Event
of Default with respect to the Securities occurs and is continuing and if such
default or Event of Default is known to the actual knowledge of a Responsible
Officer with the Corporate Trust Department of the Trustee, the Trustee shall
give to each Holder of Securities notice of such default or Event of Default
within 90 days after it occurs to all Holders of Securities in the manner and
to the extent provided in Section 313(c) of the Trust Indenture Act, unless
such default or Event of Default shall have been cured or waived before the
mailing or publication of such notice; provided that, except in the case of a
default or Event of Default in the payment of any amount with respect to any
Security, the Trustee shall be protected in withholding such notice if the
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders.
SECTION 7.6 Reports by Trustee to Holders. Within 60
days after each June 30, beginning with June 30, 1996, the Trustee shall mail
to each Holder as and to the extent provided in Trust Indenture Act Section
313(c) a brief report dated as of such June 30, if required by Trust Indenture
Act Section 313(a).
SECTION 7.7 Compensation and Indemnity. The Company shall
pay to the Trustee such reasonable compensation as shall be agreed upon in
writing from time to time for its services. The compensation of the
Trustee shall not be limited by any law on compensation of a Trustee of an
express trust. The Company shall reimburse the Trustee upon request for
all reasonable out-of-pocket expenses, disbursements and advances incurred
or made by the Trustee. Such expenses shall include the reasonable
compensation and expenses of the Trustee's agents, counsel and other
persons not regularly in its employ.
The Company shall indemnify the Trustee for, and hold it
harmless against, any loss or liability or expense incurred by it without
willful misconduct, negligence or bad faith on its part arising out of or in
connection with the acceptance or administration of this Indenture and the
Securities and the performance of duties under this Indenture and the
Securities, including the costs and expenses of defending itself against or
investigating any claim or liability and of complying with any process served
upon it or any of its officers in connection with the exercise or performance
of any of its powers or duties under this Indenture and the Securities.
To secure the Company's payment obligations in this Section
7.7, the Trustee shall have a lien prior to the Securities on all money or
property held or collected by the Trustee, in its capacity as Trustee, except
money or property held in trust to pay any amount with respect to the
Securities.
The obligations of the Company under this Section to
compensate and indemnify the Trustee and each predecessor Trustee and to
pay or reimburse the Trustee and each predecessor Trustee for expenses,
disbursements and advances shall constitute additional indebtedness
hereunder and shall survive the satisfaction and discharge of this
Indenture or the rejection or termination of this Indenture under
bankruptcy law. Such additional indebtedness shall be a senior claim to
that of the Securities upon all property and funds held or collected by the
Trustee as such, except funds held in trust for the benefit of the Holders
of particular Securities or coupons, and the Securities are hereby
subordinated to such senior claims. If the Trustee renders services and
incurs expenses following an Event of Default under Section 6.1(c) or
Section 6.1(d) hereof, the parties hereto and the holders by their
acceptance of the Securities hereby agree that such expenses are intended
to constitute expenses of administration under any bankruptcy law.
SECTION 7.8 Replacement of Trustee. A resignation or
removal of the Trustee as Trustee with respect to the Securities and
appointment of a successor Trustee as Trustee with respect to the Securities
shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.8.
The Trustee may resign as Trustee with respect to the
Securities at any time by so notifying the Company in writing. The Holders of
a majority in aggregate Principal Amount of the outstanding Securities may
remove the Trustee or a successor Trustee as Trustee with respect to the
Securities by so notifying the Trustee in writing and may appoint a successor
Trustee with respect thereto with the consent of the Company. The Company may
remove the Trustee as Trustee with respect to the Securities if: (i) the
Trustee is no longer eligible under Section 7.10 of this Indenture; (ii) the
Trustee is adjudged a bankrupt or insolvent; (iii) a receiver or other public
officer takes charge of the Trustee or its property; or (iv) the Trustee
becomes incapable of acting; (v) within 10 days of the Merger, the Company
notifies the Trustee and the Holder Actuary in writing of its intent to remove
such Trustee and nominates a successor Trustee; provided that the Holder
Actuary must consent to the appointment of such successor Trustee, which
consent shall not be unreasonably withheld.
If the Trustee resigns or is removed as Trustee with respect to
the Securities, or if a vacancy exists in the office of Trustee with respect
to the Securities for any reason, the Company shall promptly appoint a
successor Trustee with respect thereto. If the successor Trustee with respect
to the Securities does not deliver its written acceptance required by the next
succeeding paragraph of this Section 7.8 within 30 days after the retiring
Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in aggregate Principal Amount of the outstanding
Securities may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect thereto.
A successor Trustee with respect to the Securities shall
deliver a written acceptance of its appointment to the retiring Trustee and
to the Company. Immediately after the delivery of such written acceptance,
subject to the lien provided for in Section 7.7, (i) the retiring Trustee
shall transfer all property held by it as Trustee in respect of the
Securities to the successor Trustee, (ii) the resignation or removal of the
retiring Trustee in respect of the Securities shall become effective and
(iii) the successor Trustee shall have all the rights, powers and duties of
the Trustee in respect of the Securities under this Indenture. A successor
Trustee shall mail notice of its succession to each Holder of Securities.
Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts
referred to in the preceding paragraph.
The Company shall give notice of any resignation and any
removal of the Trustee with respect to the Securities and each appointment of
a successor Trustee in respect of the Securities to all Holders of Securities.
Each notice shall include the name of the successor Trustee and the address of
its Corporate Trust Office.
Notwithstanding replacement of the Trustee with respect to the
Securities pursuant to this Section 7.8, the Company's obligations under
Section 7.7 shall continue for the benefit of the retiring Trustee.
SECTION 7.9 Successor Trustee by Merger, Etc. If the
Trustee consolidates with, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation or
national banking association, the resulting, surviving or transferee
corporation or national banking association without any further act shall be
the successor Trustee with the same effect as if the successor Trustee had
been named as the Trustee herein.
SECTION 7.10 Eligibility. This Indenture shall always
have a Trustee who satisfies the requirements of Trust Indenture Act Section
310(a). The Trustee shall have a combined capital and surplus of at least
$25,000,000 as set forth in its most recent published annual report of
condition.
SECTION 7.11 Money Held in Trust. The Trustee shall not
be liable for interest on any money received by it except as the Trustee may
agree in writing with the Company. Money held in trust by the Trustee need
not be segregated from other funds except to the extent required by law and
except for money held in trust under Article 8 of this Indenture.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.1 Satisfaction and Discharge of Indenture. If
at any time (a) (i) the Company shall have deposited with the Paying Agent on
or immediately prior to the date due money (or Registered Common Stock and
cash in lieu of any fractional shares) sufficient to pay all amounts with
respect to all of the Securities outstanding hereunder, as and when the same
shall have become due and payable or (ii) the Company shall have delivered to
the Trustee for cancellation all Securities theretofore authenticated (other
than any Securities which shall have been destroyed, lost or stolen and which
shall have been replaced or paid as provided in Section 2.8) and (b) in either
case, the Company shall also pay or cause to be paid all other sums payable
hereunder by the Company, then this Indenture shall cease to be of further
effect (except as to (i) the rights, obligations and immunities of the Trustee
hereunder, (ii) Sections 8.3 and 8.4 and (iii) the Registration Rights set
forth in Exhibit C), and the Trustee, on demand of the Company accompanied by
an Officers' Certificate and an Opinion of Counsel and at the cost and expense
of the Company, shall execute proper instruments acknowledging such
satisfaction of and discharging this Indenture. The Company agrees to
reimburse the Trustee for any costs or expenses thereafter reasonably and
properly incurred and to compensate the Trustee for any services thereafter
reasonably and properly rendered by the Trustee in connection with this
Indenture or the Securities.
SECTION 8.2 Application by Trustee of Funds Deposited for
Payment of Securities. Subject to Section 8.4, all moneys deposited with
the Trustee under this Indenture shall be held in trust and applied by it
to the payment, either directly or through any paying agent (including the
Company acting as its own paying agent), to the holders of the particular
Securities for the payment or redemption of which such moneys have been
deposited with the Trustee, of all sums due and to become due thereon; but
such money need not be segregated from other funds except to the extent
required by law.
SECTION 8.3 Repayment of Moneys Held by Paying Agent. In
connection with the satisfaction and discharge of this Indenture all moneys
then held by any paying agent under the provisions of this Indenture shall,
upon demand of the Company, be repaid to it or paid to the Trustee and
thereupon such paying agent shall be released from all further liability with
respect to such moneys.
SECTION 8.4 Return of Moneys Held by Trustee and Paying
Agent Unclaimed for Three Years. Any moneys (or Registered Common Stock)
deposited with or paid to the Trustee or any paying agent for the payment on
any Security and not applied but remaining unclaimed for three years after the
date upon which such Payment Amount shall have become due and payable, shall,
upon the written request of the Company and unless otherwise required by
mandatory provisions of applicable escheat or abandoned or unclaimed property
law, be repaid to the Company by the Trustee or such paying agent, and the
holder of such Security shall, unless otherwise required by mandatory
provisions of applicable escheat or abandoned or unclaimed property laws,
thereafter look only to the Company for any payment which such holder may be
entitled to collect, and all liability of the Trustee or any paying agent with
respect to such moneys (or Registered Common Stock) shall thereupon cease.
[COVENANT DEFEASANCE TO BE ADDED]
ARTICLE 9
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1 Without Consent of Holders of Securities.
Notwithstanding Section 9.2 of this Indenture, the Company and the Trustee
may amend or supplement this Indenture or the Securities without the
consent of any Holder of a Security:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Securities in addition to
or in place of certificated Securities;
(c) to provide for the assumption of the Company's
obligations under this Indenture to the Holders in the case of a merger,
consolidation or other transaction pursuant to Article 5 hereof;
(d) to make any change that would provide any additional
rights or benefits to the Holders of the Securities or that does not adversely
affect the legal rights hereunder of any Holder of the Security; or
(e) to comply with requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act.
Upon the request of the Company accompanied by a resolution of
the Board of Directors of the Company authorizing the execution of any such
supplemental indenture, and upon receipt by the Trustee of the documents
described in Section 9.6 hereof, the Trustee shall join with the Company in
the execution of any amended or supplemental indenture authorized or permitted
by the terms of this Indenture and to make any further appropriate agreements
and stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental indenture that affects
its own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.2 With Consent of Holders of Securities.
Except as provided below in this Section 9.2, the Company and the Trustee may
amend or supplement this Indenture or the Securities with the consent of the
Holders of at least a majority in aggregate Principal Amount of the Securities
then outstanding (including consents obtained in connection with a tender
offer or exchange offer for the Securities), and, subject to Sections 6.4 and
6.7 hereof, any existing default or Event of Default (other than a default or
Event of Default in the payment of any amount due under the Securities, except
a payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of this Indenture or the Securities may be
waived with the consent of the Holders of a majority in aggregate Principal
Amount of the then outstanding Securities (including consents obtained in
connection with a tender offer or exchange offer for the Securities).
Upon the request of the Company accompanied by a resolution
of the Board of Directors of the Company authorizing the execution of any
such amended or supplemental indenture, and upon the filing with the
Trustee of evidence reasonably satisfactory to the Trustee of the consent
of the Holders of Securities as aforesaid, and upon receipt by the Trustee
of the documents described in Section 9.6 hereof, the Trustee shall join
with the Company in the execution of such amended or supplemental indenture
unless such amended or supplemental indenture affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to,
enter into such amended or supplemental indenture.
It shall not be necessary for the consent of the Holders of
Securities under this Section 9.2 to approve the particular form of any
proposed amendment or waiver, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders of Securities
affected thereby a notice briefly describing the amendment, supplement or
waiver. Any failure of the Company to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture or waiver. Subject to Sections 6.4 and 6.7
hereof, the Holders of a majority in aggregate Principal Amount of the
Securities then outstanding may waive compliance in a particular instance
by the Company with any provision of this Indenture or the Securities.
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Security held by a non-consenting Holder):
(a) reduce the aggregate Principal Amount of Securities whose
Holders must consent to an amendment, supplement or waiver;
(b) reduce the Payment Amount or change the fixed maturity of
any Security or alter the provisions with respect to the redemption of the
Securities (other than the provisions of Sections 4.6);
(c) reduce the rate of or change the time for payment of
interest on any Securities;
(d) waive a default or Event of Default in the payment of the
Fixed Amount or the Contingent Amount or interest on the Securities (except a
rescission of acceleration of the Securities by the Holders of at least a
majority in aggregate Principal Amount thereof and a waiver of the payment
default that resulted from such acceleration);
(e) make any Security payable in money other than that stated
in the Securities;
(f) make any change in the provisions of this Indenture
relating to waivers of past defaults or Events of Default or the rights of
Holders of Securities to receive payments of the Fixed Amount or the
Contingent Amount or interest on the Securities;
(g) waive a redemption payment with respect to any Security
(other than a payment required by Section 4.6); or
(h) make any change in Section 6.4 or 6.7 hereof or in
Section 9.1 or in this Section 9.2 hereof.
SECTION 9.3 Compliance with Trust Indenture Act. Every
amendment to this Indenture or the Securities shall be set forth in a
supplemental indenture that complies with the Trust Indenture Act as then in
effect.
SECTION 9.4 Revocation and Effect of Consents. Until an
amendment, supplement or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of
a Security or portion of a Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made
on any Security. However, any such Holder or subsequent Holder of a
Security may revoke the consent as to its Security if the Trustee receives
written notice of revocation before the date the waiver, supplement or
amendment becomes effective. An amendment, supplement or waiver becomes
effective in accordance with its terms and thereafter binds every Holder.
The Company may, but shall not be obligated to, fix a record
date for determining which Holders must consent to such amendment or waiver.
If the Company fixes a record date, the record date shall be fixed at (i) the
later of 30 days prior to the first solicitation of such consent or the date
of the most recent list of Holders furnished to the Trustee prior to such
solicitation pursuant to Section 2.05 or (ii) such other date as the Company
shall designate.
SECTION 9.5 Notation on or Exchange of Securities. The
Trustee may place an appropriate notation about an amendment, supplement or
waiver on any Security thereafter authenticated. The Company in exchange for
all Securities may issue and the Trustee shall authenticate new Securities
that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new
Security shall not affect the validity and effect of such amendment,
supplement or waiver.
SECTION 9.6 Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment or supplemental indenture authorized
pursuant to this Article 9 if the amendment does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. The Company may not
sign an amendment or supplemental indenture until the Board of Directors of
the Company approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.1 hereof)
shall be fully protected in relying upon, an Officers' Certificate and an
Opinion of Counsel stating that the execution of such amended or supplemental
indenture is authorized or permitted by this Indenture.
ARTICLE 10
DETERMINATION OF THE PAYMENT AMOUNT
SECTION 10.1 Determination of the Contingent Amount. On
any Settlement Date, the Payment Amount shall be paid pro rata to the Holders
of the Securities as provided in this Indenture. The Contingent Amount shall
be determined as provided in this Article 10 and in Exhibit B hereto, which is
hereby incorporated in and expressly made a part of this Indenture. The
Payment Amount shall be paid in cash or, subject to Section 10.7, Registered
Common Stock.
SECTION 10.2 Holder Actuary; Compensation and Indemnity.
(a) On the Issue Date, the Company shall appoint Ernst & Young LLP as Holder
Actuary to represent the interests of the Holders of the Securities as
provided in Indenture and pursuant to the Holder Actuary Agreement dated the
date hereof between the Company and the Holder Actuary.
The reasonable fees and expenses of the Holder Actuary incurred
in connection with the performance of its duties under this Indenture, and the
reasonable fees and expenses of any necessary agents engaged by the Holder
Actuary in connection therewith (the "Holder Actuary Cost"), shall be promptly
paid in full by Company; provided that the Company shall have no obligation to
pay the Holder Actuary Cost to the extent that such cost exceeds $50,000 in
any one year (or $200,000 in any year which includes a Settlement Date).
The Company shall indemnify the Holder Actuary and any
predecessor Holder Actuary for, and hold it harmless against, any loss or
liability or expense incurred by it without willful misconduct, negligence or
bad faith on its part arising out of or in connection with the performance of
its duties as Holder Actuary under this Indenture, the Securities or the
Holder Actuary Agreement, including the costs and expenses of defending itself
against or investigating any claim or liability and of complying with any
process served upon it or any of its officers in connection with the exercise
or performance of any of its powers or duties under this Indenture, the
Securities or the Holder Actuary Agreement.
The obligations of the Company under this Section to compensate
and indemnify the Holder Actuary and each predecessor Holder Actuary and to
pay or reimburse the Holder Actuary and each predecessor Holder Actuary as set
forth in this Section shall constitute additional indebtedness hereunder and
shall survive the satisfaction and discharge of this Indenture or the
rejection or termination of this Indenture under bankruptcy law. If the
Holder Actuary renders services and incurs expenses following an Event of
Default under Section 6.1(c) or Section 6.1(d) hereof, the parties hereto and
the holders by their acceptance of the Securities hereby agree that such
expenses are intended to constitute expenses of administration under any
bankruptcy law.
(b) In the event of the resignation of the Holder Actuary or
any other circumstance whereby the Holder Actuary shall cease to perform or
otherwise not be available to perform its duties under this Indenture, the
Trustee shall select a successor Holder Actuary, which successor actuary shall
be a nationally recognized property and casualty actuarial firm which has had
no relationship with the Company during the greater of (i) the 5 years
preceding the Issue Date and (ii) the period during which the Securities have
been outstanding.
SECTION 10.3 Company Actuary. (a) The Company shall
appoint an actuary to act as Company Actuary under this Article 10. The
Company Actuary may be, but shall not be not required to be, an employee of
the Company. The Company may replace the Company Actuary at any time for any
reason; provided that any such action does not and would not likely result in
an extension of the Settlement Date under Section 2.13. The Trustee and the
Holder Actuary shall be promptly notified in writing of the appointment,
resignation or discharge of the Company Actuary. The fees and expenses of the
Company Actuary shall be paid by the Company without any adjustment to the
Contingent Amount.
SECTION 10.4 Preparation of Reserve Reports. (a)
Promptly following (i) the occurrence of a Change of Control, (ii) an
acceleration of the Securities pursuant to Section 6.2 following an Event of
Default, (iii) delivery of a notice of redemption to the Trustee under Section
3.1, and (iv) December 31, 2005 (each a "Trigger Date"), the Company shall
notify the Trustee, the Holder Actuary and the Company Actuary of:
(a) the Settlement Date (without regard to any extension
under Section 2.13);
(b) whether or not the Securities are to be settled in
Registered Common Stock pursuant to Section 10.7; and
(c) the paragraph of the Securities and/or Section of this
Indenture pursuant to which the Securities will be
settled.
In addition, promptly following the Trigger Date, the Company
shall furnish to the Company Actuary and the Holder Actuary the information or
access to the information referred to in Section 4.2 to allow each such
Actuary to prepare a report (each a "Reserve Report") reflecting calculation
of the Contingent Amount as of the applicable Settlement Date.
(b) In accordance with and to the extent set forth in Exhibit
B, each Reserve Report, including calculation of the Contingent Amount, shall
be prepared independently by each Actuary. Such calculation shall be made in
accordance with Exhibit B and, as set forth in Exhibit B, shall take account
of the Tax Benefit resulting from the Adverse Reserve Development.
The Tax Benefit may be calculated with the assistance of (i) in
the case of the Company Actuary, an accountant selected by the Company who may
be a Company employee and (ii) in the case of the Holder Actuary, an
accountant selected by such Holder Actuary. The calculation of any items
relevant to the determination of the Tax Benefit pursuant to Exhibit B shall
be made in a manner that is consistent with the manner in which any comparable
adjustments to reserves are reported or have been reported by the Company for
federal income tax purposes. From the Trigger Date to the Settlement Date
(including any extension thereof pursuant to Section 2.13), the Company shall
provide each of the Holder Actuary and the Independent Actuary (and any of
their agents) access to the books and records of the Company and each
Subsidiary of the Company as provided in Section 4.2.
(c) Each Reserve Report shall include in reasonable detail an
explanation of the methodology used in such Report and all supporting
calculations of Adverse Reserve Development (as defined in Exhibit B). Each
Actuary shall use its best efforts to deliver its Reserve Report to the other
Actuary at least 105 calendar days prior to the Settlement Date.
(d) If the calculation of the Contingent Amount set forth
in the Holder Actuary's Reserve Report (i) does not differ from that set
forth in the Company Actuary's Reserve Report or (ii) differs from that set
forth in the Company Actuary's Reserve Report and the amount of the
difference does not exceed $3,000,000, then the Contingent Amount set forth
in Company Actuary's Reserve Report shall be the Contingent Amount for
purposes of payment of or settlement of the Securities.
SECTION 10.5 Resolution of Disputes; Arbitration. (a) If
the calculation of the Contingent Amount set forth in the Holder Actuary's
Reserve Report differs from that set forth in the Company Actuary's Reserve
Report and the amount of the difference exceeds $3,000,000, the Company and
the Holder Actuary shall use their reasonable best efforts to resolve this
difference. If, however, the difference cannot be resolved within 30
calendar days after delivery of the later to be delivered of either the
Company Actuary or Holder Actuary Reserve Report, the Company and the
Holder Actuary shall thereafter jointly appoint an independent third party
actuary, which shall be a nationally recognized property and casualty
actuarial firm, with no relationship to the Company, the Trustee, the
Holder Actuary or any holder of 5% or more of the Securities (the
"Independent Actuary") to resolve said dispute. If the parties cannot
agree on the appointment of an Independent Actuary within 10 calendar days,
then the Company and the Holder Actuary shall each select two actuarial
firms meeting the requirements set forth in the preceding sentence. Each
of the Company and Holder Actuary shall then be entitled to reject one of
the two selections of the other party. The Independent Actuary shall then
be chosen at random from the remaining two selections. The Independent
Actuary shall have the authority to engage an independent third party
accountant with no relationship to the Company, the Trustee, the Holder
Actuary or any beneficial owner of 10% or more of the Securities to resolve
any disagreement with respect to the calculation of the Tax Benefit.
(b) Not later than 30 days prior to any Settlement Date, the
Independent Actuary shall prepare and deliver to the Company, the Trustee, the
Company Actuary and the Holder Actuary its calculation of the Contingent
Amount. This calculation shall be prepared in accordance with the guidelines
set forth in Exhibit B. Based on the foregoing, the Independent Actuary will
determine which of (i) the Contingent Amount set forth in the Company
Actuary's Reserve Report and (ii) the Contingent Amount set forth in the
Holder Actuary's Reserve Report, is, in the judgment of the Independent
Actuary, the best estimate of the Contingent Amount. The amount so selected
will be the Contingent Amount for purposes of calculating the Payment Amount.
(c) The reasonable fees and expenses of the Independent
Actuary incurred in connection with this Indenture, and the reasonable fees
and expenses of any necessary agents engaged by the Independent Actuary in
connection therewith, shall be promptly paid in full by Company; provided
that 50% of all such fees and expenses (the "Arbitration Cost") shall be
deducted from the Contingent Amount as provided in Exhibit B.
Notwithstanding the foregoing, the Independent Actuary shall have
discretion to apportion such fees and expenses differently between the
parties as the Independent Actuary deems equitable under the circumstances
based upon its views as to the relative accuracy of the Contingent Amount
contained in the Reserve Reports prepared by each of the Company Actuary
and the Holder Actuary. The Arbitration Cost shall not be subject to the
limits relating to the Actuary Cost set forth above under Section 10.2(b).
SECTION 10.6 Annual Review of Reserves And Claims. Within
90 calendar days following December 31 of each calendar year prior to the
Settlement Date, other than December 31, 2005 (each such December 31, a
"Report Date"), the Company shall deliver to the Holder Actuary and to the
Trustee a written statement setting forth in reasonable detail, including all
supporting calculations and methodology, the Adverse Reserve Development
calculated as of the Report Date for such year. In addition, each year the
Company Actuary shall provide to the Holder Actuary and the Trustee a written
report stating that all such amounts have been calculated in accordance with
the guidelines set forth in Exhibit B hereto. Annually following delivery of
each Report, the Company shall cause the Company Actuary to meet with the
Holder Actuary and review in detail with the Holder Actuary the Adverse
Reserve Development occurring during such calendar year. Following each such
annual meeting, the Holder Actuary shall provide a written report to the
Company Actuary expressing any material issues that have come to its attention
regarding the Company's calculation of the Adverse Reserve Development. All
statements and reports of the Company, the Company Actuary and the Holder
Actuary under this Section 10.6 shall be solely for informational purposes,
shall be non-binding and may not be used or considered for any purpose in any
arbitration.
SECTION 10.7 Settlement in Stock. (a) The Company shall
have the right to satisfy the Payment Amount due to Holders under the
Securities, whether at maturity, upon redemption or upon the occurrence of a
Change of Control, in Registered Common Stock; provided that (i) at the time
of payment such stock is quoted for trading on any U.S. national securities
exchange or on The NASDAQ Stock Market and (ii) the Payment Amount of all
Securities is able to be satisfied through the delivery of Registered Common
Stock. In connection therewith, the Company shall not be required to issue
fractional shares of common stock, and instead may pay cash in lieu of any
such fractional shares. The Company shall not have the right to pay the
Payment Amount due under the Securities in Registered Common Stock if an Event
of Default has occurred and is continuing.
(b) For purposes of any such payment, such Registered Common
Stock shall be valued at 85.0% of its Fair Value. For these purposes, "Fair
Value" of such Registered Common Stock shall mean the average of the closing
sales or last reported sales prices of such Common Stock of the Company for
the 20 trading days immediately preceding the date that is five trading days
prior to the Settlement Date. Certain Holders on the Settlement Date who
receive upon repayment of the Securities Common Stock of the Company shall
have registration rights as described in the Registration Rights Agreement
attached as Exhibit C to this Indenture ("Registration Rights").
ARTICLE 11
MISCELLANEOUS
SECTION 11.1 Trust Indenture Act of 1939. This Indenture
shall incorporate and be governed by the provisions of the Trust Indenture Act
that are required to be part of and to govern indentures qualified under the
Trust Indenture Act.
SECTION 11.2 Notices. Any notice or communication shall
be sufficiently given if written and (a) if delivered in person when received
or (b) if mailed by first class mail 5 days after mailing, or (c) as between
the Company and the Trustee if sent by facsimile transmission, when
transmission is confirmed, in each case addressed as follows:
if to the Company:
__________________
Piedmont Management Company Inc.
80 Maiden Lane, 20th Floor
New York, New York 10038
Telecopy: (212) 262-4658
Attention: Chief Financial Officer
if to the Trustee:
__________________
[Trustee]
__________________
New York, New York _______
Telecopy: (212) ____-____
Attention: [Corporate Trust Administration]
The Company or the Trustee by written notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication shall be sufficiently given to
Holders by mailing to such Holders at their addresses as they shall appear on
the Security Register. Notice mailed shall be sufficiently given if so mailed
within the time prescribed. Copies of any such communication or notice to a
Holder shall also be mailed to the Trustee and each Agent at the same time.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders.
Except as otherwise provided in this Indenture, if a notice or communication
is mailed in the manner provided in this Section 11.2, it is duly given,
whether or not the addressee receives it.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee,
but such filing shall not be a condition precedent to the validity of any
action taken in reliance upon such waiver.
In case it shall be impracticable to give notice as herein
contemplated, then such notification as shall be made with the approval of
the Trustee shall constitute a sufficient notification for every purpose
hereunder.
SECTION 11.3 Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee:
(i) an Officers' Certificate stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in
this Indenture relating to the proposed action have been complied
with; and
(ii) an Opinion of Counsel stating that, in the opinion of
such counsel, all such conditions precedent have been complied with.
SECTION 11.4 Statements Required in Certificate or
Opinion. Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each person signing such certificate or
opinion has read such covenant or condition and the definitions
herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion
contained in such certificate or opinion is based;
(iii) a statement that, in the opinion of each such person, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(iv) a statement as to whether or not, in the opinion of each
such person, such condition or covenant has been complied with;
provided that, with respect to matters of fact, an Opinion of Counsel
may rely on an Officers' Certificate or certificates of public
officials.
The Company, the Trustee and any agent of the Company or the
Trustee may deem and treat the person in whose name any Security shall be
registered upon the Security Register as the absolute owner of such Security
(whether or not such Security shall be overdue and notwithstanding any
notation of ownership or other writing thereon) for the purpose of receiving
payment of or on account of such Security and for all other purposes; and
neither the Company nor the Trustee nor any agent of the Company or the
Trustee shall be affected by any notice to the contrary.
SECTION 11.5 Rules by Trustee, Paying Agent or Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 11.6 Payment Date Other Than a Business Day. If
any date for payment of any amount due on any Security shall not be a Business
Day at any place of payment, then payment of principal of or interest on such
Security, as the case may be, need not be made on such date, but may be made
on the next succeeding Business Day at any place of payment with the same
force and effect as if made on such date and no interest shall accrue in
respect of such payment for the period from and after such date.
SECTION 11.7 Governing Law. The internal laws of the
State of New York shall govern this Indenture and the Securities.
SECTION 11.8 No Adverse Interpretation of Other
Agreements. This Indenture may not be used to interpret another indenture or
loan or debt agreement of the Company or any Subsidiary of the Company. Any
such indenture or agreement may not be used to interpret this Indenture.
SECTION 11.9 Successors. All agreements of the Company in
this Indenture and the Securities shall bind its successors. All agreements
of the Trustee in this Indenture shall bind its successors.
SECTION 11.10 Duplicate Originals. The parties may sign
any number of copies of this Indenture. Each signed copy shall be an
original, but all of them together represent the same agreement.
SECTION 11.11 Separability. In case any provision in this
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 11.12 Table of Contents, Headings, Etc. The Table
of Contents and headings of the Articles and Sections of this Indenture have
been inserted for convenience of reference only, are not to be considered a
part hereof and shall in no way modify or restrict any of the terms and
provisions hereof.
SECTION 11.13 Incorporators, Stockholders, Officers and
Directors of Company Exempt from Individual Liability. No recourse under or
upon any obligation, covenant or agreement contained in this Indenture or any
indenture supplemental hereto, or in any Security or any coupons appertaining
thereto, or because of any indebtedness evidenced thereby, shall be had
against any incorporator, as such or against any past, present or future
stockholder, officer, director or employee, as such, of the Company or of any
successor, either directly or through the Company or any successor, under any
rule of law, statute or constitutional provision or by the enforcement of any
assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of the
Securities by the holders thereof and as part of the consideration for the
issue of the Securities.
SECTION 11.14 Judgment Currency. The Company agrees, to
the fullest extent that it may effectively do so under applicable law, that
(a) if for the purpose of obtaining judgment in any court it is necessary to
convert the sum due in respect of the Securities (the "Required Currency")
into a currency in which a judgment will be rendered (the "Judgment
Currency"), the rate of exchange used shall be the rate at which in accordance
with normal banking procedures the Trustee could purchase in The City of New
York the Required Currency with the Judgment Currency on the day on which
final unappealable judgment is entered, unless such day is not a Business Day,
then, to the extent permitted by applicable law, the rate of exchange used
shall be the rate at which in accordance with normal banking procedures the
Trustee could purchase in The City of New York the Required Currency with the
Judgment Currency on the Business Day preceding the day on which final
unappealable judgment is entered and (b) its obligations under this Indenture
to make payments in the Required Currency (i) shall not be discharged or
satisfied by any tender, or any recovery pursuant to any judgment (whether or
not entered in accordance with subsection (a)), in any currency other than the
Required Currency, except to the extent that such tender or recovery shall
result in the actual receipt, by the payee, of the full amount of the Required
Currency expressed to be payable in respect of such payments, (ii) shall be
enforceable as an alternative or additional cause of action for the purpose of
recovering in the Required Currency the amount, if any, by which such actual
receipt shall fall short of the full amount of the Required Currency so
expressed to be payable and (iii) shall not be affected by judgment being
obtained for any other sum due under this Indenture.
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the date first written above.
(SEAL) PIEDMONT MANAGEMENT COMPANY
INC.
Attest:
________________
By:
_____________________________
Name:
Title:
(SEAL) [TRUSTEE],
as Trustee
Attest:
________________
By:
_____________________________
Name:
Title:
STATE OF _________ )
)
COUNTY OF ________ )
BEFORE ME, the undersigned authority, on this __ day of
________, 1995, personally appeared ____________, ____________ of Piedmont
Management Company Inc., a Delaware corporation, known to me (or proved to
me by introduction upon the oath of a person known to me) to be the person
and officer whose name is subscribed to the foregoing instrument, and
acknowledged to me that he/she executed the same as the act of such
corporation for the purposes and consideration herein expressed and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL THIS ____ DAY OF ________, 1995.
(SEAL)
________________________________
NOTARY PUBLIC, STATE OF ________
Print Name:_____________________
Commission Expires:_____________
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, on this _______ day of
________, 1995, personally appeared _________________, _______________ of
[Trustee], a national association, known to me (or proved to me by
introduction upon the oath of a person known to me) to be the person and
officer whose name is subscribed to the foregoing instrument, and
acknowledged to me that he/she executed the same as the act of such trust
for the purposes and consideration herein expressed and in the capacity
therein stated.
GIVEN UNDER MY HAND AND SEAL THIS _____ DAY OF ________, 1995.
(SEAL)
________________________________
NOTARY PUBLIC, STATE OF NEW YORK
Print Name:_____________________
Commission Expires:_____________
Exhibit A
[FORM OF FACE OF SECURITY]
No. $[principal amount](*)
Piedmont Management Company Inc.
Contingent Interest Notes Due June 30, 2006.
Piedmont Management Company Inc., a Delaware
corporation (such company, and its successors and assigns under the Indenture
hereinafter referred to, being herein called the "Company"), for value
received, hereby promises to pay to ________________ or registered
assigns, on the relevant Settlement Date (as defined in the Indenture), the
following amounts (the "Payment Amount"):
(1) the principal amount of this Security plus interest on such
principal amount from the Issue Date through the Settlement
Date at a rate of 8.0% per annum, compounded annually, at the
Company's office or agency for said purpose in New York, New
York, on the relevant Settlement Date (as defined in the
Indenture);
(2) the pro rata portion (as defined below) of the Contingent
Amount, as defined in the Indenture (the "Indenture"), dated as
of __________ __, 1995 between the Company and [TRUSTEE], as
trustee (the "Trustee"), at the Company's office or agency for
said purpose in New York, New York, on the relevant Settlement
Date; and
(3) the pro rata portion (as defined below) of the Extension
Interest (as defined in the Indenture), if any, at the
Company's office or agency for said purpose in New York, New
York, on the relevant Settlement Date.
For these purposes, "pro rata portion" means the ratio of the
principal amount of this Security to the aggregate principal amount of all of
the Securities issued under the Indenture.
_______________
* The dollar amount indicated is the principal amount of the Security. In
addition to the principal amount, the Holder of this Security shall receive
such other amounts as indicated in this Security.
Payment of the Payment Amount due under this Security shall be
made in such coin or currency of the United States of America as at the time
of payment shall be legal tender for the payment of public and private debts
("U.S. Currency"); provided that under certain circumstances as set forth in
the Indenture such payment may be made in Registered Common Stock (as defined
in the Indenture).
Reference is made to the further provisions set forth on the
reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place.
Capitalized terms used herein without definition shall have the
same meaning as in the Indenture.
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed under its corporate seal.
(*)The dollar amount indicated is the principal amount of the Security. In
addition to the principal amount, the Holder of this Security shall receive
such other amounts as indicated in this Security.
Dated: ___________ __, 1995
[Seal]
______________________________
______________________________
[FORM OF REVERSE OF SECURITY]
Piedmont Management Company Inc.
Contingent Interest Notes Due June 30, 2006
1. Interest
The Company promises to pay interest on the principal amount of
this Security from the Issue Date through the Settlement Date at a rate of
8.0% per annum, compounded annually.
In the event that Extension Interest, if any, shall become due
and payable on this Security pursuant to the Indenture, the Company promises
to pay such Extension Interest in accordance with the terms and rates set
forth in Section 2.13 of the Indenture.
2. Method of Payment
The Company through the Paying Agent shall pay any Payment
Amount on this Security to the registered holder of this Security on any
Settlement Date. Except as otherwise provided in the Indenture, the Holder of
this Security must surrender this Security to the Paying Agent to collect any
Payment Amount. Payment of the Payment Amounts due under this Security shall
be made in U.S. Currency; provided that under certain circumstances as set
forth in the Indenture such payment may be made in Registered Common Stock (as
defined in the Indenture).
3. Paying Agent and Registrar
Initially, the Trustee will act as Paying Agent and Registrar.
The Company may appoint and change any Paying Agent, Registrar or transfer
agent without prior notice to the Holder of this Security. The Company may
have one or more additional Paying Agents or transfer agents with respect to
this Security. The Company or any affiliate of the Company may act as Paying
Agent or Registrar to the Holder of this Security.
4. Indenture
The Company issued the Securities under the Indenture. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15
U.S.C. Section Section 77aaa-77bbbb) as in effect on the date of the Indenture
(the "Act"). The Securities are subject to all such terms, and Holders of the
Securities are referred to the Indenture and the Act for a statement of those
terms.
Subject to Section 2.8 of the Indenture, the aggregate
principal amount of Securities which may be authenticated and delivered under
the Indenture is limited to $1,000,000 plus interest accreting thereon from
the Issue Date through the Settlement Date at a rate of 8.0% per annum,
compounded annually. The Securities are general unsecured obligation of the
Company and rank equally and pari passu with all other unsecured and
unsubordinated debt of the Company.
5. Optional Redemption
(a) The Securities are subject to redemption, in whole but not
in part, at any time on or after the third anniversary of the Issue Date, at
100% of the Payment Amount, upon not less than 180 nor more than 190 days'
notice furnished to the Trustee and the Holder Actuary pursuant to Section 3.1
of the Indenture. Once such notice is furnished, Securities called for
redemption become irrevocably due and payable on the Redemption Date at the
redemption price. A notice of redemption may not be conditional.
(b) Notice of redemption will be mailed, by either the Company
or the Trustee as determined pursuant to the terms of the Indenture, at least
140 days but not more than 150 days before the Redemption Date to each Holder
of a Security to be redeemed at the address of such Holder as it appears in
the Security Register. Such notice of redemption shall state all such matters
as may be required to be stated pursuant to Section 3.2 of the Indenture.
(c) Except as set forth in Section 4.6 of the Indenture, the
Company shall not be required to make mandatory redemption or sinking fund
payments with respect to the Securities.
6. Purchase of Securities upon a Change of Control
(a) In the event that a Change of Control (as defined in
the Indenture) occurs, the Company shall make a Change of Control Offer to
each Holder of Securities to repurchase all, but not less than all, of such
Holder's Securities at a purchase price equal the Change of Control
Purchase Price on the Change of Control Purchase Date.
(b) Within 15 days following the date on which the Change of
Control occurs, the Company shall mail a notice to each Holder of Securities
stating that a Change of Control Offer is being made pursuant to the Indenture
and such other matters as may be required to be stated pursuant to Section 4.6
of the Indenture.
(c) A Holder may accept the Change of Control Offer upon (1)
delivery to any Paying Agent of a written Change of Control Purchase Notice at
any time prior to the close of business on the third Business Day before the
Change of Control Purchase Date, stating that such Holder accepts the
Company's offer to repurchase all of such Holder's Securities and (2) delivery
of such Securities to such Paying Agent at such office prior to, on or after
the Change of Control Purchase Date (together with all necessary
endorsements), such delivery being a condition to receipt by the Holder of the
Change of Control Purchase Price therefor.
(d) A Change of Control Purchase Notice may be withdrawn
before or after delivery by the Holder to the relevant Paying Agent at the
office of such Paying Agent of the Security to which such Change of Control
Purchase Notice relates, by means of a written notice of withdrawal (by
telegram, telex, facsimile transmission or letter) received by such Paying
Agent at such office not later than three Business Days prior to the Change of
Control Purchase Date, specifying, as applicable:
(1) the name of such Holder and
(2) a statement that such Holder is withdrawing his election
to have such Securities purchased.
Each Paying Agent will promptly return to the prospective
Holders thereof any Securities with respect to which a Change of Control
Purchase Notice has been withdrawn in compliance with the Indenture.
7. Deposit of Redemption or Purchase Price
If the Company has deposited with the Paying Agent money (or
Registered Common Stock, if permitted under the Indenture) sufficient to pay
the redemption or purchase price of, and unpaid and accrued interest, if any,
on all Securities to be redeemed or purchased on the Redemption Date or Change
of Control Purchase Date, interest shall cease to accrue on the Securities or
the portions of Securities called for redemption or tendered and not withdrawn
in a Change of Control Offer (regardless of whether certificates for such
securities are actually surrendered), and the only remaining right of the
Holder with respect to such Security or portion thereof shall be to receive
such payment upon proper presentation and surrender of the Securities.
8. Exchange
This Security is in registered form and in a denomination that
the Company and the Trustee have determined. A Holder may only transfer or
exchange this Security in accordance with the Indenture. A Holder may be
required to, among other things, furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture.
9. Persons Deemed Owners
The Company, the Trustee and any agent of the Company or the
Trustee may deem and treat the person in whose name any Security shall be
registered upon the Security Register as the absolute owner of such Security
(whether or not such Security shall be overdue and notwithstanding any
notation of ownership or other writing thereon) for the purpose of receiving
payment of or on account of such Security and for all other purposes; and
neither the Company nor the Trustee nor any agent of the Company or the
Trustee shall be affected by any notice to the contrary.
10. Amendment, Waiver
The Indenture permits, with certain exceptions as therein
provided, the amendment or supplement thereof with the consent of the Holders
of a majority in aggregate Principal Amount of the Securities then outstanding
at the time of such amendment or supplement. The Indenture also contains
provisions permitting the Holders of a majority in aggregate Principal Amount
of the then outstanding Securities to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. A consent to an amendment, supplement or
waiver by or on behalf of the Holder of the Security is conclusive and binding
upon such Holder and upon every subsequent Holder of the Security or portion
of the Security that evidences the same debt as the consenting Holder's
Security, even if notation of such consent is not made upon the Security.
11. Defaults and Remedies
The Securities have the Events of Default as set forth in
Section 6.1 of the Indenture. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate Principal
Amount of the Securities, subject to certain limitations, may declare all the
Securities to be due and payable immediately. Certain events of bankruptcy or
insolvency are Events of Default and shall result in the Securities being due
and payable immediately upon the occurrence of such Events of Default.
Holders of Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable
indemnity or security. Subject to certain limitations, Holders of a majority
in aggregate Principal Amount of the then outstanding Securities may direct
the Trustee in its exercise of any trust or power. The Holders of a majority
in aggregate Principal Amount of the then outstanding Securities, by written
notice to the Trustee, may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal or interest that has become
due solely because of the acceleration) have been cured or waived. Except in
the case of a default or Event of Default in the payment of any amount with
respect to any Security, the Trustee shall be protected in withholding notice
of such default or Event of Default from the Holders, if the Trustee in good
faith determines that the withholding of such notice is in the interests of
the Holders. The above description of Events of Default and remedies is
qualified by reference, and subject in its entirety, to the more complete
description thereof contained in the Indenture.
12. Trustee Dealings with the Company or Its Affiliates
The Trustee, in its individual or any other capacity, may
become the owner or pledgee of Securities and may otherwise deal with the
Company or its Affiliates with the same rights it would have if it were not
the Trustee. Any Agent may do the same with like rights. However, the
Trustee is subject to Trust Indenture Act Sections 310(b) and 311.
13. No Recourse Against Others
No recourse under or upon any obligation, covenant or agreement
contained in this Indenture or any indenture supplemental hereto, or in any
Security or any coupons appertaining thereto, or because of any indebtedness
evidenced thereby, shall be had against any incorporator, as such or against
any past, present or future stockholder, officer, director or employee, as
such, of the Company or of any successor, either directly or through the
Company or any successor, under any rule of law, statute or constitutional
provision or by the enforcement of any assessment or by any legal or equitable
proceeding or otherwise, all such liability being expressly waived and
released by the acceptance of the Securities by the Holders thereof and as
part of the consideration for the issue of the Securities.
14. Authentication
This Security shall not be valid or obligatory until an
authorized officer of the Trustee (or an Authenticating Agent) manually signs
the certificate of authentication below.
15. Governing Law
The internal laws of the State of New York shall govern the
Indenture and this Security.
The Company will furnish to the Holder of this Security upon
written request and without charge to such Holder a copy of the Indenture
which has in it the text of this Security in larger type. Requests may be
made to the Company at the address set forth in the Indenture.
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the within-mentioned
Indenture.
[TRUSTEE]
, as Trustee
________________________
Authorized Officer
Exhibit B
Calculation of
Contingent Amount
With respect to any Settlement Date, the Contingent Amount shall be calculated
in accordance with the following definitions:
Contingent Amount: With respect to any Settlement Date, the
amount equal to:
(A) (x) the sum of (i) the Maximum
Interest and (ii) the Tax Benefit minus
(y) the Adverse Reserve Development;
provided that in no event will the
amount resulting from this clause (A)
be less than the Minimum Amount or
greater than $55.0 million
minus
(B) the sum of (i) the Actuary Cost and
(ii) the Arbitration Cost.
Maximum Interest: With respect to any Settlement Date, the
amount equal to $55.0 million discounted back
from the Maturity Date to the applicable
Settlement Date at a rate of 8.0% compounded
annually.
Adverse Reserve
Development: For any Determination Date, the amount equal
to:
(A) (i) Incurred Loss and Allocated
Loss Expense Development plus (ii)
Commission Development minus Earned
Premium Development, in each case as of
the applicable Determination Date;
minus
(B) $25.0 million.
Incurred Loss and
Allocated Loss
Expense Development: Shall mean:
(1) the sum of the development of
incurred losses and allocated
loss expenses for each
calendar year beginning with
the calendar year ending
December 31, 1996 through the
calendar year ending on the
Determination Date, reflected
on RECO's Statutory Annual
Statement, Schedule P - Part 2
- Summary (one year
development column of Incurred
losses and allocated loss
expenses) with respect to the
Protected Business for
accident years 1994 and prior;
plus
(2) the development of incurred
losses and allocated loss
expenses for the calendar year
ended December 31, 1995,
reflected on RECO's 1995
Statutory Annual Statement,
Schedule P - Part 2 - Summary
(one year development column
of incurred losses and
allocated loss expenses) with
respect to the Protected
Business for accident years
1994 and prior, minus
$831,000;
plus
(3) the sum of 25% of the development
of incurred losses and allocated
loss expenses for each calendar
year beginning with the calendar
year ending December 31, 1996
through the calendar year ending
on the Determination Date,
reflected on RECO's Statutory
Annual Statement, Schedule P -
Part 2 - Summary (one year
development column of incurred
losses and allocated loss
expenses) with respect to all
business for accident year 1995;
plus
(4) any GAAP adjustment related to
the provision for uncollectible
reinsurance of incurred losses
and allocated loss expenses
applicable to the Protected
Business.
Earned Premium
Development: Shall mean estimated ultimate premiums
recorded in the GAAP financial statements of
the Company through the Determination Date
minus estimated ultimate premiums recorded in
the GAAP financial statements of the Company
through March 31, 1995, in each case with
respect to retrospectively rated casualty
treaty excess contracts included in the
Protected Business.
Commission Development: Shall mean the estimated ultimate commissions
recorded in the GAAP financial statements of
the Company through the Determination Date
minus estimated ultimate commissions recorded
in the GAAP financial statements of the
Company through March 31, 1995 with respect
to the contracts applicable to the Protected
Business.
Verification: In determining any component of Incurred Loss
and Allocated Loss Expense Development,
Earned Premium Development or Commission
Development, whether as reflected on RECO's
Statutory Annual Statement or on RECO's GAAP
financial statements, each such component
shall be subject to verification by the
Holder Actuary and the Company Actuary
against the books and records of RECO.
Actuary Cost: With respect to any Settlement Date, if
the sum of (x) the amount determined
pursuant to clause (A) of the definition
of "Contingent Amount" above and (y) the
Fixed Amount is equal to or less than $10.0
million, 50% of the Holder Actuary Cost,
and if such amount is greater than $10.0
million, 100% of the Holder Actuary Cost.
Determination Date: With respect to the final Maturity Date,
December 31, 2005, and with respect to any
other Settlement Date, December 31 of the year
immediately preceding (i) a Change of
Control, (ii) an acceleration of the
Securities pursuant to Section 6.2 of the
Indenture following an Event of Default, and
(iii) delivery of a notice of redemption to
the Trustee under Section 3.1 of the
Indenture.
Protected Business: All insurance and reinsurance business,
however denominated, as to which premiums
earned have been reflected on the books of
RECO on or prior to March 31, 1995.
GAAP: U.S. generally accepted accounting principles
as in effect on the Determination Date.
Subject to "Applicable Standards" and "Certain
Changes" below, all amounts shall be
calculated in accordance with GAAP.
Tax Benefit: For any Settlement Date, means without
duplication the sum of (A) the "Actual Tax
Benefit" (as defined below) of the Adverse
Reserve Development and (B) the "Deferred Tax
Benefit" (as defined below) of the Adverse
Reserve Development. The Actual Tax Benefit
shall be equal to the difference between the
amount of United States federal income tax
payable by the affiliated group of which the
Company is the common parent with respect to
all taxable periods beginning on (or
including) March 31, 1995 and ending on the
applicable Determination Date (the "Taxable
Period") and the amount of United States
federal income tax that would have been
payable with respect to such Taxable Period in
the absence of such Adverse Reserve
Development. The Deferred Tax Benefit shall
be equal to the deferred tax asset reflected
on the GAAP consolidated financial statements
of the Company as of the applicable
Determination Date attributable to the
Adverse Reserve Development, after taking
account of the valuation allowance, if any,
with respect thereto (to the extent such
valuation allowance is not allocable to a
specific component of the deferred tax asset,
it shall be apportioned ratably); provided
that the Settlement Date is the Maturity
Date. In the event that the Settlement Date
is not the Maturity Date, the Deferred Tax
Benefit shall be equal to the product of (i)
the maximum corporate United States federal
income tax rate as of the applicable
Determination Date and (ii) the amount of the
Adverse Reserve Development which did not
result in an Actual Tax Benefit during the
Taxable Period.
Minimum Amount: For any Settlement Date, an amount equal to
the lesser of (x) the Tax Benefit and (y)
$10.0 million minus the Fixed Amount.
Further Provisions
Applicable Standards: The components of Adverse Reserve Development
in the aggregate are to be determined and
calculated in accordance with generally
accepted actuarial standards of practice as
applied in the insurance industry, from time
to time, including but not limited to
Actuarial Standard of Practice #9 of the
Actuarial Standards Board (specifically,
Documentation and Disclosure in Property and
Casualty Ratemaking, Loss Reserving, and
Valuation), as amended from time to time.
Both the Company Actuary and the Holder
Actuary are to be bound by these standards in
the determination of Adverse Reserve
Development.
Certain Changes: In determining any component of Adverse
Reserve Development, there shall be taken
into account, as appropriate, changes in
insurance industry standards, generally
accepted accounting principles, generally
accepted actuarial standards and changes in
prevailing law. Without limiting the
foregoing, in the event of any legislative
reform that has the effect of reducing any
liability that relates to Protected Business,
the Adverse Reserve Development shall be
appropriately reduced. Conversely, in the
event of any legislative reform that has the
effect of substantially transforming any
liability that relates to Protected Business
into a charge that would not be included in
the definition of "Adverse Reserve
Development" appropriate adjustment shall be
made to include the amount of such charge in
the calculation of the Contingent Amount.
Consistency: Each year Adverse Reserve Development at RECO
shall be established on a basis and using a
methodology that is no more conservative than
those used to determine reserves and assets
for the other insurance and reinsurance on
the books of the Company and its other
subsidiaries.
Exhibit C
[Registration Rights Agreement]
TO BE DRAFTED
THE REGISTRATION RIGHTS SHALL BE SUBSTANTIALLY TO THE EFFECT AS SET FORTH
BELOW:
Holders on the Settlement Date who together receive common
stock of the Company upon repayment of the Securities representing 25% or more
of the common stock of the Company issued upon the repayment of such Securities
shall have the right to initiate the registration of such common stock within
two years of the Settlement Date; provided that no such demand registration
shall be required unless more than $10,000,000 of stock will be sold in any
such registration and provided further that the Company shall not be required
to effect more than two such demand registrations. All Holders who are
affiliates of the Company on the Settlement Date shall have unlimited
piggyback registration rights in connection with any registrations of the
common stock for a period of 5 years from the Settlement Date, subject to
customary limitations.
REGISTRATION RIGHTS MECHANICS SHALL BE DRAFTED SUBSTANTIALLY SIMILAR TO THE
REGISTRATION RIGHTS MECHANICS SET FORTH IN EXHIBIT I TO THE MERGER AGREEMENT.
EXHIBIT B
CONTRIBUTION AND DISTRIBUTION AGREEMENT
Dated as of , 1995
Between
PIEDMONT MANAGEMENT COMPANY INC.
and
[Insert name of new holding company]
TABLE OF CONTENTS
Page
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.1. Certain Definitions................................ 1
ARTICLE II
CONTRIBUTION OF ASSETS TO LH CORP.;
ASSUMPTION OF LIABILITIES
SECTION 2.1. Transfer of Shares of Contributed
Subsidiaries.................................... 2
SECTION 2.2. Contribution of Other Assets....................... 2
SECTION 2.3. Assumption of Liabilities.......................... 2
SECTION 2.4. Settlement of Intercompany Accounts................ 3
SECTION 2.5. Tax Disaffiliation Agreement....................... 4
ARTICLE III
RECAPITALIZATION OF LH CORP.; DISTRIBUTION OF SHARES
SECTION 3.1. Recapitalization of LH Corp........................ 4
SECTION 3.2. Mechanics of the Spin-off.......................... 4
SECTION 3.3. Timing of Spin-off................................. 4
ARTICLE IV
CONDITIONS
SECTION 4.1. Recapitalization of LH Corp.; Contribution of
Assets............................................. 5
SECTION 4.2. Tax Disaffiliation Agreement....................... 5
SECTION 4.3. Conditions Precedent to Merger
Satisfied.......................................... 5
SECTION 4.4. Release of Liens; Satisfaction of
Indebtedness.................................... 5
SECTION 4.5. Certain Financial Matters.......................... 5
SECTION 4.6. Listing............................................ 5
ARTICLE V
TIME OF DISTRIBUTION
SECTION 5.1. Effectiveness of Spin-off.......................... 6
SECTION 5.2. Parent Deliveries.................................. 6
SECTION 5.3. LH Corp. Deliveries................................ 6
SECTION 5.4. Mutual Release, Etc................................ 6
ARTICLE VI
ADDITIONAL MATTERS RELATING TO THE SPIN-OFF
SECTION 6.1. Representations and Warranties..................... 7
SECTION 6.2. Use of Name........................................ 8
SECTION 6.3. Access to Information; Retention of
Records............................................ 8
SECTION 6.4. Provision of Corporate Records..................... 9
SECTION 6.5. Non-Competition and Confidentiality................ 9
SECTION 6.6. Provision of Witnesses............................. 9
SECTION 6.7. Expenses........................................... 10
ARTICLE VII
INDEMNIFICATION
SECTION 7.1. Indemnity.......................................... 10
SECTION 7.2. Procedure.......................................... 11
ARTICLE VIII
INSURANCE
SECTION 8.1. Insurance.......................................... 13
ARTICLE IX
EMPLOYEE BENEFITS MATTERS
SECTION 9.1.......................................................... 13
SECTION 9.2.......................................................... 14
SECTION 9.3.......................................................... 14
SECTION 9.4.......................................................... 14
SECTION 9.5.......................................................... 15
SECTION 9.6.......................................................... 15
SECTION 9.7.......................................................... 16
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Complete Agreement; Construction................... 16
SECTION 10.2. Counterparts....................................... 16
SECTION 10.3. Termination........................................ 16
SECTION 10.4. Amendments and Waivers............................. 16
SECTION 10.5. Governing Law...................................... 17
SECTION 10.6. Notices............................................ 17
SECTION 10.7. Successors and Assigns............................. 18
SECTION 10.8. Interpretation..................................... 18
SECTION 10.9. Further Assurances and Consents.................... 18
SECTION 10.10. Arbitration........................................ 18
EXHIBITS
Exhibit A Tax Disaffiliation Agreement
Exhibit B Instrument of Assignment
Exhibit C Instrument of Assumption
SCHEDULES
Schedule 2.2
Schedule 2.3
Schedule 9.1
CONTRIBUTION AND DISTRIBUTION AGREEMENT, dated as of ______, 1995
(the "Distribution Agreement"), between Piedmont Management Company Inc., a
Delaware corporation ("Parent"), and [Insert name of new holding company], a
Delaware corporation and a wholly owned subsidiary of Parent ("LH Corp.").
RECITALS
WHEREAS, Parent and Chartwell Re Corporation, a Delaware
corporation (the "Company"), have entered into an Agreement and Plan of
Merger, dated as of August 7, 1995 (the "Merger Agreement"), providing for the
merger of Parent with and into the Company, with the Company as the surviving
corporation;
WHEREAS, immediately prior to the Effective Time (as defined in
the Merger Agreement), subject to the satisfaction or waiver of the conditions
set forth in Article IV of this Distribution Agreement, (i) Parent intends to
contribute to LH Corp. all of the outstanding shares of capital stock of the
Contributed Subs owned by Parent (the "AMS Shares") and certain other assets
and (ii) the Board of Directors of Parent expects, following such
contribution, to distribute as a dividend to the holders of common stock of
Parent, par value $0.50 per share (the "Parent Common Stock"), on a pro rata
basis, all of the then outstanding shares of common stock, par value $_____
per share, of LH Corp. (the "LH Corp. Common Stock") (such transaction being
hereinafter referred to as the "Spin-off"); and
WHEREAS, the purpose of the Spin-off being to make possible the
Merger by divesting Parent of operations relating to the asset management
business, this Distribution Agreement sets forth certain agreements between
Parent and LH Corp. in consideration of the separation of their ownership.
NOW, THEREFORE, in consideration of the premises, and of the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.1. Certain Definitions. As used in this
Distribution Agreement, the following terms shall have the following
respective meanings:
"Contributed Subs" shall mean Lexington Management Corporation
("LMC"), Manlex Corporation, Piedmont Capital Corporation, Lexington Funds
Distributor, Inc., Piedmont Funding Corporation, Lexington Capital Management,
Inc., Lexington Capital Management Associates, LCM Financial Services, Inc.,
Lexington Plan Administrators, Inc., MSR Advisors Inc. ("MSRA"), Market
Systems Research Inc. and Piedmont Asset Advisors.
"LH Individual Account Plan" shall mean the LH Corp. Pay
Conversion Plan (prior to the Time of Distribution, the Parent Pay Conversion
Plan).
"Merger Date" shall mean the date on which the transactions
contemplated by the Merger Agreement are consummated.
"Retained Subs" shall mean The Reinsurance Corporation of New York
("RECO") and ReCor Insurance Company.
"Special Agreements" shall mean the change in control and/or stay
bonus agreements, as applicable, entered into between Parent and ______
individuals.
"Time of Distribution" shall mean the time as of which the
Spin-off is effective, as determined pursuant to Section 3.3.
"Transfer Agent" shall mean First Chicago Trust Company of New
York, the transfer agent for the Parent Common Stock.
"Transferred Employees" shall mean those active employees of
Parent or its subsidiaries listed on Schedule 9.4 hereto who become employees
with the Company following the consummation of the transactions contemplated
by the Merger Agreement.
Other capitalized terms used herein and not otherwise defined
shall have the respective meanings given them in the Merger Agreement.
ARTICLE II
CONTRIBUTION OF ASSETS TO LH CORP.; ASSUMPTION OF LIABILITIES
SECTION 2.1. Transfer of Shares of Contributed Subsidiaries.
Immediately prior to the Time of Distribution, Parent shall contribute to LH
Corp. all of the AMS Shares.
SECTION 2.2. Contribution of Other Assets. Immediately prior
to the Time of Distribution, Parent shall assign, contribute, convey, transfer
and deliver (collectively, "contribute") to LH Corp. all of the right, title
and interest of Parent in and to certain assets and properties related to the
business of the Contributed Subs listed on Schedule 2.2 (the "Contributed
Assets").
SECTION 2.3. Assumption of Liabilities. In connection with
the contribution of the Contributed Assets, LH Corp. shall assume and agree to
pay, perform and discharge, as and when due, and shall hold Parent harmless
from, all of the liabilities (including contingent liabilities) and
obligations of Parent related to the business of the Contributed Subs listed on
Schedule 2.3 (the "Assumed Liabilities").
SECTION 2.4. Settlement of Intercompany Accounts. (a) As of
the Time of Distribution: (i) Parent and LH Corp. shall eliminate without
payment the $2,302,637 payable due from Lexington Plan Administrators, Inc.
("LPA") to Parent and the $4,554,493 payable due from Lexington Capital
Management, Inc. ("LCM") to Parent, in each case existing as of March 31, 1995;
(ii) Parent shall assume the $1,350,014 payable due from LPA to RECO and the
$2,014,167 payable due from LCM to RECO, in each case existing as of March 31,
1995, and LPA and LCM shall be released therefrom; (iii) Parent and the
Retained Subs, on the one hand, and LH Corp. and the Contributed Subs, on the
other, shall settle by cash payment the full net amount (the "Final Balance")
owing between them as of the Time of Distribution under the Investment
Management Agreement between LMC and RECO and the Investment Advisory
Agreement between MSRA and RECO disclosed in Section 3.2(q) of the Disclosure
Schedule, with all components of the Final Balance to be computed in
accordance with the terms disclosed in such Section 3.2(q) of the Disclosure
Schedule; and (iv) Parent shall pay LH Corp. $271,937 in repayment of certain
tax sharing payments previously made. Any amounts due to or from Parent and
the Retained Subs on the one hand and LH Corp. and the Contributed Subs on the
other pursuant to clauses (iii) and (iv) of the foregoing sentence shall be
netted so that there shall be a single payment thereunder as of the Time of
Distribution.
(b) At least five business days prior to the Time of
Distribution, Parent shall provide the Company with (i) an estimate of the
Final Balance and (ii) an accounting for all transactions between Parent and
the Retained Subs, on the one hand, and LH Corp. and the Contributed Subs, on
the other, from March 31, 1995 to the Time of Distribution, in sufficient
detail to enable the Company to confirm (A) LH Corp.'s estimate of the Final
Balance, and (B) the accuracy of the representations and warranties in Section
3.2(q) of the Merger Agreement. Following the Time of Distribution, LH Corp.
and the Contributed Subs will promptly reimburse Parent and the Retained Subs
in cash in the full amount of any transfer of funds or other assets from Parent
and the Retained Subs, on the one hand, to LH Corp. and the Contributed Subs,
on the other, during the period from March 31, 1995 to the Time of
Distribution, which transfer was not disclosed on Section 3.2(q) of the
Disclosure Schedule or consented to in writing by the Company, other than those
transfers of assets provided for by other Sections of this Agreement.
Notwithstanding any other provision of this Distribution Agreement to the
contrary, Parent shall not be obligated to repay any portion of the dividends
described in Section 5.14(b) of the Merger Agreement.
(c) Any payments required pursuant to this Section 2.4 shall be
made by wire transfer of immediately available funds.
SECTION 2.5. Tax Disaffiliation Agreement. Prior to the Time
of Distribution, Parent and LH Corp. shall enter into an agreement relating to
past and future tax allocation and the administration of certain claims of the
Internal Revenue Service substantially in the form attached hereto as Exhibit
A (the "Tax Disaffiliation Agreement").
ARTICLE III
RECAPITALIZATION OF LH CORP.; DISTRIBUTION OF SHARES
SECTION 3.1. Recapitalization of LH Corp. (a) The
authorized capital stock of LH Corp. currently consists of shares of LH
Corp. Common Stock (the "Existing LH Corp. Shares"), all of which are issued
and outstanding and owned beneficially and of record by Parent.
(b) Immediately prior to the Time of Distribution, Parent shall
(i) appropriately cause LH Corp. to amend and restate its Certificate of
Incorporation to, among other things, provide for an increase in the number of
authorized shares of common stock of LH Corp. to [fill in with a number in
excess of PMAN shares outstanding] shares and (ii) exchange the Existing LH
Corp. Shares for a total number of shares of LH Corp. Common Stock equal to
the total number of shares of Parent Common Stock outstanding as of the Record
Date (as defined below) for the Spin-off.
SECTION 3.2. Mechanics of the Spin-off. At the Time of
Distribution, the Transfer Agent shall distribute to each holder of record of
Parent Common Stock, as of the close of the stock transfer books on the record
date designated by or pursuant to the authorization of the Board of Directors
of Parent (the "Record Date"), other than Parent or any subsidiary,
certificates representing such number of shares of LH Corp. Common Stock as is
equal to the number of shares of Parent Common Stock held by such holder on
the Record Date.
SECTION 3.3. Timing of Spin-off. Immediately prior to the
Time of Distribution, subject to the satisfaction or waiver of the conditions
set forth in Article IV, the Board of Directors of Parent shall formally
declare the Spin-off and pay it by delivery of certificates for LH Corp.
Common Stock to the Transfer Agent for delivery to the holders entitled
thereto. The Spin-off shall be deemed to be effective upon notification by
Parent to the Transfer Agent that the Spin-off has been declared and that the
Transfer Agent is authorized to proceed with the distribution of LH Corp.
Common Stock, which notification Parent agrees to deliver promptly following
such declaration.
ARTICLE IV
CONDITIONS
The obligations of Parent and LH Corp. to consummate the Spin-off
shall be subject to the fulfillment of each of the following conditions:
SECTION 4.1. Recapitalization of LH Corp.; Contribution of
Assets. The contribution of the AMS Shares to LH Corp., the assignment of the
Contributed Assets, the assumption of the Assumed Liabilities and the
recapitalization of LH Corp. shall have been completed as described in, and in
accordance with, Articles II and III hereof.
SECTION 4.2. Tax Disaffiliation Agreement. The Tax
Disaffiliation Agreement shall have been executed and delivered by each of
Parent and LH Corp.
SECTION 4.3. Conditions Precedent to Merger Satisfied. Each
condition to the closing of the Merger set forth in Sections 6.1(a) through
(h) of the Merger Agreement shall have been satisfied or waived.
SECTION 4.4. Release of Liens; Satisfaction of Indebtedness.
A written acknowledgement by First Union, in its capacity as bank lender to
Parent, that all liens on the AMS Shares will be released upon consummation of
the Merger, shall have been delivered. All guarantees or other arrangements
pursuant to which (i) Parent or any Retained Sub provides credit support for
any obligation of LH Corp. or any Contributed Sub or (ii) LH Corp. or any
Contributed Sub provides credit support for any obligation of Parent or any
Retained Sub shall have been terminated and released.
SECTION 4.5. Certain Financial Matters. As of the Time of
Distribution, the Board of Directors of Parent shall be reasonably satisfied
that, after giving effect to the Spin-off, (i) LH Corp. and the Contributed
Subs will not be insolvent and will not have unreasonably small capital with
which to engage in their businesses and (ii) Parent's surplus would be
sufficient to permit, without violation of Section 170 of the General
Corporation Law of the State of Delaware, the Spin-off.
SECTION 4.6. Listing. The LH Corp. Common Stock to be issued
in the Spin-off shall have been approved for listing on the New York Stock
Exchange or the American Stock Exchange or approved for trading on the Nasdaq
National Market, subject to official notice of issuance.
ARTICLE V
TIME OF DISTRIBUTION
SECTION 5.1. Effectiveness of Spin-off. Subject to the
satisfaction or waiver of the conditions set forth in Article IV, the
transactions contemplated by this Agreement shall take place at the offices of
LeBoeuf, Lamb, Greene & MacRae, L.L.P., on the Closing Date, immediately prior
to the Effective Time.
SECTION 5.2. Parent Deliveries. At the Time of Distribution,
Parent shall deliver to LH Corp.:
(a) a duly executed Instrument of Assignment substantially in
the form of Exhibit B hereto (the "Instrument of Assignment");
(b) a written acknowledgement by First Union, in its capacity as
bank lender to Parent, that all liens on the AMS Shares will be released upon
consummation of the Merger;
(c) a duly executed Transfer Agency Agreement (the "Transfer
Agency Agreement") between Parent and the Transfer Agent relating to the
Spin-off; and
(d) cash in the amount determined pursuant to Section 2.4(a), if
required thereunder.
SECTION 5.3. LH Corp. Deliveries. At the Closing, LH Corp.
shall deliver to Parent:
(a) a duly executed Instrument of Assumption substantially in
the form of Exhibit C hereto (the "Instrument of Assumption");
(b) in each case where LH Corp. is a party to any agreement or
instrument referred to in Section 5.2, a duly executed counterpart of such
agreement or instrument;
(c) a certificate or certificates representing all of the LH
Corp. Common Stock, for delivery to the Transfer Agent for distribution
pursuant to the Transfer Agency Agreement; and
(d) cash in the amount determined pursuant to Section 2.4(a), if
required thereunder.
SECTION 5.4. Mutual Release, Etc. (a) Effective upon the
Spin-off and except as otherwise specifically set forth in this Distribution
Agreement or in any other agreement to be executed in connection with the
Spin-off as contemplated hereby (each, an "Ancillary Agreement"), (i) Parent
releases and forever discharges, and Parent will cause the Retained Subs to
release and forever discharge, LH Corp. and the Contributed Subs, and (ii) LH
Corp. releases and forever discharges, and LH Corp. will cause the Contributed
Subs to release and forever discharge, Parent and the Retained Subs, of and
from any and all claims, demands and liabilities whatsoever of every name and
nature, both in law and in equity, which the releasing party has or ever had,
which arise out of or relate to events, circumstances or actions taken by such
other party prior to the Time of Distribution, and from any further obligation
under any agreement or contract in effect between them prior to the Time of
Distribution; provided, however, that the foregoing general release shall not
apply to this Distribution Agreement or any Ancillary Agreement or the
transactions contemplated hereby or thereby and shall not affect either
party's right to enforce this Distribution Agreement or any Ancillary
Agreement in accordance with their respective terms. LH Corp. understands and
agrees that neither Parent nor any of its subsidiaries is, in this
Distribution Agreement or in any other agreement or document, representing or
warranting in any way as to the assets, business or liabilities transferred as
contemplated hereby or as to any consents or approvals required in connection
with the consummation of the transactions contemplated by this Distribution
Agreement, it being agreed and understood that LH Corp. and its subsidiaries
shall take all of the assets being transferred hereunder "as is, where is" and
that they shall bear the risk that the conveyance of such assets shall be
insufficient to vest in them title that is good and marketable and free from
encumbrances.
(b) In the event that Parent or any Retained Sub shall be unable
to transfer any assets to LH Corp. prior to the Time of Distribution for any
reason, including because of the failure to obtain any approval or consent in
connection with such transfer, Parent and each of the Retained Subs (i) shall
hold any such property for the benefit of LH Corp., (ii) shall not transfer any
such property to any person other than to LH Corp., (iii) shall cooperate with
LH Corp. at LH Corp.'s expense to obtain expeditiously any such approvals or
consents, and (iv) shall, upon obtaining the necessary approvals and consents
relating to such property, promptly take such action as may be necessary to
complete the transfer of such property.
ARTICLE VI
ADDITIONAL MATTERS RELATING TO THE SPIN-OFF
SECTION 6.1. Representations and Warranties. LH Corp. hereby
represents and warrants to Parent that:
(a) all of the representations and warranties of Parent and Sub
made in Section 3.2(q) of the Merger Agreement are true and correct; and
(b) this Distribution Agreement and each of the other agreements
contemplated hereby to be executed and delivered by LH Corp. will, as of the
Time of Distribution, have been duly authorized, executed and delivered by it
and will constitute its valid and binding obligation, enforceable in
accordance with their respective terms.
SECTION 6.2. Use of Name. (a) From and after the Time of
Distribution, LH Corp. shall promptly remove all references to Parent from all
documents, stationery and facilities relating to the Contributed Subs and
their business operations and shall not, at any time, employ or use a name in
connection with its business operations that is in any way similar to Parent's
name (or any name that is confusingly similar to that of any existing
subsidiaries of Parent) or utilize Parent's other trademarks or trade names
anywhere or at anytime.
(b) From and after the Time of Distribution, Parent shall, and
shall cause the Retained Subs to, promptly remove all references to the
Contributed Subs from all documents, stationery and facilities relating to
Parent or the Retained Subs and shall not, at any time, employ or use a name
in connection with its business operations that is in any way similar to the
name of any of the Contributed Subs or to LH Corp.'s name (or any name that
is confusingly similar to that of any existing subsidiaries of LH Corp.).
SECTION 6.3. Access to Information; Retention of Records.
(a) From and after the Time of Distribution, each party to this
Distribution Agreement shall afford the other party and its accountants,
counsel and other designated representatives reasonable access (including
using reasonable efforts to make available persons or firms possessing
information) and duplicating rights during normal business hours to all
records, books, contracts, instruments, computer data and other data and
information in such party's possession relating to the business and affairs of
such other party (other than data and information subject to an
attorney/client or other privilege), insofar as such access is reasonably
required by such other party including, without limitation, for audit,
accounting and litigation purposes, as well as for purposes of fulfilling
disclosure and reporting obligations.
(b) Except as otherwise required by law or agreed to in writing,
each party shall retain, and shall cause its respective subsidiaries to
retain, all information relating to the other party's business in accordance
with the past practice of Parent. Notwithstanding the foregoing, except as
provided in the Tax Disaffiliation Agreement, any party may destroy or
otherwise dispose of any information at any time, provided that, prior to such
destruction or disposal, (i) such party shall provide not less than 30 days'
prior written notice to the other party, specifying the information proposed
to be destroyed or disposed of and (ii) if the recipient of such notice shall
request in writing prior to the scheduled date for such destruction or
disposal that any of the information proposed to be destroyed or disposed of
be delivered to such requesting party, the party proposing the destruction or
disposal shall promptly arrange for the delivery of such of the information as
was requested at the expense of the requesting party.
SECTION 6.4. Provision of Corporate Records. Each party
shall arrange as soon as practicable following the Time of Distribution for
the provision to the other party of existing corporate governance documents
(e.g., minute books, stock registers, stock certificates, documents of title,
etc.) in its possession relating to such other party or its business and
affairs.
SECTION 6.5. Non-Competition and Confidentiality. (a) LH
Corp. agrees that, for a period of 18 months after the Time of Distribution,
it shall not, anywhere in the United States of America, directly or
indirectly, engage in the insurance or reinsurance business, either as an
insurer, reinsurer, retrocessionaire, agent, broker or otherwise.
(b) Parent and the Retained Subs, on the one hand, and LH Corp.
and the Contributed Subs, on the other, shall hold, and shall cause their
respective directors, officers, employees, agents, consultants and advisors to
hold, in strict confidence, unless compelled to disclose by judicial or
administrative process or, in the opinion of its independent legal counsel, by
other requirements of law, all information concerning the other party (and, in
the case of LH Corp. and the Contributed Subs, the "other party" for this
purpose shall be deemed to include the Company and its subsidiaries) in its
possession (except to the extent that such information can be shown to have
been (i) available to such party on a non-confidential basis prior to the
disclosure by the other party or (ii) in the public domain through no fault of
such party), and neither party shall release or disclose such information to
any other person, except its directors, officers, employees, agents,
consultants and advisors who shall be bound by the provisions of this Section.
Each party shall be deemed to have satisfied its obligation to hold
confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
SECTION 6.6. Provision of Witnesses. Each party shall use
reasonable efforts to make available to the other party, upon written request,
its officers, directors, employees and agents as witnesses to the extent that
such persons may reasonably be required in connection with any legal,
administrative or other proceedings arising out of the business of the other
party prior to the Time of Distribution in which the requesting party may from
time to time be involved.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1. Indemnity. (a) LH Corp. agrees to indemnify
and hold harmless Parent, the Company, their respective affiliates, successors
and assigns and the officers, directors, partners, employees, agents and
representatives of any of them, from and against any and all losses, damages,
claims or liabilities (collectively "Damages") primarily arising out of, based
upon, or resulting from the operation of the businesses of, or primarily
relating to, LH Corp. or any Contributed Sub (including without limitation
those Damages arising due to the failure of LH Corp. or any Contributed Sub to
pay, perform or otherwise discharge its respective obligations under this
Distribution Agreement or any other agreement, contract, loan or obligation in
any way arising out of or connected with their business or the Spin-off).
Without limiting the generality of the foregoing, LH Corp. agrees
to indemnify and hold harmless Parent, the Company, their respective officers,
directors, employees, agents and representatives, each person, if any, who
controls Parent or the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act, and each of the heirs,
executors, successors and assigns of any of the foregoing, from and against
any and all Damages arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Form S-4, CI
Notes Form S-1, Spin-off Form S-1 (if required), Form 10 or Proxy Statement
(collectively, the "SEC Documents") or any omission or alleged omission to
state in any SEC Document a material fact required to be stated therein or
necessary to make the statements made therein not misleading, but in each case
only to the extent such untrue statement or omission or alleged untrue
statement or omission relates to LH Corp., any Contributed Sub, any
Contributed Asset, any Assumed Liability or the Spin-off.
(b) Parent agrees to indemnify and hold harmless LH Corp., its
affiliates, successors and assigns and the officers, directors, partners,
employees, agents and representatives of any of them from and against any and
all Damages primarily arising out of, based upon, or resulting from the
operation of the businesses of, or primarily relating to, Parent or any
Retained Sub (including without limitation those Damages arising due to the
failure of Parent or any Retained Sub to pay, perform or otherwise discharge
its respective obligations under this Distribution Agreement or any other
agreement, contract, loan or obligation in any way arising out of or connected
with their business or the Spin-off).
Without limiting the generality of the foregoing, Parent agrees to
indemnify and hold harmless LH Corp., its officers, directors, employees,
agents and representatives, each person, if any, who controls LH Corp. within
the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act, and each of the heirs, executors, successors and assigns of any
of the foregoing, from and against any and all Damages arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in any SEC Document or any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
made therein not misleading, but in each case only to the extent such untrue
statement or omission or alleged untrue statement or omission does not relate
to LH Corp., any Contributed Sub, any Contributed Asset, any Assumed Liability
or the Spin-off.
(c) In the event that any indemnification provided in paragraph
(a) or (b) is unavailable for any reason, the parties shall contribute in
respect of the applicable Damages on an equitable basis.
(d) Any indemnification or contribution pursuant to this Section
7.1 shall be paid net of the amount of any insurance (other than any insurance
paid for by the applicable indemnitee) or other amounts that would be payable
by any third party to the indemnified party in the absence of this Agreement.
It is expressly agreed that no insurer or any other third party shall be (a)
entitled to a benefit it would not be entitled to receive in the absence of
the foregoing indemnification and contribution provisions, (b) relieved of the
responsibility to pay any claims to which it is obligated or (c) entitled to
any subrogation rights with respect to any obligation hereunder.
(e) Notwithstanding any other provision hereof to the contrary,
this Section 7.1 shall not be deemed to create any obligation, or expand the
scope of any existing obligation, on the part of any party to this Agreement
to indemnify or hold harmless such party's own officers, directors, partners,
employees, agents or representatives. The indemnification provided by this
Section 7.1 shall not include any Damages relating to any Tax (as defined in
the Tax Disaffiliation Agreement), which shall be covered exclusively by the
Tax Disaffiliation Agreement.
SECTION 7.2. Procedure. (a) Any party seeking any
indemnification provided for under this Distribution Agreement (the
"Indemnified Party") in respect of, arising out of or involving a claim made
by any person against the Indemnified Party (a "Third Party Claim"), shall
notify in writing the party from whom indemnification is sought (the
"Indemnifying Party") of the Third Party Claim within 15 business days after
receipt by such Indemnified Party of written notice of the Third Party Claim;
provided, however, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent that the Indemnifying
Party shall have been actually prejudiced as a result of such failure.
(b) If a Third Party Claim is made against an Indemnified Party,
the Indemnifying Party shall be entitled to participate in the defense thereof
and, if it so chooses (except as provided in Section 7.2(c)), to assume the
defense thereof with counsel selected by the Indemnifying Party and reasonably
satisfactory to the Indemnified Party. Should the Indemnifying Party so elect
to assume the defense of a Third Party Claim, the Indemnifying Party shall not
be liable to the Indemnified Party for any legal expenses (except as provided
below and in Section 7.2(c)) subsequently incurred by the Indemnified Party in
connection with the defense thereof. Notwithstanding the Indemnifying Party's
election to assume the defense of such Third Party Claim, the Indemnified
Party shall have the right to employ separate counsel and to participate in
the defense of such action at its own expense; provided, however, that the
Indemnifying Party shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the Indemnifying Party to
represent the Indemnified Party would present such counsel with a conflict of
interest that would preclude such counsel from representing the Indemnified
Party pursuant to legal canons of ethics or other applicable law, (ii) the
Indemnifying Party shall not have employed counsel reasonably satisfactory to
the Indemnified Party to represent it within 30 days after notice to the
Indemnifying Party of the institution of such Third Party Claim or (iii) the
Indemnifying Party shall authorize the Indemnified Party to employ separate
counsel at the Indemnifying Party's expense. If the Indemnifying Party
chooses to defend or prosecute a Third Party Claim, each party hereto shall
cooperate in the defense or prosecution thereof. Such cooperation shall
include the retention and (upon the Indemnifying Party's request) the
provision to the Indemnifying Party of records and information which are
reasonably relevant to such Third Party Claim, and making employees available
(subject to reimbursement by the Indemnifying Party of actual expenses
incurred in connection therewith) on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder. If
the Indemnifying Party chooses to defend or prosecute any Third Party Claim,
the Indemnified Party shall agree to any settlement, compromise or discharge
of such Third Party Claim which the Indemnifying Party may recommend and which
by its terms obligates the Indemnifying Party to pay the full amount of the
liability in connection with such Third Party Claim and releases the
Indemnified Party completely in connection with such Third Party Claim.
Whether or not the Indemnifying Party shall have assumed the defense of a
Third Party Claim, so long as the Indemnifying Party acknowledges in writing
its obligation to indemnify the Indemnified Party with respect to the
applicable claims, the Indemnified Party shall not admit any liability with
respect to, or settle, compromise or discharge such Third Party Claim without
the Indemnifying Party's prior written consent, which consent may not be
withheld unless, in the Indemnifying Party's good-faith judgment, such
settlement, compromise or discharge is unreasonable in light of such Third
Party Claim against, and defenses available to, the Indemnified Party.
(c) Notwithstanding anything set forth in Section 7.2(b) to the
contrary, in the event an Indemnified Party reasonably believes and so
notifies the Indemnifying Party in writing that the applicable claim, even if
fully indemnified for, is reasonably likely to have a material adverse effect
on the Indemnified Party's business, financial condition or results of
operations, then the Indemnifying Party shall not have the right to assume the
defense of such claim but shall have the right to employ separate counsel and
to participate in the defense of such action at its own expense. In such an
event, the Indemnified Party and its counsel shall consult, whenever reasonably
practicable, with the Indemnifying Party and its counsel with respect to the
status of the claim and any related litigation.
ARTICLE VIII
INSURANCE
SECTION 8.1. Insurance. From and after the Time of
Distribution, LH Corp. will use its reasonable best efforts to procure
insurance having terms, conditions, exclusions and limitations substantially
equivalent to the insurance coverages currently maintained by Parent with
respect to the Contributed Subs and the Contributed Assets and providing
coverage with respect to the property, business and operations of the
Contributed Subs from and after the Time of Distribution and with respect to
any liabilities of LH Corp. caused by or arising out of occurrences or events
taking place at or after the Time of Distribution. In no event shall Parent
or any Retained Sub be required to obtain or provide insurance coverage for LH
Corp. or the Contributed Subs with respect to any of the foregoing.
ARTICLE IX
EMPLOYEE BENEFITS MATTERS
SECTION 9.1. Effective as of the Time of Distribution, except as
otherwise provided in this Article IX, (i) LH Corp. shall assume the
sponsorship of all of the employee benefit plans, stock option plans and
severance agreements listed on Schedule 9.1 attached hereto and their related
trusts, insurance contracts and other related funding media (collectively, the
"Plans") with respect to all of the participants therein and beneficiaries
thereunder as of such date, (ii) Parent shall cause all right, title,
interest, authorities, obligations, duties, liabilities and assets in, to and
under the Plans to be transferred to and assumed by LH Corp. in accordance with
applicable law and (iii) Parent shall cease to have any such right, title,
interest, authority, obligation, duty, liabilities or assets with respect to
the Plans. LH Corp. and Parent shall execute and deliver such documents and
instruments as may be required to effect such transfers and assumptions in
accordance with applicable law. Parent shall use its best efforts to cause
any insurance companies, trustees or other third parties whose consent may be
necessary or desirable to effect such transfers and assumptions to consent in
writing thereto.
SECTION 9.2. Effective as of the Time of Distribution, each of
the Plans shall be amended by (i) changing all references to "Piedmont
Management Company Inc." to "[ ]", (ii) ceasing further benefit accruals
under the Plans for participants not employed by LH Corp. or any other
Contributed Sub as of the end of the Closing Date ("Parent Employees") and
(iii) to the extent permissible pursuant to applicable law, fully vesting the
benefits accrued by the Parent Employees under the Plans as of the Closing
Date (including for these purposes any Parent Employees terminated between the
date of the Merger Agreement and the Closing Date).
SECTION 9.3. Effective as of the Closing Date, Parent shall cease
to be a participating employer in the Plans.
SECTION 9.4. (a) Parent hereby represents that the LH Corp.
Individual Account Plan has received a favorable determination letter from the
Internal Revenue Service and Parent knows of no event or circumstance
occurring or existing since the date of such letter that would cause such plan
to fail to be qualified under Section 401(a) of the Code, or that would cause
the trust related to such plan to fail to be exempt from taxation under
Section 501(a) of the Code.
(b) As soon as practicable following the Merger Date, LH Corp.
shall (i) cause the trustee of the LH Corp. Individual Account Plan to
identify the assets of the LH Corp. Individual Account Plan representing the
full account balances of Transferred Employees as of the Merger Date, (ii)
make any and all filings and submissions to the appropriate governmental
agencies arising in connection with such segregation of assets and (iii) make
all necessary amendments to the LH Corp. Individual Account Plan and related
trust agreement to provide for such identification of assets and the transfer
of assets as described below. The manner in which the account balances of
Transferred Employees under the LH Corp. Individual Account Plan are invested
shall not be affected by such identification of assets.
(c) As soon as practicable following the Merger Date, Parent
shall make any and all filings and submissions to the appropriate governmental
agencies required to be made by it in connection with the transfer of assets
described in this Section 9.4 to an individual account plan maintained by
Parent or any of its affiliates (the "Successor Individual Account Plan"). As
soon as practicable after LH Corp. has informed Parent that it is reasonably
satisfied as to the qualified status of the Successor Individual Account Plan
as amended to the date of transfer (including any amendment, to the extent
necessary, to effect the transfer of assets described in this Section 9.4), LH
Corp. shall cause the trustee of the LH Corp Individual Account Plan to
transfer in the form of cash or marketable securities (or such other form,
including participant loans, as may be agreed by LH Corp. and Parent) the full
account balances of Transferred Employees under LH Corp. Individual Account
Plan (which account balances will have been credited with appropriate earnings
attributable to the period from the date of the identification thereof
pursuant to clause (b) above to the date of transfer described herein),
reduced by any necessary benefit or withdrawal payments to or in respect of
Transferred Employees occurring during such period, to the appropriate trustee
as designated by Parent under the trust agreement forming a part of the
Successor Individual Account Plan.
(d) In consideration for the transfer of assets described
herein, Parent shall, or shall cause one or more of its subsidiaries to,
effective as of the date of transfer described herein, assume the obligations
of LH Corp. and its subsidiaries in respect of the dollar amounts of the
account balances accumulated by Transferred Employees under the LH Corp.
Individual Account Plan (exclusive of any portion of such account balances
that are paid or otherwise withdrawn prior to the date of transfer described
herein) on or prior to the date of transfer. Neither Parent nor any of its
affiliates shall assume any other obligations or liabilities arising under or
attributable to the LH Corp. Individual Account Plan.
SECTION 9.5. At the Time of Distribution, Parent shall pay LH
Corp. approximately $157,000 in consideration of LH Corp.'s agreement to (i)
assume Parent's obligations to reimburse the cost of providing continuing
medical and dental coverage under the Plans to Parent Employees (including
Transferred Employees) covered by Special Agreements and (ii) provide
continuation coverage under the Plans in accordance with the Consolidated
Omnibus Budget Reconciliation Act of 1985 to Parent Employees who are or
become eligible for and elect such continued coverage.
SECTION 9.6. At the Time of Distribution, Parent shall pay LH
Corp. approximately $300,000 in consideration of LH Corp.'s agreement to
assume Parent's obligations to provide post-retirement medical and life
insurance under the Plans to those current or former employees of Parent and
its affiliates (other than LH Corp.) who have or will have retired at or prior
to the Time of Distribution.
SECTION 9.7. No provision of this Article IX shall create any
third party beneficiary rights in any former employee of Parent and its
affiliates, Parent Employee or Transferred Employee, including any rights in
respect of continued employment or resumed employment, and no provision of
this Distribution Agreement shall create any rights in any such persons in
respect of any benefits that may be provided, directly or indirectly, under
any employee benefit plan or arrangement.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Complete Agreement; Construction. This
Distribution Agreement, together with the Ancillary Agreements, constitutes
the entire understanding of the parties hereto with respect to the subject
matter hereof, superseding all negotiations, prior discussions and prior
agreements and understandings relating to such subject matter. To the extent
that the provisions of this Distribution Agreement are inconsistent with the
provisions of any Ancillary Agreement, the provisions of such Ancillary
Agreement shall prevail.
SECTION 10.2. Counterparts. For the convenience of the
parties hereto, this Distribution Agreement may be executed in separate
counterparts, each such counterpart being deemed to be an original instrument,
and such counterparts shall together constitute the same agreement.
SECTION 10.3. Termination. Notwithstanding anything to the
contrary in this Distribution Agreement, this Distribution Agreement may be
terminated and the transactions contemplated hereby abandoned at any time
prior to the Time of Distribution by mutual written consent of Parent and LH
Corp. in the event the Merger Agreement is terminated by any party thereto in
accordance with the terms thereof.
SECTION 10.4. Amendments and Waivers. This Distribution
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto and consented to by the Company. By an
instrument in writing, the parties hereto may waive compliance by any other
party with any term or provision of this Distribution Agreement that such other
party was or is obligated to comply with or perform; provided that no such
waiver by Parent shall be effective unless consented to by the Company.
SECTION 10.5. Governing Law. This Distribution Agreement
shall be governed by and construed in accordance with the laws of the State of
New York, without reference to its conflicts of law principles.
SECTION 10.6. Notices. Any notice, request, instruction or
other document to be given hereunder by any party to any other party shall be
in writing and shall be deemed to have been duly given (i) on the first
business day occurring on or after the date of transmission if transmitted by
facsimile (upon confirmation of receipt by journal or report generated by the
facsimile machine of the party giving such notice), (ii) on the first business
day occurring on or after the date of delivery if delivered personally or
(iii) on the first business day following the date of dispatch if dispatched
by Federal Express or other next-day courier service. All notices hereunder
shall be given as set forth below, or pursuant to such other instructions as
may be designated in writing by the party to receive such notice:
If to Parent or the Company:
c/o Chartwell Re Corporation
300 Atlantic Street, Suite 400
Stamford, Connecticut 06901
Attention: Kathleen M. Carroll
with a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019
Attention: Peter R. O'Flinn
If to LH Corp.:
[LH Corp.]
Park 80 West, Plaza II
Saddle Brook, New Jersey 07662
Attention: Robert M. DeMichele
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: David F. Ferguson
SECTION 10.7. Successors and Assigns. This Distribution
Agreement shall be binding on, enforceable against and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
None of the parties hereto may assign its rights or delegate any of its duties
under this Distribution Agreement without the prior written consent of the
other party. In addition, Parent may not assign its rights or delegate its
duties under this Distribution Agreement without the express consent of the
Company. Nothing contained in this Distribution Agreement is intended to
confer on any person or entity other than the parties hereto and their
respective successors and permitted assigns any benefit, rights or remedies
under or by reason of this Distribution Agreement, except that (i) Sections
7.1(a), (b) and (c) are intended to benefit the affiliates, successors,
assigns, directors, officers, partners, employees, agents, representatives,
controlling persons and others referred to therein and (ii) each provision
hereof which refers to the Company is intended to benefit the Company.
SECTION 10.8. Interpretation. When a reference is made in
this Distribution Agreement to a Section, Schedule or Exhibit, such reference
shall be to a Section of or Schedule or Exhibit to this Distribution Agreement
unless otherwise indicated. The table of contents and headings contained in
this Distribution Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Distribution
Agreement. Whenever the words "include", "includes" or "including" are used
in this Distribution Agreement, they shall be deemed to be followed by the
words "without limitation". All accounting terms not defined in this
Distribution Agreement shall have the meanings determined by generally accepted
accounting principles.
SECTION 10.9. Further Assurances and Consents. Parent and LH
Corp. will, and will cause their respective subsidiaries to, do such
additional things as are necessary or proper to carry out and effectuate the
intent of this Distribution Agreement or any part hereof or the transactions
contemplated hereby.
SECTION 10.10. Arbitration. Resolution of any and all disputes
arising from or in connection with this Distribution Agreement, whether based
on contract, tort, statute or otherwise, including, but not limited to,
disputes over arbitrability and disputes in connection with claims by third
parties (collectively, "Disputes"), shall be exclusively governed by and
settled in accordance with the provisions of this Section 10.10; provided,
however, that nothing contained herein shall preclude either party from
seeking or obtaining (a) injunctive relief or (b) equitable or other judicial
relief to enforce the provisions hereof or to preserve the status quo pending
resolution of Disputes hereunder. Parent or LH Corp. may commence proceedings
hereunder by delivering a written notice to the other party providing a
reasonable description of the Dispute to the other, and expressly requesting
arbitration hereunder. The parties hereby agree to submit all Disputes to
arbitration under the terms hereof, which arbitration shall be final,
conclusive and binding upon the parties, their successors and assigns. The
arbitration shall be conducted in New York City by three arbitrators acting by
majority vote (the "Panel") selected by agreement of the parties not later
than 15 days after delivery of the Demand or, failing such agreement,
appointed pursuant to the commercial arbitration rules of the American
Arbitration Association, as amended from time to time (the "AAA Rules"). If
an arbitrator so selected becomes unable to serve, his or her successors shall
be similarly selected or appointed. The arbitration shall be conducted
pursuant to the Federal Arbitration Act and such procedures as the parties may
agree, or, in the absence of or failing such agreement, pursuant to the AAA
Rules. Notwithstanding the foregoing: (a) each party shall have the right to
audit the books and records of the other party that are reasonably related to
the Dispute; (b) each party shall provide to the other, reasonably in advance
of any hearing, copies of all documents which a party intends to present in
such hearing; and (c) each party shall be allowed to conduct reasonable
discovery through written requests for information, document requests,
requests for stipulation of fact and depositions, the nature and extent of
which discovery shall be determined by the Panel, taking into account the
needs of the parties and the desirability of making discovery expeditious and
cost effective. All hearings shall be conducted on an expedited schedule, and
all proceedings shall be confidential. Either party may at its expense make a
stenographic record thereof. The Panel shall complete all hearings not later
than 90 days after its selection or appointment, and shall make a final award
not later than 30 days thereafter. The award shall be in writing and shall
specify the factual and legal basis for the award. All reasonable costs and
expenses of arbitration, including the Panel's fees and expenses and fees and
expenses of experts, shall be paid by the non-prevailing party.
Notwithstanding the foregoing, in no event may the Panel award multiple,
punitive or exemplary damages.
THIS AGREEMENT CONTAINS BINDING ARBITRATION PROVISIONS WHICH MAY
BE ENFORCED BY THE PARTIES.
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.
PARENT
By:____________________________________
Name:
Title:
LH CORP.
By:____________________________________
Name:
Title:
CONTRIBUTION AND DISTRIBUTION AGREEMENT
DISCLOSURE SCHEDULE
PIEDMONT MANAGEMENT COMPANY INC.
Schedule 2.2
Contribution of Other Assets
1. Consolidated deferred tax asset, worth approximately $2,300,000
2. Goodwill of Lexington Management Company, worth approximately $239,000,
to be transferred from Piedmont Management Company Inc. ("Piedmont") to
Lexington Management Company
3. Stock of Alliance Capital Reserves, Lexington Gold Fund, Alltel Corp,
BFS Bankorp Inc., Berkley W R Corp, Geotek Communications Inc., Navigators
Group, Inc., and Wellsford Res. Prop., which support Piedmont's obligations
under the deferred compensation agreement with Robert DeMichele; additional
securities purchased after the date of this Agreement with the proceeds of
sale of any of the foregoing securities, or any other securities purchased
after the date of this Agreement, with any additional contributions
required to be made by Piedmont under such deferred compensation agreement
4. Receivable for loan to John Waymire, President of Lexington Capital
Management Inc., in the amount of $194,856
Schedule 2.3
Assumption of Liabilities
See Items in Schedule 9.1
Schedule 9.1
Employee Benefits Matters
1. Deferred Compensation Agreement dated February 2, 1981 between Robert
DeMichele and Piedmont Management Company Inc., in amount of $1,647,347
2. Piedmont Management Company Inc. Executive Benefit Plan (as Amended and
Restated to January 1, 1994) and related Rabbi Trust Agreement for the
benefit of Robert M. DeMichele
3. Piedmont Management Company Inc. Supplemental Benefits Plan (Effective
January 1, 1984)
4. Piedmont Management Company Inc. Pay Conversion Plan (as Amended and
Restated as of January 1, 1989) and related Trust Agreement with The Bank
of New York (as amended)
5. Piedmont Management Company Inc. Retirement Plan (January 1, 1989) and
related Trust Agreement with The Bank of New York (as amended)
6. Directors and Officers Insurance and Company Reimbersement Policy
(National Union Fire Insurance Company of Pittsburgh, PA)
7. Workers' Compensation Policy (Chubb)
8. Group Life Policy (INA Life Insurance Company of New York)
9. Group Universal Life Policy (CIGNA)
10. Group Insurance Plan - Dental (CIGNA)
11. Medical Benefit Indemnification Policy (CIGNA)
12. group Insurance Plan 0 Designated Provider Program (CIGNA)
13. Group Medical Expense Insurance Policy/Group Dental Insurance Policy
(CIGNA)
14. Short Term Disability Policy (INA Life Insurance Company of New York)
15. Long Term Disability Policy (Hartford Life Insurance Company)
16. Personal Accident Insurance Policy (First UNUM Life Insurance Company)
17. Pass Through Premium Account
18. Dependant Care Policy
Schedule 9.4
[To be completed prior to signing this Agreement]
TAX DISAFFILIATION AGREEMENT
This Agreement is entered into as of the ____ day of ________,
1995 between York ("York"), a Delaware corporation, and L.Co. ("L.Co."), a
Delaware corporation.
W I T N E S S E T H:
WHEREAS, York and Stamford Corporation have entered into an
Agreement and Plan of Merger dated as of ________, 1995 (the "Merger
Agreement");
WHEREAS, York and L.Co. intend to enter into a Distribution
Agreement dated ________, 1995 (the "Distribution Agreement"), providing for
the distribution by York to its shareholders of all of the common stock of
L.Co. (the "Distribution");
WHEREAS, York and L.Co. desire to set forth their agreement on the
rights and obligations of York, L.Co. and their respective Affiliates with
respect to various Tax matters and the handling and allocation of federal,
state, and local Taxes incurred in Taxable periods beginning prior to the
Distribution Date;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties agree as follows:
1. Definitions
(a) As used in this Agreement:
"Affiliate" (and the correlative meaning, "Affiliation") of any
person shall mean any individual, corporation, partnership or other entity
directly or indirectly controlling, controlled by or under common control with
such person.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
or any successor thereto.
"Consolidated Federal Tax" shall mean the consolidated Federal Tax
liability of the York Consolidated Group.
"Distribution Date" shall mean the date on which York distributes
to its shareholders all of the common stock of L.Co..
"Federal Tax" shall mean any United States Federal Tax.
"Final Determination" shall mean (i) with respect to Federal
Taxes, (A) a "determination" as defined in Section 1313(a) of the Code, or (B)
the date of acceptance by or on behalf of the Internal Revenue Service of Form
870-AD (or any successor form thereto), as a final resolution of Tax liability
for any Taxable period, except that a Form 870-AD (or successor form thereto)
that reserves the right of the taxpayer to file a claim for refund and/or the
right of the Internal Revenue Service to assert a further deficiency shall not
constitute a Final Determination with respect to the item or items so
reserved; (ii) with respect to Taxes other than Federal Taxes, any final
determination of liability in respect of a Tax provided for under applicable
law; (iii) any final disposition by reason of the expiration of the applicable
statute of limitations; and (iv) the payment of Tax by York, L.Co., or any
Affiliate of York or L.Co., whichever is responsible for payment of such Tax
under applicable law, with respect to any item disallowed or adjusted by a
Taxing Authority, provided that the provisions of Section 8 hereof have been
complied with, or, if such section is inapplicable, that the party responsible
under the terms of this Agreement for such Tax is notified by the party paying
such Tax that it has determined that no action should be taken to recoup such
disallowed item, and the other party agrees with such determination.
"L.Co. Group" shall mean the corporations which are members of the
affiliated group of corporations of which L.Co. is the common parent (within
the meaning of Section 1504 of the Code) immediately after the Distribution
Date and any predecessors or successors thereto.
"Other Taxes" are defined in Section 4.
"York Consolidated Group" shall mean, with respect to any Taxable
period, the corporations which are members of the affiliated group of
corporations of which York is the common parent (within the meaning of Section
1504 of the Code).
"York Group" shall mean the corporations which are members of the
York Consolidated Group during any Taxable period, excluding the corporations
which are the members of the L.Co. Group.
"Piedmont Stockholders" shall mean the lineal descendants of
Lunsford Richardson Sr., their spouses, trusts established for the benefit of,
corporations controlled by, or charitable organizations established by such
descendants.
"Post-Distribution Period" shall mean any taxable period beginning
after the Distribution Date.
"Pre-Distribution Period" shall mean any Taxable period ending on
or before the Distribution Date.
"Pre-Distribution Tax Liability" shall mean the Federal Tax
liability of York and each corporation included in the York Consolidated Group
for any period as to which a consolidated Federal Tax Return is filed by York
for such group for all Pre-Distribution Periods and for the portions (up to the
Distribution Date) of any Taxable periods including but not ending on the
Distribution Date regardless of whether any such liability has been previously
assessed in whole or in part or is assessed in whole or in part after the date
hereof, or whether such liability is or was imposed on the York Consolidated
Group collectively or on any corporation included within any such group
separately.
"Preliminary Federal Tax Return" shall mean the preliminary
Federal Tax Return setting forth the Federal Tax Liability of the York
Consolidated Group for the taxable year ending on the Distribution Date.
"Prime" shall mean the rate announced from time to time as "prime"
by Morgan Guaranty Trust Company of New York as its prime rate.
"Pro Forma Federal Return" means the pro forma Federal Tax return
setting forth the Federal Tax liability of the L.Co. Group for the Taxable
year ending on the Distribution Date.
"Referee" is defined in Section 16.
"Return" shall mean any Tax Return, statement, report or form
(including estimated Tax Returns and reports and information Returns and
reports) required to be filed with any Taxing Authority.
"Tax" (and the correlative meaning, "Taxes," "Taxing" and
"Taxable") shall mean (A) any net income, gross income, gross receipts,
alternative or add-on minimum, sales, use, ad valorem, franchise, profits,
license, withholding, payroll, employment, excise, transfer, recording,
severance, stamp, occupation, premium, property, environmental, custom duty,
or other tax, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest and any penalty, addition to tax or
additional amount imposed by a Taxing Authority; (B) any liability of York,
L.Co. or any Affiliate of York or L.Co. (or, in each case, any successor in
interest thereto by merger or otherwise), as the case may be, for the payment
of any amounts of the type described in clause (A) for any Taxable period
resulting from the application of Treasury Regulation Section 1.1502-6 or, in
the case of any similar provision applicable under state law; and (C) any
liability of York, L.Co. or any Affiliate of York or L.Co. (or, in each case,
any successor in interest thereto by merger or otherwise) for the payment of
any amounts described in clause (A) as a result of any express or implied
obligation to indemnify any other party.
"Tax Asset" shall mean any net operating loss, net capital loss,
investment Tax credit, foreign Tax credit, charitable deduction or any other
credit or Tax attribute, including additions to basis of property, which could
reduce Federal Taxes including, without limitation, deductions, credits, or
alternative minimum net operating loss carryforwards related to alternative
minimum Taxes.
"Taxing Authority" shall mean any governmental authority
responsible for the imposition of any Tax.
(b) Any term used in this Agreement which is not defined in this
Agreement shall, to the extent the context requires, have the meaning assigned
to it in the Code or the applicable Treasury regulations thereunder.
2. Federal Taxes--Administrative and Compliance Matters.
(a) Sole Tax Sharing Agreement. The parties acknowledge that
there has not been a Final Determination of the Pre-Distribution Tax
Liability, and that the members of the L.Co. Group are includible in the York
Consolidated Group for the Pre-Distribution Period. Any and all existing Tax
sharing agreements or arrangements, written or unwritten, between the York
Group and the L.Co. Group shall be terminated as of December 31, 1994, and
after such date this Agreement shall constitute the sole Tax sharing agreement
between the York Group and each member of the L.Co. Group.
(b) Intent. Treasury regulations designate York as the sole
agent of all members of the York Consolidated Group with respect to all
Federal Tax matters. Notwithstanding Section 2(c) hereof, if the Internal
Revenue Service District Director (or a corresponding state official) deals
directly with any member of the L.Co. Group in respect of its Tax liability
for a Pre-Distribution Period (as is the District Director's right), such
member of the L.Co. Group shall have full authority to act, provided however,
that L.Co. must promptly notify York of any such communications or dealings.
(c) Designation of Agent. L.Co. and each member of the L.Co.
Group hereby irrevocably designate York as its agent, coordinator, and
administrator for the purpose of taking any and all actions (including the
execution of waivers of applicable statutes of limitation) necessary or
incidental to the filing of any Federal Tax Return, any amended Federal Tax
Return or any claim for refund (even where an item or Tax Asset giving rise to
an amended Return or refund claim arises in a Post-Distribution Period),
credit or offset of Tax or any other proceedings in each case relating to any
Pre-Distribution Period. York, as agent, shall be responsible to see that all
such administrative matters relating thereto shall be handled promptly and
appropriately. York shall be L.Co.'s agent with respect to making payments to,
or collecting Refunds from, any Taxing Authority with respect to
Pre-Distribution Tax Liabilities. L.Co. will then reimburse York, or York
will reimburse L.Co., as the case may be, for the L.Co. allocable share. York
shall inform and consult with L.Co. prior to taking any action on behalf of,
or which will have any material impact on, any member of the L.Co. Group,
including, without limitation, strategies relating to waivers of any statute
of limitations.
(d) 1995 Returns. York will prepare and file the consolidated
Federal Tax Return for the taxable years ending on the Distribution Date.
L.Co. shall deliver to York the Pro Forma Federal Return 90 days prior to the
due date for filing the Consolidated Federal Tax Return of The York Group
(including extensions). York shall deliver to L.Co. the Preliminary Federal
Tax Return (the "Preliminary Return") 60 days prior to the due dates for
filing (including extensions). Such Preliminary Return shall set forth all
necessary and required information (including, without limitation, schedules,
statements and such supporting documentation as L.Co. may reasonably request
from time to time) in such form as would be required for filing with the
Internal Revenue Service and shall correctly reflect the facts regarding the
income, properties, operations and status of any entity required to be shown
thereon. Such Preliminary Return shall be prepared taking into account
elections and methods of accounting that are consistent with those made or
used by the York Consolidated Group. L.Co. may (at its expense) review all
work papers and procedures used to prepare each Preliminary Return. L.Co.
shall notify York in writing of any proposed adjustments to a Preliminary
Return within 30 days of the date upon which it receives such Preliminary
Return from York. In the event that York shall, within 10 days following the
receipt of such notification from L.Co., disagree with any proposed adjustment
made under the above provision, such disagreement shall be referred to the
Referee whose decision with respect to such adjustment shall be final and
binding, and the Preliminary Return as adjusted (if at all) pursuant to the
decision of the Referee shall be deemed to be a final Return for purposes of
this Agreement.
3. Federal Taxes -- Allocation of Taxes.
(a) 1995 Federal Taxes. In its capacity as agent, York shall pay
all Federal Taxes due in connection with the filing of its 1995 Returns or
with any request for extension of time within which to file any such Return.
Within 20 days of filing of any such Returns, York shall send a statement to
L.Co. showing the amount of the unpaid or overpaid portion of the L.Co.
Group's allocable share of the total Federal Tax liability, if any, as shown
on such Returns as filed.
(b) Amended Returns with Amounts Due by L.Co.. Subject to
Section 8(e)(v), York will not file an amended Return on behalf of the York
Consolidated Group for any Pre-Distribution Period if such Return results in
an increase in the Pre-Distribution Tax Liability attributable to any member
of the L.Co. Group or any L.Co. Affiliate for such period.
(c) Calculation and Payments of Amounts Due.
(i) Responsible Party. Calculations required to be made
pursuant to this Section 3 and the relevant portion of Section 6(c)
shall be made by York. Upon receipt of such calculations, L.Co. shall
have 21 days to review (at L. Co.'s expense) the computations and to
notify York of any disagreements. During L.Co.'s review and in the
event that L.Co. has notified York of a disagreement, for an additional
10 days both L.Co. and York shall make reasonable efforts to resolve any
questions or disputes. In the event the parties cannot agree, their
disputes will be resolved pursuant to Section 16.
(ii) Method of Calculation. Except as otherwise provided, L.Co.'s
share of any Federal Tax shall be calculated pursuant to the method
described in Exhibit A hereto.
(iii) Payments Due. Except as otherwise provided, all payments
required by this Section 3 and the relevant portions of Section 6(c)
will be due 30 days after the fixing of liability or the resolution of a
dispute (as provided for in 3(c)(i)).
(iv) Interest. Any amount not paid when due under Section
3(c)(iii) shall bear interest at Prime until the date on which payment
is made.
(v) Duplicative Payments Not Required. Notwithstanding the
foregoing, no payment shall be required under any provision of this
Agreement to the extent it is duplicative of any payment required by any
other provision of this Agreement.
4. Other Taxes.
(a) Liability for all Taxes other than Federal Taxes ("Other
Taxes"), attributable to any member of the L.Co. Group, and the responsibility
for filing of all Returns relating to such Other Taxes, shall be the sole
responsibility of the L.Co. Group. Liability for all Other Taxes,
attributable to any member of the York Group and the responsibility for filing
all Returns relating to such Other Taxes, shall be the sole responsibility of
the York Group. Each party agrees to indemnify and hold the other harmless in
accordance with the undertakings contained in this Section 4(a).
(b) The L.Co. Group shall be entitled to all refunds and credits
of Other Taxes attributable to any member of the L.Co. Group, and the York
Group shall be entitled to all refunds and credits of Other Taxes attributable
to any member of the York Group.
5. Certain Representations and Covenants.
(a) (I) L.Co. Representations. L.Co. represents that, as of
the date hereof, and covenants that on the Distribution Date there is no plan
or intention (A) to liquidate L.Co. or to merge or consolidate L.Co. with any
other person subsequent to the Distribution or (B) to sell or otherwise
dispose of any asset of L.Co. subsequent to the Distribution, except in the
ordinary course of business.
(II) L.Co. and York Representations: L.Co. and York each
represents that, as of the date hereof, and covenants that on the Distribution
Date:
(i) Except as disclosed in the Merger Agreement, having made
inquiries of the trustees of certain trusts established for the benefit of the
descendants of Lunsford Richardson, Sr. and certain other shareholders of York
who own 5% or more of the common stock of York, neither L.Co. nor York (as
applicable) is aware of any present plan or intention by the current
shareholders of York to sell, exchange, transfer by gift, or otherwise dispose
of any of their stock in, or securities of, York, L.Co. or Stamford subsequent
to the Distribution, (ii) the Center for Creative Leadership owns
approximately [7.8%] of the Piedmont common stock and has owned such shares
throughout the five-year period ending on the Distribution Date (assuming
conversion of the Preferred Stock but excluding the issuance of Common Stock
to certain holders of York Stock Options pursuant to Section 2.1(d) of the
Merger Agreement), and (iii) the Piedmont Stockholders other than the Center
for Creative Leadership own approximately [45%] of the Piedmont common stock
(assuming conversion of the Preferred Stock but excluding the issuance of
Common Stock to certain holders of York Stock Options pursuant to Section
2.1(d) of the Merger Agreement).
(b) L.Co. Covenants. L.Co. covenants to York that (i) during
the three-year period following the Distribution Date it will not liquidate,
merge or consolidate with any other person, or sell, exchange, distribute or
otherwise dispose of its assets other than in the ordinary course of business
and (ii) following the Distribution, L.Co. will, for a minimum of three years,
continue the active conduct of the historic business conducted by L.Co.
throughout the five year period prior to the Distribution.
(c) Exceptions. Notwithstanding the foregoing, L.Co. may take
actions inconsistent with the covenants contained in Section 5(b) above if:
(i) L.Co. obtains a ruling from the Internal Revenue Service to
the effect that such actions will not result in the Distribution being
taxable to York or its shareholders; or
(ii) L.Co. obtains an opinion of recognized counsel acceptable to
York to the same effect as in Section 5(c)(i).
6. Indemnities.
(a) L.Co. Indemnity. L.Co. and each member of the L.Co. Group
will jointly and severally indemnify York and each member of the York Group
against and hold them harmless from
(i) any Pre-Distribution Tax Liability assessed after the
Distribution Date pursuant to a Final Determination, solely to the
extent attributable to an adjustment of any item of income, gain, gross
receipts, loss, credit, deduction or other tax attribute of any member
of the L.Co. Group, or a L.Co. Affiliate; and
(ii) any liability resulting from a breach by L.Co. or any member
of the L.Co. Group after the Distribution Date of any representation or
covenant made by L.Co. herein.
(b) York Indemnity. York and each member of the York Group will
jointly and severally indemnify L.Co. and each member of the L.Co. Group
against and hold them harmless from
(i) any Pre-Distribution Tax Liability, or Tax liability
resulting from the Distribution, other than any such liabilities
described in Sections 6(a)(i) and (ii) hereof,
(ii) any liability resulting from a breach by York or any member of
the York Group after the Distribution Date of any representation or
covenant made by York herein, and
(iii) any liability resulting from a breach by Stamford of any
representation or warranty contained in Section 3.1(o) of the Merger
Agreement.
(c) Discharge of Indemnity. L.Co. and each member of the L.Co.
Group, and York and each member of the York Group, shall discharge their
obligations under Sections 6(a)(ii), 6(b)(i) and 6(b)(ii) hereof,
respectively, by paying the relevant amount within 30 days of demand therefor.
Within 20 days of a Final Determination of an obligation of L.Co. and each
member of the L.Co. Group under Section 6(a)(i), York shall send a statement
to L.Co. showing the amount due thereunder. Calculation and payment mechanics
relating to items described in Section 6(a)(i) are set forth in Section 3(c).
Notwithstanding the foregoing, if either L.Co. or York disputes in good faith
the fact or the amount of its obligation under Section 6(a) or Section 6(b),
then no payment of the amount in dispute shall be required until any such good
faith dispute is resolved in accordance with Section 16 hereof; provided,
however, that any amount not paid within 30 days of demand therefor shall bear
interest as provided in Section 3(c)(iv).
(d) Method of Calculation. Except as otherwise provided, the
amount of L.Co.'s liability under Section 6(a)(i) and York's liability under
Section 6(b)(i), including the calculation of any party's share of any Federal
Tax shall be calculated pursuant to the method described in Exhibit A hereto.
(e) Refunds. Any refunds of Tax received by York relating to a
Pre-Distribution Period, to the extent attributable to any item of income,
loss, credit, deduction or other tax attribute of any member of the L.Co.
Group or a L.Co. Affiliate shall be paid by York to L.Co. within 30 days of
receipt. If York disputes the fact or the amount of any L.Co. claim pursuant
to the preceding sentence, then no payment of the amount in dispute shall be
required until any such dispute is resolved in accordance with Section 16
hereof.
7. Communication and Cooperation.
(a) Consult and Cooperate. L.Co. and York shall consult and
cooperate (and shall cause each of their Affiliates to cooperate) fully at
such time and to the extent reasonably requested by the other party in
connection with all matters subject to this Agreement. Such cooperation shall
include, without limitation,
(i) the retention and provision on reasonable request of any and
all information including all books, records, documentation or other
information, any necessary explanations of information, and access to
personnel, until the expiration of the applicable statute of limitation
(giving effect to any extension, waiver, or mitigation thereof);
(ii) the execution of any document that may be necessary or helpful
in connection of any required Return or in connection with any audit,
proceeding, suit or action; and
(iii) the use of the parties' best efforts to obtain any
documentation from a governmental authority or a third party that may be
necessary or helpful in connection with the foregoing.
(b) Provide Information. York and L.Co. shall keep each other
fully informed with respect to any material development relating to all
matters subject to this Agreement.
(c) Tax Attribute Matters. York and L.Co. shall advise and
consult with each other with respect to any proposed Tax adjustments relating
to the York Consolidated Group which are the subject of an Internal Revenue
Service audit or investigation, or are the subject of any proceeding or
litigation, and which may affect any Tax attribute of York, L.Co. or any
Affiliate of York or L.Co. (including, but not limited to, basis in an asset
or the amount of earnings and profits).
8. Audits and Contests.
(a) Notice. York shall promptly notify L.Co. in writing of any
inquiries from the Internal Revenue Service or any other Taxing Authority
which relate or may relate to matters described in Section 3(c) or 6(a).
L.Co. shall promptly notify York in writing of any inquiries from the Internal
Revenue Service or other Taxing Authority which relate or may relate to
matters described in Section 3(c) or 6(b). Each party shall forward to the
other party relevant portions of any reports or other communications which
relate to such matters.
(b) Settlement of Issues. No settlement of any audit,
examination, action, suit or other judicial or administrative proceeding
involving an amount in controversy in excess of $50,000 relating to matters
described in Section 6(a) for any Pre-Distribution Period shall be accepted or
entered into by or on behalf of the York Consolidated Group unless L.Co. has
consented thereto in writing (which consent shall not be unreasonably
withheld); provided, however, that in the event that L.Co. does not consent
and York believes that the withholding of consent was unreasonable, the
parties shall resolve their disagreement under the procedures provided in
Section 16. In the process of resolving such a disagreement, the Referee (or
other applicable arbiter) shall consider the magnitude and size of the item in
question, the impact of the resolution on other L.Co. Taxable periods and the
likelihood of L.Co.'s position ultimately prevailing.
(c) Venue. In the event that a notice of deficiency (or similar
notice) is received from the Internal Revenue Service or other Taxing
Authority by the York Consolidated Group for a Pre-Distribution Period and
such notice relates in whole or in part to a matter involving an amount in
controversy in excess of $50,000 described in Section 6(a), then;
(i) York, upon receiving a written request from L.Co., which
shall be given no later than a date reasonably required to permit timely
filing of a petition in the United States Tax Court, for redetermination
of the deficiency, shall timely file such petition; provided, however,
that, notwithstanding such request, after consultation with L.Co., York
shall have the option, if the notice also relates to matters described
in Section 6(b), to pay the amount of the deficiency, to file a claim
for the refund thereof, and, if the claim is denied, to bring an action
in a court of competent jurisdiction seeking the refund of such Tax. If
a Final Determination does not provide for a refund of an amount covered
by Section 6(a) and contested under this Section, L.Co. shall pay York
such amount plus interest from the time of York's payment of the
deficiency at a rate equal to Prime. L. Co. shall also pay any
reasonable out-of-pocket costs of York incurred in the prosecution of
such suit or refund claim;
(ii) If (A) L.Co. does not request York to file a petition in the
United States Tax Court for redetermination of the deficiency pursuant
to this Section 8(c)(i), (B) York does not, on its own initiative,
timely file such a petition, and (C) L.Co. requests that York file a
claim for refund, then York shall pay the deficiency, file a claim for
refund thereof, and, if the claim is denied, bring an action in a court
of competent jurisdiction seeking such refund; provided that, in such
case, L.Co. shall pay to York, (i) on or before the date on which the
deficiency is paid by York, the amount as if the notice of deficiency
were a Final Determination (that L.Co. would otherwise be responsible for
with respect to matters described in Section 6(a)) and any such payment
shall be credited against the payment required with appropriate
adjustment to be made promptly upon a Final Determination with respect
to such proceedings for refund and (ii) within 30 days of demand, any
reasonable out-of-pocket costs incurred by York in the prosecution of
such refund claim. Notwithstanding anything to the contrary herein, if
as a result of a Final Determination the amount due by L.Co. pursuant to
the preceding sentence (the "Final Liability") is less than the amount
previously paid by L.Co. pursuant hereto (the "Prepaid Amount"), York
shall pay to L.Co. within 30 days after such Final Determination an
amount based upon an amount equal to the excess of the Prepaid Amount
over the Final Liability, together with interest attributable to such
excess and received by York with respect thereto (reduced by the excess
of any tax imposed on the receipt of such interest over the amount of
any Tax savings realized by York upon any payment made to L.Co. pursuant
to this sentence). Notwithstanding the foregoing, no payment shall be
required under this provision to the extent it is duplicative of any
payment required by any other provision of this Agreement.
(d) Judicial Appeals. In the event that a judgment of the
United States Tax Court or other court of competent jurisdiction results in an
adverse determination with respect to a matter described in Section 6(a) then:
(i) in the case an appeal of the adverse determination in
a case involves no material issues other than matters described in
Section 6(a), L.Co. shall have the right to cause York to appeal from
such adverse determination if L.Co. delivers to York an opinion from an
independent tax counsel selected by L.Co. that such appeal has a
reasonable chance of success and the amount in controversy exceeds
$100,000;
(ii) in the case of an appeal of any other adverse determination
which involves material issues other than those described in Section
6(a), L.Co. shall have the right to cause York to appeal from such
adverse determination if L.Co. delivers to York an opinion from an
independent tax counsel selected by L.Co. and reasonably acceptable to
York that it is more likely than not that such appeal will succeed and
the amount in controversy exceeds $100,000;
(iii) in the case of an adverse determination which involves matters
described in Section 6(b) and within such determination material matters
described in Section 6(a) were favorably disposed, L.Co. shall have the
right, to prevent York from appealing from such adverse determination,
unless York delivers to L.Co. an opinion from an independent tax counsel
selected by York and reasonably acceptable to L.Co. that it is more
likely than not that such appeal will succeed.
(iv) if L.Co. causes York to appeal any adverse determination
pursuant to this Section 8(d), L.Co. will pay the reasonable
out-of-pocket costs of York incurred in such appeal.
(e) Participation and Closing. (i) L.Co. and its
representatives, at L.Co.'s expense, shall be entitled to participate in all
conferences, meetings, or proceedings with any Taxing Authority, the subject
matter of which is or includes matters described in Section 6(a); provided
however, that if (A) less than $100,000 of the amount of the total of annual
proposed adjustment is attributable to matters described in Section 6(a) and
the proposed adjustments do not cause significant prejudice to the L.Co. Group
in other Taxable periods and (B) York, in good faith, determines that the
commencement or continuance of any such discussions or submissions by L.Co.
would extend the audit or review of the Tax Return of the York Consolidated
Group for such Taxable year beyond the period such audit or review would
require but for the commencement or continuance of such discussions or
submissions then, upon receipt of notice by L.Co. from York to such effect,
L.Co. shall have no further right to commence or continue such discussions or
submissions with respect to the audit or review for such Taxable year, and
York shall have the right to compromise such issues and cause such audit or
review to be closed.
(ii) If York suspends L.Co.'s rights to commence or continue
discussions or submissions with respect to a Taxable year under Section
8(e)(i) and compromises the proposed adjustments thereunder, York will not be
entitled to indemnity under Section 6(a) for any such items if it is more
likely than not that L.Co.'s position on any such item would have prevailed
in a court of competent jurisdiction. If York believes it is entitled to an
indemnity for such an item under Section 6(a) and L.Co. disagrees (on the
grounds that L.Co. believes that the item is more likely than not to prevail)
the parties shall resolve the disagreement provided in Section 16.
(iii) L.Co. and its representatives, at L.Co.'s expense, shall be
entitled to participate (at L. Co.'s expense) in all appearances before any
court, the subject matter of which includes matter described in Section 6(a).
(iv) The participation referred to in Sections 8(e)(i) and (ii)
shall include the right to control the submission and content of
documentation, protests, memoranda of fact and law and briefs, the conduct of
oral arguments or presentations, the selection of witnesses and the
negotiation of stipulations of fact, all as may be deemed appropriate by
L.Co., but solely with respect to a matter described solely in Section 6(a).
With respect to matters described in both Sections 6(a) and 6(b), the parties
agree to consult in good faith to determine the submission and content of
documentation, protests, memoranda of fact and law and briefs, the conduct of
oral arguments and presentations, the selection of witnesses and the
negotiation of stipulations of fact. If the parties cannot agree with respect
to the matters described in the preceding sentence, such dispute shall be
referred to the Referee and decided pursuant to Section 16.
(v) Notwithstanding the provisions of Section 3(b) and 8(d)(iii),
Piedmont may file an amended Return or appeal certain determinations under
circumstances where such action could result in an increase in a
Pre-Distribution Tax Liability attributable to any member of the L. Co. Group
or any L. Co. affiliate if the amount of the increased Tax Liability, in the
aggregate, does not exceed the "Cap Amount". For purposes of the preceding
sentence, the "Cap Amount" at the time each determination is made shall mean
$75,000 less the amount of any previous increase or increases in the
Pre-Distribution Tax Liability of the L. Co. Group or any L. Co. affiliate
that resulted from an action taken by York or any member of the York Group
pursuant to Sections 3(b) and 8(d)(iii).
9. Payments.
All payments to be made hereunder shall be made in immediately
available funds. Payments shall be deemed made when received.
10. Notices.
Any notice, demand, claim, or other communication under this
Agreement shall be in writing and shall be deemed to have been given upon the
delivery or mailing thereof, as the case may be, if delivered personally or
sent by certified mail, Return receipt requested, postage prepaid, to the
parties at the following addresses (or at such other address as a party may
specify by notice to the other):
If to York, to:
Attn:
If to L.Co., to:
Attn:
11. Costs and Expenses.
Except as expressly set forth in this Agreement, each party shall
bear its own costs and expenses incurred pursuant to this Agreement. For
purposes of this Agreement, "out-of-pocket" expenses shall include reasonable
attorney's fees, accountant's fees and other related professional fees and
disbursements.
12. Effectiveness; Termination and Survival.
This Agreement shall become effective upon the consummation of the
Distribution. Notwithstanding anything in this Agreement to the contrary,
this Agreement shall remain in effect and its provisions shall survive for the
full period of all applicable statutes of limitation (giving effect to any
extension, waiver or mitigation thereof).
13. Section Headings.
The headings contained in this Agreement are inserted for
convenience only and shall not constitute a part hereof or in any way affect
the meaning or interpretation of this Agreement.
14. Entire Agreement; Amendments and Waivers.
(a) Entire Agreement. This Agreement contains the
entire understanding of the parties hereto with respect to the subject matter
contained herein. No alteration, amendment, modification, or waiver of any of
the terms of this Agreement shall be valid unless made by an instrument signed
by an authorized officer of York and L.Co., or in the case of a waiver, by the
party against whom the waiver is to be effective.
(b) Waiver. No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver hereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any right, power or privilege.
15. Governing Law and Interpretation. This Agreement has been
made in and shall be construed and enforced in accordance with the laws of the
State of New York.
16. Dispute Resolution.
(a) CEO's. If the parties hereto are unable to resolve any
disagreement or dispute, either party may refer the matter to the Chief
Executive Officers (CEOs) of the parties by giving the other party written
notice ("Notice") within 60 days of the failure of the parties to resolve such
dispute. Within 20 days after delivery of Notice, the CEOs of both parties
shall meet at a mutually acceptable time and place to exchange relevant
information and attempt to resolve the dispute within 45 days after delivery
of Notice. All negotiations pursuant to this Section 16(a) shall be
confidential and shall be treated as compromise and settlement negotiations
for purposes of the Federal Rules of Evidence and state rules of evidence.
(b) Referees. Any disagreement not resolved by mutual agreement
of the parties or under Section 16(a) shall be resolved by an independent
referee that is mutually acceptable to the parties hereto (a "Referee"). In
the event the parties cannot agree on a Referee within 120 days of the date of
the Notice described in paragraph (a) above, each party shall select within
30 days an independent nationally recognized law firm or accounting firm
expert in tax matters and such firms shall jointly choose the Referee. A
Referee so chosen shall resolve any such disagreement pursuant to such
procedures as it may deem advisable. Any such resolution shall be binding on
the parties hereto without further recourse.
(c) Costs. The costs of any Referee shall be apportioned between
York and L.Co. as determined by such Referee in such manner as the Referee
deems reasonable, taking into account the circumstances of the dispute, the
conduct of the parties and the result of the dispute.
17. Counterparts.
This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
18. Assignments; Third Party Beneficiaries.
This Agreement shall be binding upon and shall inure only to the benefit of
the parties hereto and their respective successors and assigns. Upon
consummation of the Merger, Stamford shall succeed to the rights and
obligations of York under this Agreement. This Agreement is not intended to
benefit any person other than the parties hereto and such successors and
assigns, and no such other person shall be a third party beneficiary hereof.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year first written above.
York on its own behalf and on
behalf of the companies
listed on Schedule 1 hereto.
By:__________________________
Title:_______________________
L.Co. on its own behalf and on
behalf of the companies
listed on Schedule 2 hereto.
By:__________________________
Title:_______________________
Exhibit A
1. If a Pre-Distribution Tax liability is assessed after the Distribution
Date pursuant to a Final Determination, solely to the extent that such
Tax liability is attributable to an adjustment of any item of income,
loss, credit deduction or other tax attribute of any member of the L.Co.
Group, then such liability shall be the sole responsibility of the L.Co.
Group.
2. The L.Co. Group's share of any Consolidated Federal Tax liability for
the 1995 taxable year or any portion thereof shall be calculated by
multiplying such liability by a fraction, the numerator of which shall
be the taxable income of the L.Co. Group and the denominator of which
shall be the total taxable income of the York Consolidated Group.
3. For purposes of paragraphs 1 and 2 above, "Tax liability" (1) shall
exclude any liability for the payment of alternative minimum tax; and
(2) shall refer to an actual out-of-pocket payment to any Taxing
Authority, after taking into account the utilization of net operating
losses and any other Tax Assets.
4. Any alternative minimum Tax liability (and any Tax Assets attributable
to such liability) shall be allocated to L.Co. in the event that the
preference items giving rise to such alternative minimum tax liability
are attributable to any member of the L.Co. Group, and shall be
allocated to York in the event that the preference items giving rise to
such alternative minimum tax liability are attributable to any member of
the York Group.
Exhibit C
RESTATED
CERTIFICATE OF INCORPORATION
OF
CHARTWELL RE CORPORATION
FIRST: The name of the Corporation is Chartwell Re
Corporation (hereinafter the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is The Corporation Trust Center, 1209
Orange Street, in the City of Wilmington, County of New Castle. The name of
its registered agent at that address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may now or hereafter be
organized under the General Corporation Law of the State of Delaware as set
forth in Title 8 of the Delaware Code (the "GCL").
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 20,000,000 shares of common
stock, par value $.01 per share (the "Common Stock"), and 5,000,000 shares of
preferred stock, par value $1.00 per share (the "Preferred Stock").
Shares of the Preferred Stock of the Corporation may be issued
from time to time in one or more classes or series, each of which class or
series shall have such distinctive designation or title as shall be fixed by
the Board of Directors of the Corporation (the "Board of Directors") prior to
the issuance of any shares thereof. Each such class or series of Preferred
Stock shall have such voting powers, full or limited, or no voting powers, and
such preferences and relative, participating, optional or other special rights
and such qualifications, limitations or restrictions thereof, as shall be
stated in such resolution or resolutions providing for the issue of such class
or series of Preferred Stock as may be adopted from time to time by the Board
of Directors prior to the issuance of any shares thereof pursuant to the
authority hereby expressly vested in it, all in accordance with the laws of
the State of Delaware.
FIFTH: The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors consisting of not
less than one director nor more than fourteen directors, the exact number of
directors to be determined from time to time by resolution adopted by the
Board of Directors. The directors shall be divided into three classes,
designated Class I, Class II and Class III. Each class shall consist, as
nearly as may be possible, of one-third of the total number of directors
constituting the entire Board of Directors. The term of the initial Class
I directors shall terminate on the date of the 1996 annual meeting of
stockholders; the term of the initial Class II directors shall terminate on
the date of the 1997 annual meeting of stockholders and the term of the
initial Class III directors shall terminate on the date of the 1998 annual
meeting of stockholders. At each annual meeting of stockholders beginning
in 1996, successors to the class of directors whose term expires at that
annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among
the classes so as to maintain the number of directors in each class as
nearly equal as possible, and any additional director of any class elected
to fill a vacancy resulting from an increase in such class shall hold
office for a term that shall coincide with the remaining term of that
class, but in no case will a decrease in the number of directors shorten
the term of any incumbent director. A director shall hold office until the
annual meeting for the year in which his term expires and until his
successor shall be elected and shall qualify for office, subject, however,
to prior death, resignation, retirement, disqualification or removal from
office. Any vacancy on the Board of Directors, however resulting, may be
filled by an affirmative vote of the majority of the directors then in
office, even if less than a quorum, or by an affirmative vote of the sole
remaining director. Any director elected to fill a vacancy shall hold
office for a term that shall coincide with the term of the class to which
such director shall have been elected.
Notwithstanding the foregoing, whenever the holders of any one
or more classes or series of Preferred Stock issued by the Corporation
shall have the right, voting separately by class or series, to elect
directors at an annual or special meeting of stockholders, the election,
term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of this Certificate of
Incorporation or the resolution or resolutions adopted by the Board of
Directors pursuant to Article FOURTH applicable thereto, and such directors
so elected shall not be divided into classes pursuant to this Article FIFTH
unless expressly provided by such terms.
SIXTH: Subject to the rights, if any, of the holders of
shares of Preferred Stock then outstanding, any or all of the directors of the
Corporation may be removed from office at any time, but only for cause and
only by the affirmative vote of the holders of a majority of the outstanding
securities of the Corporation then entitled to vote generally in the election
of directors, considered for purposes of this Article SIXTH as one class.
SEVENTH: Elections of directors at an annual or special meeting
of stockholders shall be by written ballot unless the Bylaws of the
Corporation shall otherwise provide.
EIGHTH: Any action required or permitted to be taken at any
annual or special meeting of stockholders may be taken only upon the vote of
the stockholders at an annual or special meeting duly noticed and called, as
provided in the Bylaws of the Corporation, and may not be taken by a written
consent of the stockholders pursuant to the GCL.
NINTH: Special meetings of the stockholders of the
Corporation for any purposes may be called at any time by the Board of
Directors, the Chairman of the Board of Directors or the President. Special
meetings of the stockholders of the Corporation may not be called by any other
person or persons.
TENTH: The officers of the Corporation shall be chosen in
such manner, shall hold their offices for such terms and shall carry out such
duties as are determined solely by the Board of Directors, subject to the
right of the Board of Directors to remove any officer or officers at any time
with or without cause.
ELEVENTH: The Corporation shall indemnify to the full extent
authorized or permitted by law any person made, or threatened to be made, a
party to any action or proceeding (whether civil or criminal or otherwise) by
reason of the fact that he, his testator or intestate, is or was a director or
officer of the Corporation or by reason of the fact that such director or
officer, at the request of the Corporation, is or was serving any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, in any capacity. Nothing contained herein shall affect any rights
to indemnification to which employees other than directors and officers may be
entitled by law. No director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty by such a director as a director. Notwithstanding the
foregoing sentence, a director shall be liable to the extent provided by
applicable law (i) for any breach of the directors duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which such director derived an improper personal benefit.
No amendment to or repeal of this Article ELEVENTH shall apply to or have any
effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
TWELFTH: The provisions set forth in Article II, Section 2
(except for the first paragraph thereof) and Section 3; Article III, Section 1
(except for the first paragraph thereof); and Article IX, Section 1 of the
By-laws or any provision contained in this Certificate of Incorporation may be
repealed, altered, amended or rescinded, in whole or in part, or a new
Certificate of Incorporation may be adopted by a majority of the entire Board
of Directors then in office with the consent of stockholders of the
Corporation holding at least sixty-six and two-thirds percent (66 2/3%) of the
votes entitled to be cast by the holders of all outstanding securities which
by their terms may be voted on all matters submitted to stockholders of the
Corporation generally.
Exhibit D
Article FOURTH, Section B of the Piedmont Charter will be amended to
add new subparagraph 6(j), to read as follows:
"(j) Conversion Upon Merger. Notwithstanding any other provision of
this Article FOURTH, immediately prior to the record date established by
the Board of Directors of the Corporation for the issuance of the CI Notes
;(as defined in t;he Agreement and Plan of Merger, dated as of August __,
1995 (the "Merger Agreement"), between the Corporation and Chartwell Re
Corporation, a Delaware corporation), each share of Series A shall be
automatically converted into two fully paid and nonassessable shares of
Common Stock. Upon such conversion, the Series A shall be automatically
converted into two fully paid and nonassessable shares of Common Stock.
Upon such conversion, the Series A shall have no further rights to receive
dividends other than those dividends provided for in Section 2.1(c) of the
Merger Agreement."
Promptly following approval of the foregoing amendment at the Piedmont
Stockholders Meeting, Piedmont shall file a Certificate of Amendment with
the appropriate offices in Delaware to make effective the foregoing
amendment.
Exhibit E
AMENDED AND RESTATED BY-LAWS
OF
CHARTWELL RE CORPORATION
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. Other Offices. The Corporation may also have
offices at such other places both within and without the State of Delaware as
the Board of Directors of the Corporation (the "Board of Directors") may from
time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders
for the election of directors or for any other purpose shall be held at such
time and place, either within or without the State of Delaware, as shall be
designated from time to time by the Board of Directors and stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The annual meetings of
stockholders (the "Annual Meeting") shall be held on such date and at such
time as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting, at which meetings the stockholders,
subject to the provisions of the Certificate of Incorporation, shall elect by
a plurality vote a Board of Directors, and transact such other business as may
properly be brought before the meeting. Written notice of the Annual Meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten (10) days nor
more than sixty (60) days before the date of the meeting.
No business may be transacted at an Annual Meeting, other than
business that is either (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors (or
any duly authorized committee thereof), (b) otherwise properly brought before
the Annual Meeting by or at the direction of the Board of Directors (or any
duly authorized committee thereof) or (c) otherwise properly brought before
the Annual Meeting by any stockholder of the Corporation (i) who is a
stockholder of record on the date of the giving of the notice provided for in
this Section 2 and on the record date for the determination of stockholders
entitled to vote at such Annual Meeting and (ii) who complies with the notice
procedures set forth in this Section 2.
In addition to any other applicable requirements, for business to
be properly brought before an Annual Meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written form to
the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than sixty (60) days nor more than ninety (90) days prior
to the anniversary date of the immediately preceding Annual Meeting; provided,
however, that in the event that the Annual Meeting is called for a date that
is not within thirty (30) days before or after such anniversary date, notice
by the stockholder in order to be timely must be so received not later than
the close of business on the tenth (10th) day following the day on which such
notice of the date of the Annual Meeting was mailed or such public disclosure
of the date of the Annual Meeting was made, whichever first occurs. To be in
proper written form, a stockholder's notice to the Secretary must set forth as
to each matter such stockholder proposes to bring before the Annual Meeting
(i) a brief description of the business desired to be brought before the
Annual Meeting and the reasons for conducting such business at the Annual
Meeting, (ii) the name and record address of such stockholder, (iii) the class
or series and number of shares of capital stock of the Corporation which are
owned beneficially or of record by such stockholder, (iv) a description of all
arrangements or understandings between such stockholder and any other person
or persons (including their names) in connection with the proposal of such
business by such stockholder and any material interest of such stockholder in
such business and (v) a representation that such stockholder intends to appear
in person or by proxy at the Annual Meeting to bring such business before the
meeting.
No business shall be conducted at the Annual Meeting except
business brought before the Annual Meeting in accordance with the procedures
set forth in this Section 2, provided, however, that, once business has been
properly brought before the Annual Meeting in accordance with such procedures,
nothing in this Section 2 shall be deemed to preclude discussion by any
stockholder of any such business. If the Chairman of an Annual Meeting
determines that business was not properly brought before the Annual Meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be discussed or transacted.
Section 3. Special Meetings. Unless otherwise prescribed
by law or by the Certificate of Incorporation, Special Meetings of
Stockholders ("Special Meetings"), for any purpose or purposes, may be called
by the Board of Directors, the Chairman, if there be one, or the President.
Special Meetings may not be called by any other person or persons. Written
notice of a Special Meeting stating the place, date and hour of the meeting
and the purpose or purposes for which the meeting is called shall be given not
less than ten (10) days nor more than sixty (60) days before the date of the
meeting to each stockholder entitled to vote at such meeting.
Section 4. Quorum. Except as otherwise required by law,
these By-laws or by the Certificate of Incorporation, holders of a majority of
the capital stock issued and entitled to vote thereat present in person or
represented by proxy shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder entitled to vote at the meeting.
Section 5. Voting. Unless otherwise required by law, the
Certificate of Incorporation or these By-Laws, any question brought before any
meeting of stockholders shall be decided by the vote of the holders of a
majority of the stock represented and entitled to vote thereat. Such votes
may be cast in person or by proxy but no proxy shall be voted on or after
three years from its date, unless such proxy provides for a longer period.
The Board of Directors, in its discretion, or the officer of the Corporation
presiding at a meeting of stockholders, in his discretion, may require that
any votes cast at such meeting shall be cast by written ballot.
Section 6. Consent of Stockholders in Lieu of Meeting.
Unless otherwise provided in the Certificate of Incorporation, any action
required or permitted to be taken at any Annual or Special Meeting of
Stockholders of the Corporation, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to
those stockholders who have not consented in writing.
Section 7. List of Stockholders Entitled to Vote. The
officer of the Corporation who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder of the Corporation who is present.
Section 8. Stock Ledger. The stock ledger of the
Corporation shall be the only evidence as to who are the stockholders entitled
to examine the stock ledger, the list required by Section 7 of this Article II
or the books of the Corporation, or to vote in person or by proxy at any
meeting of stockholders.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. Subject to the
rights, if any, of holders of preferred stock of the Corporation to elect
directors of the Corporation, the Board of Directors shall consist of not less
than one nor more than fourteen members with the exact number of directors to
be determined from time to time by resolution duly adopted by the Board of
Directors. Directors shall be elected by a plurality of the votes cast at the
Annual Meeting, and, unless otherwise provided by the Certificate of
Incorporation, each director so elected shall hold office until the Annual
Meeting for the year in which his term expires and until his successor is duly
elected and qualified, or until his earlier death, resignation, retirement,
disqualification or removal. Any director may resign at any time effective
upon giving written notice to the Corporation, unless the notice specifies a
later time for the effectiveness of such resignation. Directors need not be
stockholders.
Only persons who are nominated in accordance with the following
procedures shall be eligible for election as directors of the Corporation,
except as may be otherwise provided in the Certificate of Incorporation of the
Corporation with respect to the right of holders of preferred stock of the
Corporation to nominate and elect a specified number of directors in certain
circumstances. Nominations of persons for election to the Board of Directors
may be made at any Annual Meeting or at any Special Meeting called by the
Board of Directors, Chairman or the President for the purpose of electing
directors (a) by or at the direction of the Board of Directors (or any duly
authorized committee thereof) or (b) by any stockholder of the Corporation (i)
who is a stockholder of record on the date of the giving of the notice
provided for in this Section 1 and on the record date for the determination of
stockholders entitled to vote at such Annual or Special Meeting and (ii) who
complies with the notice procedures set forth in this Section 1. In addition
to any other applicable requirements, for a nomination to be made by a
stockholder, such stockholder must have given timely notice thereof in proper
written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation (a) in the case of an Annual Meeting, not less than sixty (60)
days nor more than ninety (90) days prior to the anniversary date of the
immediately preceding Annual Meeting; provided, however, that in the event
that the Annual Meeting is called for a date that is not within thirty (30)
days before or after such anniversary date, notice by the stockholder in order
to be timely must be so received not later than the close of business on the
tenth (10th) day following the day on which such notice of the date of the
Annual Meeting was mailed or such public disclosure of the date of the Annual
Meeting was made, whichever first occurs; and (b) in the case of a Special
Meeting called for the purpose of electing directors, not later than the close
of business on the tenth (10th) day following the day on which notice of the
date of the Special Meeting was mailed or public disclosure of the date of the
Special Meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth (a) as to each person whom the stockholder proposes
to nominate for election as a director (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment
of the person, (iii) the class or series and number of shares of capital stock
of the Corporation which are owned beneficially or of record by the person and
(iv) any other information relating to the person that would be required to be
disclosed in a proxy statement or other filing required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder; and (b) as to the
stockholder giving the notice (i) the name and record address of such
stockholder, (ii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by such stockholder,
(iii) a description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or persons
(including their names) pursuant to which the nomination(s) are to be made by
such stockholder, (iv) a representation that such stockholder intends to
appear in person or by proxy at the Annual Meeting to nominate the persons
named in its notice and (v) any other information relating to such stockholder
that would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder. Such notice must be accompanied by a
written consent of each proposed nominee to being named as a nominee and to
serve as a director if elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in
this Section 1. If the Chairman of the meeting determines that a nomination
was not made in accordance with the foregoing procedures, the Chairman shall
declare to the meeting that the nomination was defective and such defective
nomination shall be disregarded.
Section 2. Vacancies. Any vacancy on the Board of
Directors, however created, may be filled by a majority of the directors then
in office, though less than a quorum, or by a sole remaining director. Any
director elected to fill a newly created directorship resulting from an
increase in any class of directors shall hold office for a term that shall
coincide with the remaining term of the other directors of that class. Any
director elected to fill a vacancy not resulting from an increase in the
number of directors shall have the same term as the remaining term of his
predecessor.
Section 3. Duties and Powers. The business of the
Corporation shall be managed by or under the direction of the Board of
Directors which may exercise all such powers of the Corporation and do all
such lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these By-Laws directed or required to be exercised or done
by the stockholders.
Section 4. Meetings. The Board of Directors may hold
meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as may from time to time be determined
by the Board of Directors. Special meetings of the Board of Directors may be
called by the Chairman, if there be one, the President, or any directors.
Notice thereof stating the place, date and hour of the meeting shall be given
to each director either by mail not less than forty-eight (48) hours before
the date of the meeting, by telephone or telegram on twenty-four (24) hours'
notice, or on such shorter notice as the person or persons calling such meeting
may deem necessary or appropriate in the circumstances.
Section 5. Quorum. Except as may be otherwise specifically
provided by law, the Certificate of Incorporation or these By-Laws, at all
meetings of the Board of Directors, a majority of the entire Board of
Directors shall constitute a quorum for the transaction of business and the
act of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 6. Actions of Board. Unless otherwise provided by
the Certificate of Incorporation or these By-Laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all the members of the
Board of Directors or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board of Directors or committee.
Section 7. Meetings by Means of Conference Telephone.
Unless otherwise provided by the Certificate of Incorporation or these
By-Laws, members of the Board of Directors of the Corporation, or any
committee designated by the Board of Directors, may participate in a meeting
of the Board of Directors or such committee by means of a conference telephone
or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section 7 shall constitute presence in person at such
meeting.
Section 8. Committees. The Board of Directors may, by
resolution passed by a majority of the entire Board of Directors, designate
one or more committees, each committee to consist of one or more of the
directors of the Corporation. The Board of Directors may designate one or
more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of any such committee. In the
absence or disqualification of a member of a committee, and in the absence of
a designation by the Board of Directors of an alternate member to replace the
absent or disqualified member, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute
a quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in the place of any absent or disqualified member. Any
committee, to the extent allowed by law and provided in the resolution
establishing such committee, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation. Each committee shall keep regular minutes and
report to the Board of Directors when required.
Section 9. Compensation. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be
allowed like compensation for attending committee meetings.
Section 10. Interested Directors. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be
void or voidable solely for this reason, or solely because the director or
officer is present at or participates in the meeting of the Board of Directors
or committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose if (i) the material
facts as to his or their relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board of Directors or committee in good faith authorizes
the contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than
a quorum; or (ii) the material facts as to his or their relationship or
interest and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (iii) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board of Directors, a committee
thereof or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall
be chosen by the Board of Directors and shall be a President, a Secretary and
a Treasurer. The Board of Directors, in its discretion, may also choose a
Chairman of the Board of Directors (who must be a director) and one or more
Vice Presidents, Assistant Secretaries, Assistant Treasurers and other
officers. Any number of offices may be held by the same person, unless
otherwise prohibited by law, the Certificate of Incorporation or these
By-Laws. The officers of the Corporation need not be stockholders of the
Corporation nor, except in the case of the Chairman of the Board of Directors,
need such officers be directors of the Corporation.
Section 2. Election. The Board of Directors at its first
meeting held after each Annual Meeting of Stockholders shall elect the
officers of the Corporation who shall hold their offices for such terms and
shall exercise such powers and perform such duties as shall be determined from
time to time by the Board of Directors; and all officers of the Corporation
shall hold office until their successors are chosen and qualified, or until
their earlier resignation or removal. Any officer elected by the Board of
Directors may be removed at any time by the affirmative vote of a majority of
the Board of Directors. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors. The salaries of all
officers of the Corporation shall be fixed by the Board of Directors.
Section 3. Voting Securities Owned by the Corporation.
Powers of attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities owned by the Corporation may be executed in
the name of and on behalf of the Corporation by the President or any Vice
President and any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem advisable to
vote in person or by proxy at any meeting of security holders of any
corporation in which the Corporation may own securities and at any such
meeting shall possess and may exercise any and all rights and power incident
to the ownership of such securities and which, as the owner thereof, the
Corporation might have exercised and possessed if present. The Board of
Directors may, by resolution, from time to time confer like powers upon any
other person or persons.
Section 4. Chairman of the Board of Directors. The
Chairman of the Board of Directors, if there be one, shall preside at all
meetings of the stockholders and of the Board of Directors. Except where by
law the signature of the President is required, the Chairman of the Board of
Directors shall possess the same power as the President to sign all contracts,
certificates and other instruments of the Corporation which may be authorized
by the Board of Directors. During the absence or disability of the President,
the Chairman of the Board of Directors shall exercise all the powers and
discharge all the duties of the President. The Chairman of the Board of
Directors shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these By-Laws or by the
Board of Directors.
Section 5. President. The President shall, subject to the
control of the Board of Directors and, if there be one, the Chairman of the
Board of Directors, have general supervision of the business of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He shall execute all bonds, mortgages,
contracts and other instruments of the Corporation requiring a seal, under the
seal of the Corporation, except where required or permitted by law to be
otherwise signed and executed and except that the other officers of the
Corporation may sign and execute documents when so authorized by these
By-Laws, the Board of Directors, the Chairman of the Board of Directors or the
President. In the absence or disability of the Chairman of the Board of
Directors, or if there be none, the President shall preside at all meetings
of the stockholders and the Board of Directors. The President shall also
perform such other duties and may exercise such other powers as from time to
time may be assigned to him by these By-Laws or by the Board of Directors.
Section 6. Vice Presidents. At the request of the
President or in his absence or in the event of his inability or refusal to act
(and if there be no Chairman of the Board of Directors), the Vice President or
the Vice Presidents if there is more than one (in the order designated by the
Board of Directors) shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions
upon the President. Each Vice President shall perform such other duties and
have such other powers as the Board of Directors from time to time may
prescribe. If there be no Chairman of the Board of Directors and no Vice
President, the Board of Directors shall designate the officer of the
Corporation who, in the absence of the President or in the event of the
inability or refusal of the President to act, shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
Section 7. Secretary. The Secretary shall attend all
meetings of the Board of Directors and all meetings of stockholders and record
all the proceedings thereat in a book or books to be kept for that purpose;
the Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors or President, under whose supervision he shall be. If the Secretary
shall be unable or shall refuse to cause to be given notice of all meetings of
the stockholders and special meetings of the Board of Directors, and if there
be no Assistant Secretary, then either the Board of Directors or the President
may choose another officer to cause such notice to be given. The Secretary
shall have custody of the seal of the Corporation and the Secretary or any
Assistant Secretary, if there be one, shall have authority to affix the same
to any instrument requiring it and when so affixed, it may be attested by the
signature of the Secretary or by the signature of any such Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
signature. The Secretary shall see that all books, reports, statements,
certificates and other documents and records required by law to be kept or
filed are properly kept or filed, as the case may be.
Section 8. Treasurer. The Treasurer shall have the custody
of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation
and shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the
Board of Directors. The Treasurer shall disburse the funds of the Corporation
as may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors,
at its regular meetings, or when the Board of Directors so requires, an account
of all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give
the Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of
his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession
or under his control belonging to the Corporation.
Section 9. Assistant Secretaries. Except as may be
otherwise provided in these By-Laws, Assistant Secretaries, if there be any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Secretary, and in the absence of the Secretary or in
the event of his disability or refusal to act, shall perform the duties of the
Secretary, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if
there be any, shall perform such duties and have such powers as from time to
time may be assigned to them by the Board of Directors, the President, any
Vice President, if there be one, or the Treasurer, and in the absence of the
Treasurer or in the event of his disability or refusal to act, shall perform
the duties of the Treasurer, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the Treasurer. If required by the
Board of Directors, an Assistant Treasurer shall give the Corporation a bond
in such sum and with such surety or sureties as shall be satisfactory to the
Board of Directors for the faithful performance of the duties of his office
and for the restoration to the Corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control
belonging to the Corporation.
Section 11. Other Officers. Such other officers as the
Board of Directors may choose shall perform such duties and have such powers
as from time to time may be assigned to them by the Board of Directors. The
Board of Directors may delegate to any other officer of the Corporation the
power to choose such other officers and to prescribe their respective duties
and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in
the Corporation shall be entitled to have a certificate signed, in the name of
the Corporation (i) by the Chairman of the Board of Directors, the President
or a Vice President and (ii) by the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary of the Corporation, certifying the
number of shares owned by him in the Corporation.
Section 2. Signatures. Where a certificate is
countersigned by (i) a transfer agent other than the Corporation or its
employee, or (ii) a registrar other than the Corporation or its employee, any
other signature on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may
direct a new certificate to be issued in place of any certificate theretofore
issued by the Corporation alleged to have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming the certificate
of stock to be lost, stolen or destroyed. When authorizing such issue of a
new certificate the Board of Directors may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate, or his legal representative, to advertise the
same in such manner as the Board of Directors shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be
transferable in the manner prescribed by law and in these By-Laws. Transfers
of stock shall be made on the books of the Corporation only by the person
named in the certificate or by his attorney lawfully constituted in writing
and upon the surrender of the certificate therefor, which shall be cancelled
before a new certificate shall be issued.
Section 5. Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to express consent to
corporate action in writing without a meeting, or entitled to receive payment
of any dividend or other distribution or allotment of any rights, or entitled
to exercise any rights in respect of any change, conversion or exchange of
stock, or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty (60)
days nor less than ten (10) days before the date of such meeting, nor more
than sixty (60) days prior to any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 6. Beneficial Owners. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and to
hold liable for calls and assessments a person registered on its books as the
owner of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by
law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, such notice may be given by
mail, addressed to such director, member of a committee or stockholder, at his
address as it appears on the records of the Corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Written notice may also be
given personally or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is
required by law, the Certificate of Incorporation or these By-Laws, to be
given to any director, member of a committee or stockholder, a waiver thereof
in writing, signed, by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of
the Corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors at any
regular or special meeting, and may be paid in cash, in property, or in shares
of the capital stock. Before payment of any dividend, there may be set aside
out of any funds of the Corporation available for dividends such sum or sums
as the Board of Directors from time to time, in its absolute discretion, deems
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for any proper purpose, and the Board of Directors may modify or abolish any
such reserve.
Section 2. Disbursements. All checks or demands for money
and notes of the Corporation shall be signed by such officer or officers or
such other person or persons as the Board of Directors may from time to time
designate.
Section 3. Fiscal Year. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its organization
and the words "Corporate Seal, Delaware." The seal may be used by causing it
or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or
Proceedings other Than Those by or in the Right of the Corporation. Subject
to Section 3 of this Article VIII, the Corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the Corporation) by reason of the fact that he is or was a director or officer
of the Corporation, or is or was a director or officer of the Corporation
serving at the request of the Corporation as a director or officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or
Proceedings by or in the Right of the Corporation. Subject to Section 3 of
this Article VIII, the Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director or
officer of the Corporation, or is or was a director or officer of the
Corporation serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation; except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
Section 3. Authorization of Indemnification. Any
indemnification under this Article VIII (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in the
circumstances because he has met the applicable standard of conduct set forth
in Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made (1) by a majority vote of the directors who are
not parties to such action, suit or proceeding, even though less than a
quorum, or (2) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (3) by the stockholders.
To the extent, however, that a director or officer of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described above or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith, without the
necessity of authorization in the specific case.
Section 4. Good Faith Defined. For purposes of any
determination under Section 1 or 2 of this Article VIII, a person shall be
deemed to have acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, or, with
respect to any criminal action or proceeding, to have had no reasonable cause
to believe his conduct was unlawful, if his action is based on the records or
books of account of the Corporation or another enterprise, or on information
supplied to him by the officers of the Corporation or another enterprise in
the course of their duties, or on the advice of legal counsel for the
Corporation or another enterprise or on information or records given or
reports made to the Corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or another enterprise. The term "another
enterprise" as used in this Section 4 shall mean any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise
of which such person is or was serving at the request of the Corporation as a
director, officer, employee or agent. The provisions of this Section 4 shall
not be deemed to be exclusive or to limit in any way the circumstances in
which a person may be deemed to have met the applicable standard of conduct
set forth in Sections 1 or 2 of this Article VIII, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any
contrary determination in the specific case under Section 3 of this Article
VIII, and notwithstanding the absence of any determination thereunder, any
director or officer may apply to any court of competent jurisdiction in the
State of Delaware for indemnification to the extent otherwise permissible
under Sections 1 and 2 of this Article VIII. The basis of such
indemnification by a court shall be a determination by such court that
indemnification of the director or officer is proper in the circumstances
because he has met the applicable standards of conduct set forth in Sections 1
or 2 of this Article VIII, as the case may be. Neither a contrary
determination in the specific case under Section 3 of this Article VIII nor
the absence of any determination thereunder shall be a defense to such
application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 5 shall be given to
the Corporation promptly upon the filing of such application. If successful,
in whole or in part, the director or officer seeking indemnification shall
also be entitled to be paid the expense of prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses incurred
by a director or officer in defending or investigating a threatened or pending
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount
if it shall ultimately be determined that he is not entitled to be indemnified
by the Corporation as authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and
Advancement of Expenses. The indemnification and advancement of expenses
provided by or granted pursuant to this Article VIII shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any By-Law, agreement, contract,
vote of stockholders or disinterested directors or pursuant to the direction
(howsoever embodied) of any court of competent jurisdiction or otherwise, both
as to action in his official capacity and as to action in another capacity
while holding such office, it being the policy of the Corporation that
indemnification of the persons specified in Sections 1 and 2 of this Article
VIII shall be made to the fullest extent permitted by law. The provisions of
this Article VIII shall not be deemed to preclude the indemnification of any
person who is not specified in Sections 1 or 2 of this Article VIII but whom
the Corporation has the power or obligation to indemnify under the provisions
of the General Corporation Law of the State of Delaware, or otherwise.
Section 8. Insurance. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a director or officer
of the Corporation, or is or was a director or officer of the Corporation
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power or the obligation to
indemnify him against such liability under the provisions of this Article VIII.
Section 9. Certain Definitions. For purposes of this
Article VIII, references to "the Corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors or officers, so that any person who is or was a
director or officer of such constituent corporation, or is or was a director
or officer of such constituent corporation serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, shall stand in the same position under the provisions of this
Article VIII with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued. For purposes of this Article VIII, references to
"fines" shall include any excise taxes assessed on a person with respect to an
employee benefit plan; and references to "serving at the request of the
Corporation" shall include any service as a director, officer, employee or
agent of the Corporation which imposes duties on, or involves services by,
such director or officer with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to
in this Article VIII.
Section 10. Survival of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VIII shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 11. Limitation on Indemnification. Notwithstanding
anything contained in this Article VIII to the contrary, except for
proceedings to enforce rights to indemnification (which shall be governed by
Section 5 hereof), the Corporation shall not be obligated to indemnify any
director or officer in connection with a proceeding (or part thereof)
initiated by such person unless such proceeding or part thereof) was
authorized or consented to by the Board of Directors of the Corporation.
Section 12. Indemnification of Employees and Agents. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, provide rights to indemnification and to the advancement of
expenses to employees and agents of the Corporation similar to those conferred
in this Article VIII to directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, or new By-Laws may be adopted by the stockholders or by the
Board of Directors, provided, however, that notice of such alteration,
amendment, repeal or adoption of new By-Laws be contained in the notice of
such meeting of stockholders or Board of Directors as the case may be. All
such amendments must be approved by either the holders of two-thirds of the
votes entitled to be cast by the holders of the outstanding capital stock
entitled to vote thereon or by a majority of the entire Board of Directors
then in office; provided, however, Article II, Section 2 (except for the first
paragraph thereof) and Section 3; Article III, Section 1 (except for the first
paragraph thereof); and this Article IX, Section 1 may be altered, amended or
repealed only with approval of the holders of two-thirds of the votes entitled
to be cast by the holders of the outstanding capital stock entitled to vote
thereon and a majority of the entire Board of Directors then in office.
Section 2. Entire Board of Directors. As used in this
Article IX and in these By-Laws generally, the term "entire Board of
Directors" means the total number of directors which the Corporation would
have if there were no vacancies.
EXHIBIT F
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT (the "Agreement"), dated as of ________
__, 1995, among Chartwell Re Corporation, a Delaware corporation
("Chartwell"), and the security holders named in the schedule of holders (the
"Schedule of Holders") attached hereto and any future security holder of
Chartwell that becomes a party to this Agreement in accordance with the terms
hereof (collectively, the "Stockholders", and individually a "Stockholder").
WHEREAS, as of the date hereof, Piedmont Management Company
Inc. ("Piedmont") will be merged with and into Chartwell, with Chartwell
as the surviving corporation, pursuant to the Merger Agreement (as defined
below); and
WHEREAS, the Stockholders as of the date of this Agreement
consist of certain holders of the common stock, par value $.01 per share (the
"Common Stock"), of Chartwell (such Stockholders, the "Chartwell
Stockholders"), and of the common stock, par value $.50 per share (the
"Piedmont Common Stock"), of Piedmont (such Stockholders, the "Piedmont
Stockholders").
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. As used in this Agreement, the
following terms shall have the following meanings:
"CRC Threshold" shall mean a percentage equal to the sum
of (i) 10% and (ii) the aggregate percentage of the total voting power of all
Voting Securities which is held by the Chartwell Stockholders as of the
Effective Time.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Individual Threshold" shall mean, with respect to any
Person, a percentage equal to the sum of (i) 10% and
(ii) the percentage of the total voting power of all Voting Securities which
is held by such Person as of the Effective Time.
"Majority Stockholders" shall have the meaning given such
term in Section 5.1(b) hereof.
"Majority Stockholders' Notice" shall have the meaning
given such term in Section 5.1(b) hereof.
"Merger Agreement" shall mean the Agreement and Plan of
Merger dated as of __________, 1995 between Piedmont and Chartwell.
"Person" shall mean an individual, a corporation, a
partnership, an association, a joint-stock company, a trust, any
unincorporated organization, or a government or political subdivision thereof.
"PMC Threshold" shall mean a percentage equal to the sum
of (i) 10% and (ii) the aggregate percentage of the total voting power of all
Voting Securities which is held by the Piedmont Stockholders as of the
Effective Time.
"Prospective Sale Date" shall have the meaning given such
term in Section 5.1(b) hereof.
"Prospective Sale Shares" shall have the meaning given
such term in Section 5.1(b) hereof.
"Prospective Transferee" shall have the meaning given
such term in Section 5.1(b) hereof.
"Securities Act" shall mean the Securities Act of 1933,
as amended.
"Tag-Along Shares" shall have the meaning given such term
in Section 5.1(c) hereof.
"Voting Securities" shall mean the Common Stock and any
other security then entitled to vote generally in the election of directors of
Chartwell.
"Warrants" shall mean those warrants issued by Chartwell
to purchase shares of Common Stock which are outstanding as of the date of the
Merger Agreement.
"Warrantholder" shall mean any Person owning outstanding
Warrants as of the date of the Merger Agreement and any future holder of
Warrants that becomes a party to this Agreement in accordance with the terms
hereof.
All capitalized terms used and not defined herein shall have the meanings
assigned to them in the Merger Agreement.
ARTICLE II
REPRESENTATIONS
SECTION 2.1. Chartwell represents to the Stockholders that it
has full legal right, power and authority to enter into and perform this
Agreement, and the execution and delivery of this Agreement by it and the
consummation by it of the transactions contemplated by this Agreement have
been duly authorized by Chartwell. This Agreement is a valid, binding and
enforceable agreement of Chartwell.
SECTION 2.2. Each Stockholder represents to Chartwell that it
has full legal right, power and authority to enter into and perform this
Agreement, and the execution and delivery of this Agreement by it and the
consummation by it of the transactions contemplated by this Agreement have
been duly authorized by such Stockholder. This Agreement is a valid, binding
and enforceable agreement of such Stockholder.
ARTICLE III
STANDSTILL PROVISIONS
SECTION 3.1. Covenants of the Stockholders. Each Stockholder
hereby covenants and agrees that such Stockholder, acting alone or in concert
with others, shall not:
(a) during the six-month period commencing at the Effective
Time, except upon the exercise of Warrants or settlement of CI Notes
currently owned by such Stockholder or as a result of a stock split, stock
dividend or similar recapitalization by Chartwell, acquire or offer or
agree to acquire, directly or indirectly, any Voting Securities or any
material portion of the consolidated assets of Chartwell; provided, that
during such six-month period any Stockholder may acquire additional Voting
Securities if as a result of such acquisition (i) such Stockholder would
not hold Voting Securities having a percentage of the total voting power of
all Voting Securities higher than the Individual Threshold and (ii) if the
acquiror is (x) a Chartwell Stockholder, the Chartwell Stockholders would
not hold Voting Securities having a percentage of such total voting power
higher than the CRC Threshold or (y) a Piedmont Stockholder, the Piedmont
Stockholders would not hold Voting Securities having a percentage of such
total voting power higher than the PMC Threshold; or
(b) during the three-year period commencing at the Effective
Time, deposit any Voting Securities in a voting trust or subject any Voting
Securities to any arrangement or agreement (other than this Agreement) with
respect to the voting of such Voting Securities, except that Voting Securities
held or acquired by any Stockholder which is designated as a trust in the
Schedule of Holders (collectively, the "Trust Stockholders") may be held,
voted or transferred subject to the applicable trust documents.
SECTION 3.2. Remedies for Violation of Standstill Provisions.
Each Stockholder acknowledges and agrees that irreparable damage would occur
in the event any of the provisions of this Article III were not performed in
accordance with their specific terms or were otherwise breached, and that
Chartwell shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof in any court of the United States or any state
thereof having jurisdiction. The foregoing is in addition to any other remedy
to which Chartwell may be entitled at law or equity.
ARTICLE IV
VOTING AGREEMENT
SECTION 4.1. Board Representation.
(a) Piedmont Stockholder Nominees. At each annual or special
meeting of shareholders of Chartwell, or in the event of any solicitation of
written consents in lieu thereof, at or pursuant to which persons are being
elected to fill positions on the Board of Directors of Chartwell, the Piedmont
Stockholders shall be entitled to designate up to four persons for election to
Chartwell's Board of Directors. Notwithstanding the foregoing, if at any time
prior to the mailing of the proxy statement relating to any such election to
the shareholders of Chartwell, the total number of shares of Common Stock then
held by the Piedmont Stockholders is reduced, regardless of any subsequent
increase in such number of shares held, to an amount of the then issued and
outstanding shares of Common Stock that is less than:
(i) sixteen percent (16%) but equal to or greater than
twelve percent (12%) of the total number of such shares, then
the Piedmont Stockholders shall be entitled to designate up to
three persons for election to Chartwell's Board of Directors;
(ii) twelve percent (12%) but equal to or greater than
eight percent (8%) of the total number of such shares, then the
Piedmont Stockholders shall be entitled to designate up to two
persons for election to Chartwell's Board of Directors;
(iii) eight percent (8%) but equal to or greater than
five percent (5%) of the total number of such shares, then the
Piedmont Stockholders shall be entitled to designate up to one
person for election to Chartwell's Board of Directors; or
(iv) five percent (5%) of the total number of such
shares, then the Piedmont Stockholders shall no longer be
entitled to designate any person for election to Chartwell's
Board of Directors and the provisions of this Section 4.1(a)
shall terminate.
The number of persons that the Piedmont Stockholders shall be
entitled to designate pursuant to the first sentence and clauses (i), (ii) and
(iii) of the second sentence of this Section 4.1(a) shall be that number
which, given the number of Piedmont Stockholder designees sitting on
Chartwell's Board of Directors at such time that were designated pursuant to
this Agreement and whose terms of office do not expire until a date after the
relevant meeting, would allow the Piedmont Stockholders, following such
election of directors, to have that number of designees designated pursuant to
this Agreement on Chartwell's Board of Directors which is equal to the maximum
number of designees provided for under the applicable standard set forth in
such first sentence and such clauses (i), (ii) and (iii). The designation by
the Piedmont Stockholders of any person for election to Chartwell's Board of
Directors shall be made after consultation with Chartwell; provided that,
without Chartwell's consent, no person shall be so designated who is an
officer, director or employee of, or who otherwise has a greater than ten
percent (10%) ownership interest in, any competitor of Chartwell or any of its
subsidiaries. The rights of the Piedmont Stockholders pursuant to this
Section 4.1(a) shall only be exercisable through action by or on behalf of the
Piedmont Stockholders holding a majority of the then issued and outstanding
shares of Common Stock owned by the Piedmont Stockholders.
(b) Recommendations; Vacancies. Chartwell's nominating
committee (or any committee serving a comparable function) shall recommend to
Chartwell's Board of Directors that any Person designated by the Piedmont
Stockholders (after consultation and agreement by Chartwell) for election to
Chartwell's Board of Directors in accordance with the provisions of this
Section 4.1 be included in the slate of nominees recommended by such Board of
Directors to Chartwell's shareholders for election as directors at each annual
or special meeting of the shareholders of Chartwell or in any written consent
executed in lieu thereof. In the event that any designee of the Piedmont
Stockholders for election to Chartwell's Board of Directors pursuant to the
foregoing provisions shall cease to serve as a director for any reason, the
Piedmont Stockholders shall have the right to designate another Person for
election to Chartwell's Board of Directors, and the resulting vacancy shall
be filled pursuant to the provisions of this Article IV or by action of the
Board of Directors to appoint such designee to complete the unexpired term of
such director.
SECTION 4.2. Voting. Each Stockholder will vote (whether by
proxy or otherwise) all Common Stock and any other Voting Securities that such
Stockholder beneficially owns or otherwise has the power to vote, and shall
take all other actions within its power as may be reasonably necessary
(including to satisfy any quorum requirement), to elect or appoint all
designees of the Piedmont Stockholders included in Chartwell's slate for
directors pursuant to Section 4.1 at each shareholders' meeting of Chartwell,
or in any written consent executed in lieu thereof, at which such Stockholder
shall be entitled to vote such shares for such purpose.
SECTION 4.3. Subsidiary Directors. If at any time (i) any
Piedmont Stockholder designee is sitting on Chartwell's Board of Directors,
and (ii) the Board of Directors of any principal U.S. subsidiary of Chartwell
has any member who is not an officer or employee of Chartwell or any of its
subsidiaries, then Chartwell shall cause one Piedmont designee that is sitting
on Chartwell's Board of Directors to be elected to the Board of Directors of
such subsidiary as promptly as is practicable.
ARTICLE V
TAG-ALONG RIGHTS
5.1. (a) If, at any time, any Stockholder or Stockholders
propose to sell a number of shares of Common Stock representing thirty percent
(30%) or more of the then outstanding shares of Common Stock in one or a
series of related transactions, other than (i) pursuant to an effective
registration statement under the Securities Act, relating to an underwritten
public offering of such shares, (ii) to a Person who has also offered to
purchase the shares of Common Stock then held by all other Stockholders on the
same terms offered to the Stockholder or Stockholders that propose to sell
shares, or (iii) to an affiliate of such Stockholder or Stockholders, such
Stockholder or Stockholders may only sell such shares subject to and in
compliance with this Section 5.1. Any pledge of shares by any Stockholder or
Stockholders shall not be deemed to be a sale for the purposes of this Section
5.1(a).
(b) Prior to any such sale, the Stockholder or Stockholders
proposing to sell shares of Common Stock (the "Majority Stockholders") shall
first notify the other Stockholders in writing of such intended sale at least
15 days prior to the date thereof, which notice (the "Majority Stockholders'
Notice") shall set forth, to the extent not set forth in any accompanying
documents, all of the material terms of sale, including but not limited to the
name and address of the prospective transferee (the "Prospective Transferee"),
all information reasonably available to the Majority Stockholders regarding
the Prospective Transferee that the other Stockholders would reasonably need
to make a decision under this Section 5.1, the purchase price and other terms
and conditions of payment, the date on or about which such sale is to be made
(the "Prospective Sale Date") and the number of shares of Common Stock to be
purchased by the Prospective Transferee from the Majority Stockholders (the
"Prospective Sale Shares").
(c) Within ten days of receipt of a Majority Stockholders'
Notice, each other Stockholder may notify the Majority Stockholders that such
other Stockholder desires to sell shares of Common Stock to the Prospective
Transferee on the same terms and conditions as set forth in the Majority
Stockholders' Notice. Upon giving such notice to the Majority Stockholders and
subject to Section 6.11 hereof, such other Stockholder shall be entitled to
sell to the Prospective Transferee, on the same terms and conditions as set
forth in the Majority Stockholders' Notice, up to that number of shares (the
"Tag-Along Shares") equal to the product of (i) the total number of shares of
Common Stock agreed to be purchased by the Prospective Transferee and (ii) a
fraction of which the numerator shall be the number of shares of Common Stock
then owned by such other Stockholder and the denominator shall be the total
number of shares of Common Stock then owned by the parties hereto. Such other
Stockholder shall not be deemed to have entered into a legally binding
agreement to sell the Tag Along Shares unless and until such other Stockholder
shall have entered into a definitive stock purchase agreement with the
Prospective Transferee, which shall include customary conditions precedent to
such other Stockholder's obligations thereunder, including but not limited to
obtaining all necessary regulatory approvals. If such other Stockholder is
not afforded the right to participate in the transaction contemplated by the
Majority Stockholders' Notice in accordance with the terms and conditions
hereof, the Majority Stockholders may not consummate such transaction. The
transaction that is the subject of the Majority Stockholders' Notice shall be
consummated within 180 days of the expiration of the ten day period provided
for in this Section 5.1(c) that relates to such Majority Stockholders' Notice.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Effective Date. This Agreement shall become
effective as of the Effective Time of the Merger (each as defined in the
Merger Agreement).
SECTION 6.2. Headings. The headings in this Agreement are for
convenience of reference only and shall not control or affect the meaning or
construction of any provisions hereof.
SECTION 6.3. Entire Agreement; Further Assurances. This
Agreement constitutes the entire agreement and understanding of the parties
hereto in respect of the subject matter contained herein, and there are no
restrictions, promises, representations, warranties, covenants, or
undertakings with respect to the subject matter hereof, other than those
expressly set forth or referred to herein. This Agreement supersedes all prior
agreements and understandings between the parties hereto with respect to the
subject matter hereof. In the event that after the date hereof, any further
action by any party hereto is necessary to carry out the provisions of this
Agreement, each such party shall take all such necessary action.
SECTION 6.4. Notices. Any notice, request, instruction or
other document to be given hereunder by any party hereto to another party
hereto shall be in writing, shall be delivered personally, sent by registered
mail, postage prepaid, return receipt requested, by overnight courier service
or by facsimile transmission (with appropriate confirmation) to the address or
number of the party set forth below, or to such other address or number as the
party to whom notice is to be given may provide in a written notice to
Chartwell, a copy of which written notice shall be on file with the Secretary
of Chartwell. No notice shall be effective except upon actual delivery.
If to Chartwell:
Chartwell Re Corporation
300 Atlantic Street
Suite 400
Stamford, CT 06901
Attention: Chief Executive Officer
Fax: (203) 961-7310
With a copy to:
LeBoeuf, Lamb, Greene
& MacRae, L.L.P.
125 W. 55th Street
New York, NY 10019
Attention: Peter R. O'Flinn
Fax: (212) 424-8500
If to a Stockholder or Warrantholder, to the address for such
holder as set forth in the Schedule of Holders, with copies to
such other Persons as provided therein.
SECTION 6.5. Applicable Law. The laws of the State of Delaware
shall govern the interpretation, validity and performance of the terms of this
Agreement, regardless of the law that might be applied under applicable
principles of conflicts of law.
SECTION 6.6. Specific Performance. Each of the Stockholders
acknowledges and agrees that in the event of any breach of this Agreement the
non-breaching parties would be irreparably harmed and could not be made whole
by monetary damages. It is accordingly agreed that Chartwell and the
Stockholders, in addition to any other remedy to which they may be entitled at
law or in equity, shall be entitled to compel specific performance of this
Agreement.
SECTION 6.7. Consent to Jurisdiction. Each party hereto agrees
to the non-exclusive jurisdiction of any state or Federal court within the
State of Delaware, with respect to any claim or cause of action, whether in
law or equity, including specific performance, arising under or relating to
this Agreement, and waives personal service of any and all process upon it,
and consents that all services of process be made by registered mail, to the
address of the party as set forth in Section 6.4, or to such other address as
the party to whom notice is to be given may provide in a written notice to
Chartwell, a copy of which written notice shall be on file with the Secretary
of Chartwell and service so made shall be deemed to be completed when
received. Each party hereto waives any objection based on forum non
conveniens and waives any objection to venue of any action instituted
hereunder. Each party hereto waives trial by jury in any action brought
hereunder. Each party hereto agrees that a final judgment in any such action
shall be conclusive and may be enforced in any other jurisdiction by suit on
the judgment or in any other manner provided by law. Nothing in this
paragraph shall affect the right of any party hereto to serve legal process in
any other manner permitted by law. To the extent that any party hereto has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process with respect to itself or its property, such party hereby waives
such immunity in respect of its obligations hereunder.
SECTION 6.8. Severability. The invalidity, illegality or
unenforceability of one or more of the provisions of this Agreement in any
jurisdiction shall not affect the validity, legality or enforceability of the
remainder of this Agreement in such jurisdiction or the validity, legality or
enforceability of this Agreement, including any such provision, in any other
jurisdiction, it being intended that all rights and obligations of the parties
hereunder shall be enforceable to the fullest extent permitted by law.
SECTION 6.9. Agreement to be Filed. A copy of this Agreement
shall be filed with the Secretary of Chartwell and kept with the records of
Chartwell.
SECTION 6.10. Other Agreements. Nothing contained in this
Agreement shall be deemed to be a waiver of, or release from, any obligations
any party hereto may have under, or any restrictions on the transfer of the
Common Stock imposed by, any other agreement.
SECTION 6.11. Successors; Assigns; Transferees. The provisions
of this Agreement shall be binding upon and accrue to the benefit of the
parties hereto and, except as set forth below, their respective successors and
assigns. Notwithstanding the foregoing, neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by Chartwell or any Stockholder except concurrently with a transfer
of its Common Stock or Warrants in accordance with the provisions hereof. At
or prior to the time of any transfer of Common Stock or Warrants (other than a
transfer pursuant to a public offering under the Securities Act or pursuant to
Rule 144 under the Securities Act or, at the option of any Trust Stockholder,
upon a transfer by such Trust Stockholder under applicable governing
instruments or, with respect to any Trust Stockholder, any withdrawal or
distribution of Common Stock from the underlying trust) the Person to whom
such transfer is proposed to be made shall execute a counterpart of this
Agreement, and such other documents as are necessary to confirm such Person's
agreement to become a party to, and to be bound by, all terms and conditions
of this Agreement. The rights of the Piedmont Stockholders pursuant to
Article IV shall not be assignable except, at the option of the transferring
Stockholder, to any Person that so becomes a party to this Agreement and that
is (i) a descendant of Lunsford Richardson, Sr., a spouse of any such
descendant, or a trust for the benefit of, a corporation controlled by, or a
charitable organization established by, any of the foregoing (each, a
"Richardson Stockholder"), or (ii) a transferee of Common Stock or Warrants
from a Richardson Stockholder which transferee, together with one or more
Richardson Stockholders, forms a "person" or "group" (within the meaning of
Rule 13d-5 under the Exchange Act) in which Richardson Stockholders hold a
majority of the then issued and outstanding Common Stock held by such "person"
or "group"; provided that such rights shall terminate as to such Person at
such time as either (A) such Person ceases to be a part of such "person" or
"group," or (B) Richardson Stockholders no longer hold a majority of the
Common Stock held by such "person" or "group."
SECTION 6.12. Defaults. A default by any party to this Agreement in
such party's compliance with any of the conditions or covenants hereof or
performance of any of the obligations of such party hereunder shall not
constitute or excuse a default by any other party.
SECTION 6.13. Term. Subject to earlier termination of the provisions
of Section 4.1 pursuant to that Section, this Agreement shall terminate upon
the first to occur of (i) the written consent of Chartwell and all
Stockholders, (ii) the liquidation or dissolution of Chartwell, (iii) the date
which is the later of (A) the date on which settlement of the CI Notes occurs
pursuant to the CI Indenture and (B) the first date on which the total number
of shares of Common Stock held by the Piedmont Stockholders represents less
than ten percent (10%) of the then issued and outstanding Common Stock, or
(iv) eleven years from the date of this Agreement. If, prior to the
occurrence of any of the foregoing, the number of shares of Common Stock held
by any Stockholder is less than (i) in the event that such Stockholder does
not then have a representative on the Board of Directors of Chartwell, eight
percent (8%) of the then issued and outstanding Common Stock or (ii) in any
event, five percent (5%) of the then issued and outstanding Common Stock, then
the obligations of such Stockholder under Section 4.2 shall terminate
automatically at that time.
SECTION 6.14. Amendments. This Agreement may be amended,
modified, waived or supplemented only by written instrument executed by
Chartwell and Stockholders holding not less than sixty-six and two-thirds
percent (66 2/3%) of the shares of Common Stock then subject to this
Agreement; provided that Chartwell's consent and execution by Chartwell of such
instrument shall not be required for any amendment of the provisions of
Article III or Article V hereof; and provided further that the sale or
transfer by a Stockholder or Warrantholder of Common Stock or Warrants (and,
as a result, the purchaser's or transferee's becoming a party hereto) shall
not be deemed an amendment, modification, waiver or supplement of this
Agreement. Notwithstanding the foregoing, any amendment, modification, waiver
or supplement of this Agreement relating to Article IV or otherwise to the
nomination or agreement to vote for the election of the directors designated
by the Piedmont Stockholders shall require the written consent of Piedmont
Stockholders holding sixty-six and two-thirds percent (66 2/3%) of the then
issued and outstanding shares of Common Stock owned by the Piedmont
Stockholders.
SECTION 6.15. Waiver and Consent. No action taken pursuant to
this Agreement, including, without limitation, any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties,
covenants or agreements contained herein. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed
as a waiver of any preceding or succeeding breach, and no failure by any party
to exercise any right or privilege hereunder shall be deemed a waiver of such
party's rights or privileges hereunder or shall be deemed a waiver of such
party's rights to exercise the same at any subsequent time or times hereunder.
SECTION 6.16. Recapitalization, Exchanges, and Similar Actions
Affecting the Common Stock. The provisions of this Agreement shall apply, to
the full extent set forth herein, with respect to the Common Stock and to any
and all shares of capital stock of Chartwell or any successor which may be
issued in respect of, in exchange for, or in substitution of the Common Stock.
SECTION 6.17. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
CHARTWELL RE CORPORATION
By:____________________________
Name:
Title:
VIRGINIA RETIREMENT SYSTEM
By: Brinson Partners, Inc.
under Power of Attorney
By:____________________________
Name: Robert D. Blank
Title: Partner
Address: Mr. Robert D. Blank
Brinson Partners, Inc.
209 South LaSalle
12th Floor
Chicago, IL 60604
BRINSON TRUST COMPANY, AS
TRUSTEE OF THE INSTITUTIONAL
VENTURE CAPITAL FUND II
By:____________________________
Name: Robert D. Blank
Title: Assistant Trust Officer
Address: Mr. Robert D. Blank
Brinson Partners, Inc.
209 South LaSalle
12th Floor
Chicago, IL 60604
MICHIGAN MUTUAL INSURANCE COMPANY
By:___________________________
Name: Donald R. Mandich
Title: President
Address: Mr. Donald R. Mandich
Michigan Mutual Insurance
Company
25200 Telegraph Road
Southfield, MI 48086
FIMA FINANCE MANAGEMENT INC.
By:___________________________
Name:
Title:
Address: Mr. Gian Andrea Botta
FIMA Finance Management
Co.
c/o EXOR America Inc.
375 Park Avenue
New York, NY 10152
WAND/CHARTWELL INVESTMENTS L.P.
By: WAND PARTNERS (CHARTWELL) L.P.
General Partner
By: WAND PARTNERS INC.
General Partner
By:___________________________
Name: Bruce W. Schnitzer
Title: Chairman
Address: Mr. Bruce W. Schnitzer
Wand Partners Inc.
630 Fifth Avenue
Suite 2435
New York, NY 10111
Note: Piedmont Stockholders to consist of (i) those trusts, represented by an
aggregate of ten trustees, which are parties to the Voting Agreement among
Chartwell and the Piedmont Stockholders listed on the signature pages thereof,
dated as of the date of the Merger Agreement, (ii) the Center for Creative
Leadership and (iii) certain other significant individual stockholders
constituting the Richardson Stockholders (as defined in the Stockholders
Agreement).
Schedule of Holders
[DESIGNATE TRUSTS.]
EXHIBIT G
CHARTWELL RE CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Plan is to provide employees of
the Company and its Designated Subsidiaries with an opportunity to purchase
Common Stock of the Company through accumulated payroll deductions. It is the
intention of the Company that the Plan qualify as an "Employee Stock Purchase
Plan" within the meaning of Section 423 of the Code and the provisions of the
Plan shall be construed in a manner consistent with the requirements of said
Section 423.
2. Definitions.
a. "Board" shall mean the Board of Directors of the Company.
b. "Change in Capitalization" shall mean any increase,
reduction or change or exchange of shares of Common Stock for a different
number or kind of shares or other securities of the Company by reason of a
reclassification, recapitalization, merger, consolidation, reorganization,
stock dividend, stock split or reverse stock split, combination or exchange of
shares, repurchase of shares, change in corporate structure or otherwise.
c. "Change in Control of the Company" shall mean the
occurrence of one of the following events:
(i) any "person" (as defined in Section 3(a)(9) of the
Exchange Act and as such term is modified in Sections 13(d) and 14(d) of
the Exchange Act), excluding the Company or any of its subsidiaries,
Michigan Mutual Insurance Company, Amerisure Company Inc. or Wand
Partners Inc. (or any of its affiliates), a trustee or any fiduciary
holding securities under an employee benefit plan of the Company or any
of its subsidiaries, an underwriter temporarily holding securities
pursuant to an offering of such securities or a corporation owned,
directly or indirectly, by stockholders of the Company in substantially
the same proportions as their ownership of the Company, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such person any
securities acquired directly from the Company or its affiliates)
representing fifty percent (50%) or more of the combined voting power of
the Company's then outstanding securities; or
(ii) during any period of not more than two (2)
consecutive years (not including any period prior to the adoption of the
Plan), individuals who at the beginning of such period constitute the
Board and any new director (other than a director designated by a person
who has entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv) of this paragraph)
whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were the directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority
thereof; or
(iii) the shareholders of the Company approve a merger
or consolidation of the Company with any other corporation, other
than (A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity), in
combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company, at
least fifty percent (50%) of the combined voting power of the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (B) a merger or
consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no person acquires more than fifty
percent (50%) of the combined voting power of the Company's then
outstanding securities; or
(iv) the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets.
d. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
e. "Committee" shall mean a committee of members of the
Board appointed by the Board to administer the Plan and to perform the
functions set forth herein.
f. "Common Stock" shall mean shares of common stock, par
value $.01 per share, of the Company.
g. "Company" shall mean Chartwell Re Corporation, a Delaware
corporation.
h. "Compensation" shall mean the fixed salary or wage paid
by the Company to an Employee as reported by the Company to the United States
government for federal income tax purposes, including an Employee's portion of
salary deferral contributions pursuant to Section 401(k) of the Code and any
amount excludable pursuant to Section 125 of the Code, but excluding any
bonus, fee, overtime pay, severance pay, expenses or other special emolument
or any credit or benefit under any employee plan maintained by the Company or
any of its subsidiaries.
i. "Continuous Status as an Employee" shall mean the absence
of any interruption or termination of service as an Employee. Continuous
Status as an Employee shall not be considered interrupted in the case of a
leave of absence agreed to in writing by the Company (including, but not
limited to, military or sick leave), provided that such leave is for a period
of not more than ninety (90) days or reemployment upon the expiration of such
leave is guaranteed by contract or statute.
j. "Designated Subsidiaries" shall mean the Subsidiary
Corporations which have been designated by the Board from time to time in its
sole discretion as eligible to participate in the Plan.
k. "Employee" shall mean any person, including an officer,
who is regularly employed by the Company or one of its Designated
Subsidiaries.
l. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
m. "Exercise Date" shall mean the last business day of each
Offering Period for which payroll deductions are made under the Plan.
n. "Fair Market Value" per share of Common Stock as of a
particular date shall mean (i) the closing sales price per share of Common
Stock, on the national securities exchange on which the Common Stock is
principally traded, on such date or on the last preceding date on which there
was a sale of such Common Stock on such exchange, or (ii) if the shares of
Common Stock are not then listed on a national securities exchange or traded
in an over-the-counter market, such value as the Committee, in its sole
discretion, shall determine.
o. "Offering Date" shall mean January 1 of each Plan Year.
p. "Offering Period" shall mean each Plan Year while the
Plan is in effect, commencing on each Offering Date, provided that the
Committee shall have the power to change the duration of Offering Periods.
q. "Parent Corporation" shall mean any corporation (other
than the Company) in an unbroken chain of corporations ending with the
employer corporation if, at the time of the granting of an option, each of the
corporations other than the employer corporation owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
r. "Participant" shall mean an Employee who participates in
the Plan.
s. "Plan" shall mean the Chartwell Re 1995 Employee Stock
Purchase Plan, as amended from time to time.
t. "Plan Year" shall mean the calendar year.
u. "Subsidiary Corporation" shall mean any corporation
(other than the Company) in an unbroken chain of corporations beginning with
the employer corporation if, at the time of the granting of an option, each of
the corporations other than the last corporation in the unbroken chain owns
stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
3. Eligibility.
a. Subject to the requirements of Section 4.b. hereof, any
person who is (i) an Employee as of an Offering Date, (ii) regularly
scheduled to work at least twenty (20) hours per week and at least five (5)
months per calendar year and (iii) at the commencement of such Offering Period
has maintained Continuous Status as an Employee for at least one (1) year,
shall be eligible to participate in the Plan and to be granted an option for
the Offering Period commencing on such Offering Date (each, an "eligible
Employee"); provided, however, that with respect to the Offering Period
commencing on [Merger Closing Date], 1995, the condition set forth in clause
(iii) above shall be waived with respect to persons who are Employees as of
such Offering Date.
b. Notwithstanding any provision of the Plan to the
contrary, no Employee shall be granted an option under the Plan (i) if,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the
Code) would own stock and/or hold outstanding options to purchase stock
possessing five percent (5%) or more of the total combined voting power or
value of all classes of stock of the Company or of any Subsidiary
Corporation or Parent Corporation of the Company, or (ii) which permits
such Employee's right to purchase stock under all employee stock purchase
plans (as described in Section 423 of the Code) of the Company and any
Subsidiary Corporation or Parent Corporation of the Company to accrue at a
rate which exceeds twenty-five thousand dollars ($25,000) of Fair Market
Value of such stock (determined at the time such option is granted) for any
calendar year in which such option is outstanding at any time.
4. Grant of Option; Participation.
a. On each Offering Date the Company shall commence an offer
by granting each eligible Employee an option to purchase shares of Common
Stock, subject to the limitations set forth in Sections 3.b. and 10 hereof.
b. Each eligible Employee may elect to become a Participant
in the Plan with respect to an Offering Period, solely by filing an agreement
with the Company authorizing payroll deductions (as set forth in Section 5
hereof). Any such authorization will remain in effect for subsequent Offering
Periods, until modified or terminated by the Participant.
c. The option price per share of Common Stock subject to an
offering shall be the lesser of an amount equal to: (i) eighty-five percent
(85%) of the Fair Market Value of a share of Common Stock on the Offering Date
or (ii) eighty-five percent (85%) of the Fair Market Value of a share of
Common Stock on the Exercise Date.
d. No option granted under the Plan shall be exercisable
more than five (5) years after its grant date.
5. Payroll Deductions.
a. A Participant may, in accordance with rules adopted by
the Committee, authorize a payroll deduction of any whole percentage from two
percent (2%) to ten percent (10%) of such Participant's Compensation for each
pay period. A Participant may increase or decrease such payroll deduction
(including a cessation of payroll deductions) at any time but not more
frequently than once each six (6) months, by filing a new authorization form
with the Committee.
b. All payroll deductions made by a Participant shall be
credited to a recordkeeping account under the Plan maintained for such
Participant. A Participant may not make any additional payments into such
account.
6. Exercise of Option.
a. Unless a Participant withdraws from the Plan as provided
in Section 8 hereof, such Participant's election to purchase shares of Common
Stock will be exercised automatically on the Exercise Date and the maximum
number of full shares of Common Stock subject to such option will be purchased
for such Participant at the applicable option price with the accumulated
payroll deductions and cash dividends (credited pursuant to Section 9 hereof)
in such Participant's account. During a Participant's lifetime, a
Participant's option to purchase shares hereunder shall be exercisable solely
by such Participant.
b. Any cash balance remaining in a Participant's account
after the termination of an Offering Period will be carried forward to the
Participant's account for the purchase of Common Stock during the next
Offering Period if the Participant has elected to continue to participate in
the Plan. Otherwise the Participant will receive a cash payment equal to the
balance of his or her account.
c. The shares of Common Stock purchased upon exercise of an
option hereunder shall be credited to the Participant's account under the Plan
and shall be deemed to be transferred to the Participant on the Exercise Date
and, except as otherwise provided herein, the Participant shall have all
rights of a stockholder with respect to such shares.
7. Delivery of Common Stock.
a. As promptly as practicable after receipt by the Committee
of a written request for withdrawal of Common Stock from any Participant, the
Company shall arrange the delivery to such Participant of a stock certificate
representing the shares of Common Stock which the Participant requests to
withdraw. Subject to paragraph b. of this Section 7, withdrawals (i) may be
made no more frequently than once each Plan Year and (ii) cannot occur prior
to two (2) years from the Exercise Date on which such shares of Common Stock
were purchased. Shares of Common Stock received pursuant to stock dividends
or stock splits shall be treated as having been purchased on the Exercise Date
of the shares to which they relate.
b. Notwithstanding anything in paragraph a. of this
Section 7 to the contrary, shares of Common Stock may be withdrawn by a
Participant more than once during a Plan Year and prior to the second
anniversary of the Exercise Date on which such shares were purchased under
the following circumstances: (i) within sixty (60) days following a Change
in Control of the Company or (ii) upon the approval of the Committee, in
its sole discretion. Shares of Common Stock purchased pursuant to
reinvestment of cash dividends shall not be subject to the restriction in
Section 7.a.(ii) hereof.
8. Withdrawal; Termination of Employment.
a. A Participant may withdraw all, but not less than all, of
the payroll deductions and cash dividends credited to such Participant's
account (that have not been used to purchase shares of Common Stock) under the
Plan at any time by giving written notice to the Company received thereby
prior to the Exercise Date. All such payroll deductions and cash dividends
credited to such Participant's account shall be paid to such Participant
promptly after receipt of such Participant's notice of withdrawal and such
Participant's option for the Offering Period in which the withdrawal occurs
shall be automatically terminated. No further payroll deductions for the
purchase of shares of Common Stock shall be made for such Participant during
such Offering Period and any additional cash dividends during the Offering
Period shall be distributed to the Participant.
b. Upon termination of a Participant's Continuous Status as
an Employee during the Offering Period for any reason, including voluntary
termination, retirement or death, the payroll deductions and cash dividends
credited to such Participant's account (that have not been used to purchase
shares of Common Stock) shall be returned (and any future cash dividends shall
be distributed) to such Participant or, in the case of such Participant's
death, to the person or persons entitled thereto under Section 12 hereof, and
such Participant's option shall be automatically terminated.
c. A Participant's withdrawal from an offering will not have
any effect upon such Participant's eligibility to participate in a succeeding
offering or in any similar plan which may hereafter be adopted by the Company.
9. Dividends and Interest.
a. Cash dividends paid on Common Stock held in a
Participant's account shall be credited to such Participant's account and used
in addition to payroll deductions to purchase shares of Common Stock on the
Exercise Date. Dividends paid in Common Stock or stock splits of the Common
Stock shall be credited to the accounts of Participants. Dividends paid in
property other than cash or Common Stock shall be distributed to Participants
as soon as practicable.
b. No interest shall accrue on or be payable with respect
to the payroll deductions or credited cash dividends of a Participant in
the Plan.
10. Stock.
a. The maximum number of shares of Common Stock which shall
be reserved for sale under the Plan shall be 100,000, subject to adjustment
upon Changes in Capitalization of the Company as provided in Section 16
hereof. If the total number of shares of Common Stock which would otherwise
be subject to options granted pursuant to Section 4.a. hereof on an Offering
Date exceeds the number of such shares then available under the Plan (after
deduction of all such shares for which options have been exercised or are then
outstanding), the Committee shall make a pro rata allocation of the shares of
Common Stock remaining available for option grant in as uniform a manner as
shall be practicable and as it shall determine to be equitable. In such
event, the Committee shall give written notice to each Participant of such
reduction of the number of option shares affected thereby and shall similarly
reduce the rate of payroll deductions, if necessary.
b. Shares of Common Stock to be delivered to a Participant
under the Plan shall be registered in the name of the Participant or, at the
election of the Participant, in the name of the Participant and another person
as joint tenants with rights of survivorship.
11. Administration. The Plan shall be administered by the
Committee and the Committee may select an administrator to whom its duties and
responsibilities hereunder may be delegated. The Committee shall have full
power and authority, subject to the provisions of the Plan, to promulgate such
rules and regulations as it deems necessary for the proper administration of
the Plan, to interpret the provisions and supervise the administration of the
Plan, and to take all action in connection therewith or in relation thereto as
it deems necessary or advisable. Any decision reduced to writing and signed
by a majority of the members of the Committee shall be fully effective as if
it had been made at a meeting duly held. The Company shall pay all expenses
incurred in the administration of the Plan. No member of the Committee shall
be personally liable for any action, determination or interpretation made in
good faith with respect to the Plan and all members of the Committee shall be
fully indemnified by the Company with respect to any such action,
determination or interpretation.
12. Designation of Beneficiary.
a. A Participant may file, on forms supplied by and
delivered to the Company, a written designation of a beneficiary who is to
receive any shares of Common Stock and cash remaining in such Participant's
account under the Plan in the event of the Participant's death.
b. Any such beneficiary designation may be changed by the
Participant at any time by written notice filed with the Company on a form
provided for such purpose by the Company. In the event of the death of a
Participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such Participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the Participant or, if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the Participant, or if no spouse, dependent or relative is known
to the Company, then to such other person as the Company may designate.
13. Transferability. Neither payroll deductions credited to a
Participant's account nor any rights with regard to the exercise of an option
or to receive shares of Common Stock under the Plan may be assigned,
transferred, pledged or otherwise disposed of in any way (other than by will,
the laws of descent and distribution or as provided in Section 12 hereof) by
the Participant. Any such attempt at assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may treat such
act as an election to withdraw funds in accordance with Section 8 hereof.
14. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose
and the Company shall not be obligated to segregate such payroll deductions.
15. Reports. Individual accounts shall be maintained for each
Participant in the Plan. Statements of account will be given to participating
Employees as soon as practicable following each Offering Period, which
statements shall set forth the amounts of payroll deductions, the per share
purchase price, the number of shares of Common Stock purchased, the aggregate
number of such shares in the Participant's account and the remaining cash
balance, if any.
16. Effect of Certain Changes. In the event of a Change in
Capitalization or the distribution of an extraordinary dividend on shares of
Common Stock, the Committee shall conclusively determine the appropriate
equitable adjustments, if any, to be made under the Plan, including, without
limitation, adjustments to the number of shares of Common Stock which have
been authorized for issuance under the Plan but have not yet been placed under
option, as well as the price per share of Common Stock covered by each option
under the Plan which has not yet been exercised. In the event of a Change in
Control of the Company, the Offering Period will terminate unless otherwise
provided by the Committee.
17. Amendment or Termination. The Board may at any time terminate
or amend the Plan. Except as provided in Section 16 hereof, no such
termination shall adversely affect options previously granted and no amendment
may make any change in any option theretofore granted which adversely affects
the rights of any Participant without the consent of such Participant. No
amendment shall be effective unless approved by the stockholders of the
Company if stockholder approval of such amendment is required to comply with
Rule 16b-3 under the Exchange Act or to comply with any other law, regulation
or stock exchange rule.
18. Notices. All notices or other communications by a Participant
to the Company under or in connection with the Plan shall be deemed to have
been duly given when received in the form specified by the Company at the
location, or by the person, designated by the Company for the receipt thereof.
19. Regulations and Other Approvals; Governing Law.
a. The Plan and the rights of all persons claiming
entitlement to a benefit hereunder shall be construed and determined in
accordance with the laws of the State of Delaware without giving effect to the
choice of law principles thereof, except to the extent that such law is
preempted by federal law.
b. The obligation of the Company to sell or deliver shares
of Common Stock with respect to options granted under the Plan shall be
subject to all applicable laws, rules and regulations, including all
applicable federal and state securities laws, and the obtaining of all such
approvals by governmental agencies as may be deemed necessary or appropriate
by the Committee.
c. The Plan is intended to comply with Rule 16b-3 under the
Exchange Act and the Committee shall interpret and administer the provisions
of the Plan in a manner consistent therewith. Any provisions inconsistent
with such Rule shall be inoperative and shall not affect the validity of the
Plan.
20. Withholding of Taxes. If the Participant makes a disposition,
within the meaning of Section 424(c) of the Code and regulations promulgated
thereunder, of any share or shares of Common Stock issued to such Participant
pursuant to such Participant's exercise of an option, and such disposition
occurs within the two (2) year period commencing on the day after the Offering
Date or within the one (1) year period commencing on the day after the
Exercise Date, such Participant shall, within ten (10) days of such
disposition, notify the Company thereof and thereafter immediately deliver to
the Company any amount of federal, state or local income taxes and other
amounts which the Company informs the Participant the Company is required to
withhold.
21. Effective Date. The Plan shall be effective as of the date
determined by the Company subject to the approval of the Plan by the
stockholders of the Company within twelve (12) months before or after the date
on which the Plan is adopted.
CHARTWELL RE CORPORATION 1995 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
Offering Period Commencing __________, 1995
Print Name of Employee: __________________________________
Social Security Number: __________________________________
1. I elect to participate in the Chartwell Re Corporation 1995 Employee
Stock Purchase Plan (the "Plan") for this Offering Period (as defined in
the Plan) and to subscribe to purchase shares of the Common Stock of
Chartwell Re Corporation (the "Company"), par value $.01 per share, in
accordance with this Subscription Agreement and the Plan.
2. I authorize payroll deductions from each paycheck during the Offering
Period, in an amount equal to ____% of my Compensation (as defined in
the Plan). I understand that my payroll deductions must be a whole
percentage that cannot be less than 2% nor more than 10% of my
compensation. I further understand that my payroll deduction
authorization will continue in effect for future Offering Periods until
it is modified or terminated by me.
3. I understand that my payroll deductions will be accumulated for the
purchase of shares of the Company's Common Stock, at the price
determined in accordance with the terms of the Plan. I further
understand that, except as otherwise set forth in the Plan, such shares
will be purchased for me automatically on the Exercise Date (as defined
in the Plan) unless I withdraw from the Plan by giving written notice to
the Company prior to the Exercise Date.
4. I have received a copy of the Plan and a description of the Plan. I
understand that my participation in the Plan is in all respects subject
to the terms of the Plan.
5. Shares purchased for me under the Plan should be issued in the name(s)
of:
____________________________________________________________
____________________________________________________________
6. If I dispose of any shares of the Company's Common Stock received by me
pursuant to the Plan within 2 years after the Offering Date (as defined
in the Plan) or 1 year after the Exercise Date with respect to such
shares, I hereby agree to notify the Company in writing within 10 days
after the date of any such disposition.
7. I agree to be bound by the terms of the Plan. The effectiveness of this
Subscription Agreement is dependent upon my eligibility to participate
in the Plan.
Signature: _______________________
Date: ____________________________
EXHIBIT H
[Closing Date]
[Chartwell]
[Address]
Ladies and Gentlemen:
I have been advised that as of the date of this letter I have been
identified as a possible "affiliate" of Piedmont Managment Company Inc., a
Delaware corporation ("Piedmont"), as that term is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the General Rules and Regulations (the
"Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act").
Pursuant to the terms of an Agreement and Plan of Merger dated as
of ____________, 1995 (the "Merger Agreement"), by and between Piedmont and
Chartwell Re Corporation, a Delaware corporation ("Chartwell"), Piedmont will
be merged with and into Chartwell (the "Merger"). As a result of the Merger,
I will receive Merger Consideration (as defined in the Merger Agreement),
including shares of common stock, par value $.01 per share, of Chartwell (the
"Common Stock") in exchange for shares of common stock, par value $.50 per
share, of Piedmont owned by me at the Effective Time of the Merger (as defined
in the Merger Agreement).
A. In connection therewith, I represent, warrant and agree
that:
1. I shall not make any sale, transfer or other disposition of
the Common Stock I receive as a result of the Merger in violation of the
Securities Act or the Rules and Regulations.
2. I have been advised that the issuance of the Common Stock to
me as a result of the Merger has been registered with the Commission
under the Securities Act on a Registration Statement on Form S-4.
However, I have also been advised that, because at the time the Merger
was submitted for a vote of the stockholders of Piedmont I may have been
deemed an "affiliate" of Piedmont and the distribution by me of the
shares of the Common Stock I receive as a result of the Merger has not
been registered under the Securities Act, such shares must be held by me
indefinitely unless i) such distribution of such shares has been
registered under the Securities Act, ii) a sale of such shares is made
in conformity with the provisions of Rule 145 promulgated by the
Commission under the Securities Act or iii) such sale is pursuant to a
transaction which, in the opinion of counsel reasonably satisfactory to
Chartwell or as described in a "no-action" or interpretive letter from
the staff of the Commission, is not required to be registered under the
Securities Act.
3. I have carefully read this letter and the Merger Agreement
and have discussed the requirements of the Merger Agreement and other
applicable limitations upon the sale, transfer or other disposition of
the shares of the Common Stock to be received by me in the Merger, to
the extent I have felt necessary, with my counsel or with counsel for
Chartwell.
B. Furthermore, in connection with the matters set forth
herein, I understand and agree that:
1. Except as set forth in the Registration Rights Agreement
dated the date hereof, Chartwell is under no further obligation to
register the sale, transfer or other disposition of the shares of the
Common Stock received by me as a result of the Merger or to take any
other action necessary in order to make compliance with an exemption
from registration available, except as set forth in paragraph C
below.
2. Stop transfer instructions will be given to the transfer
agents of Chartwell with respect to the shares of the Common Stock I
will receive as a result of the Merger, and there will be placed on the
certificates representing such shares, or any certificates delivered in
substitution therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 UNDER THE SECURITIES ACT OF 1933
APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT
DATED , 1995 BETWEEN THE REGISTERED HOLDER HEREOF
AND [Chartwell], A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICES OF [Chartwell]."
3. Unless the transfer by me of my shares of the Common Stock
is a sale made in conformity with the provisions of Rule 145 of the
Rules and Regulations or made pursuant to a registration under the
Securities Act, Chartwell reserves the right to put the following legend
on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM
A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE
145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE
SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR
RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE
MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO A REGISTRATION
STATEMENT OR IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth above shall
be removed by delivery of substitute certificates without such legend if such
legend is not required for purposes of the Act or this Agreement. It is
understood and agreed that such legends referred to above will be removed if
(i) two years shall have elapsed from the date the undersigned acquired the
Common Stock received in the Merger and the provisions of Rule 145(d)(2) are
then available to the undersigned, upon delivery to Chartwell of appropriate
evidence thereof, if so requested by Chartwell, (ii) three years shall have
elapsed from the date the undersigned acquired the Common Stock received in
the Merger and the provisions of Rule 145(d)(3) are then applicable to the
undersigned, upon delivery to Chartwell of appropriate evidence thereof, if so
requested by Chartwell, or (iii) Chartwell has received either an opinion of
counsel, which opinion and counsel shall be reasonably satisfactory to
Chartwell, or a "no-action" letter obtained by the undersigned from the staff
of the Commission, to the effect that the restrictions imposed by Rule 145
under the Act no longer apply to the undersigned.
Execution of this letter should not be considered an admission on
my part that I am an "affiliate" of Piedmont as described in the first
paragraph of this letter or as a waiver of any rights I may have to object to
any claim that I am such an affiliate on or after the date of this letter.
C. Chartwell hereby represents, warrants and agrees that:
For as long as resales of any shares of the Common Stock owned by
me are subject to Rule 145, Chartwell shall make all filings of the
nature specified in paragraph (c)(1) or (c)(2) of Rule 144 of the Rules
and Regulations.
Very truly yours,
Accepted and agreed:
____________________
[Chartwell]
EXHIBIT I
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
________ __, 1995, among Chartwell Re Corporation, a Delaware corporation
("Chartwell"), and the security holders named in the schedule of holders (the
"Schedule of Holders") attached hereto and any future security holder of
Chartwell that becomes a party to this Agreement in accordance with the terms
hereof (collectively, the "Stockholders" and individually a "Stockholder").
WHEREAS, as of the date hereof, Piedmont Management Company
Inc. ("Piedmont") will be merged with and into Chartwell, with Chartwell
as the surviving corporation, pursuant to the Merger Agreement (as defined
below); and
WHEREAS, the Stockholders as of the date of this Agreement
represent certain of the current holders of the common stock, par value $.01
per share (the "Common Stock"), of Chartwell (the "Chartwell Stockholders"),
and of the common stock, par value $.50 per share (the "Piedmont Common
Stock"), of Piedmont (the "Piedmont Stockholders").
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. As used in this Agreement, the
following terms shall have the following meanings:
"Affiliate" shall mean any person that directly, or
indirectly through one or more intermediaries, controls or is controlled by,
or is under common control with, Chartwell.
"Business Day" shall mean any day except a Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized by law or executive order to close.
"Disadvantageous Condition" shall have the meaning given
such term in Section 3.1(a)(i) hereof.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Merger Agreement" shall mean the Agreement and Plan of
Merger dated as of __________, 1995 between Piedmont and Chartwell.
"Minimum Registration Amount" shall mean that number of
Registrable Securities represented by a number of shares of Common Stock which
is not less than 400,000 (such number to be proportionally adjusted in the
event of any stock split or stock dividend).
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"NASDAQ" shall mean the National Association of
Securities Dealers Automated Quotation System.
"Original Stockholders Agreement" shall mean the
Stockholders Agreement dated as of December 31, 1992, among Chartwell and the
Chartwell Stockholders, as amended.
"Other Stockholders" shall have the meaning given such
term in Section 3.1(a)(i) hereof.
"Person" shall mean an individual, a corporation, a
partnership, an association, a joint-stock company, a trust, any
unincorporated organization, or a government or political subdivision thereof.
"Priority Securities" shall have the meaning given such
term in Section 3.1(b)(i) hereof.
"Registrable Securities" shall mean shares of Common
Stock (including shares of Common Stock issuable upon exercise of the
Warrants) and any other security issued upon conversion or exchange of capital
stock of Chartwell or issued as a dividend or otherwise in respect of the
Common Stock, other than Rule 144 Securities (as defined herein) which may be
distributed to the public pursuant to Rule 144(k) under the Securities Act;
provided, however, that such securities shall cease to be Registrable
Securities if and when (A) a registration statement with respect to the
disposition of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of pursuant to
such effective registration statement, (B) such securities shall have been
otherwise transferred, if new certificates or other evidences of ownership for
such securities not bearing a legend restricting further transfer and not
subject to any stop transfer order or other restrictions on transfer shall
have been delivered by Chartwell, and subsequent disposition of such
securities shall not require registration or qualification of such securities
under the Securities Act, or (C) such securities shall have ceased to be
outstanding. Registrable Securities do not include any unexercised Warrants.
"Registration Expenses" shall mean all expenses incident
to Chartwell's performance of or compliance with its obligations under Article
III of this Agreement, including, without limitation, all SEC and stock
exchange or NASD registration and filing fees and expenses, fees and expenses
of compliance with applicable state securities or "blue sky" laws (including,
without limitation, reasonable fees and disbursements of counsel for the
underwriters in connection with "blue sky" qualifications of the Registrable
Securities), printing expenses, messenger and delivery expenses, the fees and
expenses incurred in connection with the listing of such securities to be
registered on each securities exchange or national market system on which such
securities are listed, fees and disbursements of counsel for Chartwell and all
independent auditors (including the expenses of any "comfort" letters required
by or incident to such performance and compliance), the fees and disbursements
of underwriters customarily paid by issuers or sellers of securities
(including the fees and expenses of any "qualified independent underwriter"
required by the NASD), the reasonable fees of one counsel retained in
connection with each such registration by the holders of a majority of the
Registrable Securities being registered, and the reasonable fees and expenses
of any special experts retained by Chartwell in connection with such
registration (but not including any underwriting discounts or commissions or
transfer taxes, if any, attributable to the sale of Registrable Securities by
holders of such Registrable Securities).
"Requesting Stockholders" shall have the meaning given
such term in Section 3.1(a)(i) hereof.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933,
as amended.
"Warrants" shall mean those warrants issued by Chartwell
to purchase shares of Common Stock which are outstanding as of the date of the
Merger Agreement.
All capitalized terms used and not defined herein shall have the meaning
assigned to them in the Merger Agreement.
ARTICLE II
REPRESENTATIONS
SECTION 2.1. Chartwell represents to the Stockholders that it
has full legal right, power and authority to enter into and perform this
Agreement, and the execution and delivery of this Agreement by it and the
consummation by it of the transactions contemplated by this Agreement have
been duly authorized by Chartwell. This Agreement is a valid, binding and
enforceable agreement of Chartwell.
SECTION 2.2. Each Stockholder represents to Chartwell that it
has full legal right, power and authority to enter into and perform this
Agreement, and the execution and delivery of this Agreement by it and the
consummation by it of the transactions contemplated by this Agreement have
been duly authorized by such Stockholder. This Agreement is a valid, binding
and enforceable agreement of such Stockholder.
ARTICLE III
REGISTRATION RIGHTS
SECTION 3.1. Registration Rights. The Stockholders shall have
the right to register their Registrable Securities in accordance with the
following provisions.
(a) Registration on Request.
(i) At any time and from time to time commencing on the
effective date hereof, upon the written request of Stockholders holding
Registrable Securities equal to at least the Minimum Registration Amount
(the "Requesting Stockholders") that Chartwell effect the registration
under the Securities Act of an amount of Registrable Securities held by
them equal to at least the Minimum Registration Amount, Chartwell will
promptly give written notice to all other Stockholders of Registrable
Securities (the "Other Stockholders") that a request for registration
has been received with respect to the Minimum Registration Amount. For
a period of 15 days following delivery of such notice, the Other
Stockholders may request that Chartwell also register their Registrable
Securities and after the expiration of such 15 day period, Chartwell
shall notify all Stockholders of the number of Registrable Securities to
be registered. Thereupon, Chartwell will use its best efforts to cause
the prompt registration under the Securities Act, subject to the
provisions of this Section 3.1, of (A) the Registrable Securities which
the Requesting Stockholders have requested Chartwell to register and (B)
all other Registrable Securities which Chartwell has been requested to
register by the Other Stockholders, and in connection therewith, prepare
and file on such appropriate form as Chartwell, in its reasonable
discretion, shall determine, a registration statement under the
Securities Act to effect such registration.
With respect to any registration statement filed, or to
be filed, pursuant to this Section 3.1(a)(i), if Chartwell shall furnish
to the Requesting Stockholders and the Other Stockholders a certified
resolution of the Board of Directors stating that in the Board of
Directors' good faith judgment it would (because of the existence of,
or in anticipation of, any acquisition or financing, merger, sale of
assets, capitalization or other similar corporate activity, or the
unavailability for reasons beyond Chartwell's control of any required
audited financial statements, or any other event or condition of similar
significance to Chartwell) be materially disadvantageous (a
"Disadvantageous Condition") to Chartwell or its stockholders for such a
registration statement to be maintained effective, or to be filed and
become effective, and setting forth the general reasons for such
judgment, Chartwell shall be entitled to cause such registration
statement to be withdrawn and the effectiveness of such registration
statement terminated, or, in the event no registration statement has yet
been filed, shall be entitled not to file any such registration
statement, until such Disadvantageous Condition no longer exists (notice
of which Chartwell shall promptly deliver to the Requesting Stockholders
and the Other Stockholders); provided, however, that Chartwell shall not
be entitled to delay any such registration statement pursuant to the
foregoing (A) for more than a total of 180 days or (B) more than once
during any 12 month period. Upon receipt of any such notice of a
Disadvantageous Condition, such Requesting Stockholders and Other
Stockholders will forthwith discontinue use of the prospectus contained
in such registration statement and, if so directed by Chartwell, each
such Stockholder will deliver to Chartwell all copies, other than
permanent file copies then in such Stockholder's possession, of the
prospectus then covering such Registrable Securities current at the time
of receipt of such notice, and, in the event no registration statement
has yet been filed, all drafts of the prospectus covering such
Registrable Securities. In the event that Chartwell shall give any
notice of a Disadvantageous Condition, Chartwell shall at such time as
it in good faith deems appropriate file a new registration statement
covering the Registrable Securities that were covered by such withdrawn
registration statement, and such registration statement shall be
maintained effective for such time as may be necessary so that the
period of effectiveness of such new registration statement shall be such
time as may be otherwise required by Section 3.1(a)(iii).
Requesting Stockholders holding a majority of the
Registrable Securities held by all Requesting Stockholders may, at any
time prior to the effective date of the registration statement relating
to such registration, revoke such request, without liability to any of
the other Requesting Stockholders or the Other Stockholders, by
providing a written notice to Chartwell revoking such request.
(ii) Number of Registrations; Expenses. Chartwell shall
not be obligated to effect more than one registration in any nine-
month period of Registrable Securities pursuant to requests from
Requesting Stockholders under this Section 3.1(a) and, in any event,
no more than four such registrations during the term of this
Agreement; provided that if Piedmont Stockholders have not been
Requesting Stockholders as to at least (A) one of the first two of
any such registrations, then only Piedmont Stockholders shall be
entitled to be the Requesting Stockholders with respect to the third
and fourth such registrations, or (B) two of the first three of any
such registrations, then only Piedmont Stockholders shall be entitled
to be the Requesting Stockholders with respect to the fourth such
registration; provided further, that Piedmont Stockholders shall not
be Requesting Stockholders as to more than a total of two of any such
registrations. Chartwell shall pay all Registration Expenses in
connection with the four registrations which the Requesting
Stockholders are entitled to request pursuant to this Section 3.1(a).
However, each Stockholder shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or
disposition of such Stockholder's Registrable Securities pursuant to
this Section 3.1(a). Notwithstanding any other provisions contained
in this Section 3.1(a), Chartwell shall not be required to register
any Registrable Securities pursuant to an effective registration
statement in connection with a request for such registration made in
accordance with this Section 3.1(a) if the previous registration
statement with respect to any request made pursuant to this Section
3.1(a) became effective less than 180 days prior to such request.
(iii) Effective Registration Statement. A registration
requested pursuant to this Section 3.1(a) shall not be deemed to have
been effected unless the registration statement relating thereto (A)
has become effective under the Securities Act and at least 50% of the
Registrable Securities of the Stockholders included in such
registration have actually been sold thereunder, and (B) has remained
effective for a period of at least 180 days (or such shorter period
in which all Registrable Securities of the Requesting Stockholders
and the Other Stockholders included in such registration have
actually been sold thereunder); provided, however, that if any
effective registration statement requested pursuant to this Section
3.1(a) is discontinued in connection with a Disadvantageous
Condition, such registration statement shall not be included as one
of the registrations which may be requested pursuant to Section
3.1(a) hereof if less than 80% of all the Registrable Securities
included in such registration have been sold thereunder; provided
further, that if after any registration statement requested pursuant
to this Section 3.1(a) becomes effective (A) such registration
statement is subject to any stop order, injunction or other order or
requirement of the SEC or other government agency or court due to the
actions or omissions to act of Chartwell and (B) less than 80% of all
of the Registrable Securities included in such registration have been
sold thereunder, or less than 80% of the Registrable Securities of a
particular Requesting Stockholder included in such registration have
been sold thereunder, such registration statement shall not be
included as one of the registrations which such Requesting
Stockholders are entitled to request pursuant to Section 3.1(a)(ii).
(iv) Selection of Underwriters. If any requested
registration pursuant to this Section 3.1(a) is in the form of an
underwritten offering, the Stockholders holding a majority of the
Registrable Securities in respect of which registration has been
requested shall have the right to select the investment banker and
manager or co-managers that will administer the offering, subject to the
consent of Chartwell, which consent shall not be unreasonably withheld.
(v) Pro Rata Participation in Requested Registrations. If
a requested registration pursuant to this Section 3.1(a) involves an
underwritten offering and the managing underwriter shall advise
Chartwell that, in its view, the number of equity securities requested
to be included in such registration exceeds the largest number of
securities which can be sold without having a material adverse effect on
such offering, including the price at which such securities can be sold,
the number of Registrable Securities requested to be registered by the
Requesting Stockholders and the Other Stockholders included by Chartwell
in such registration shall be allocated pro rata among the Requesting
Stockholders and the Other Stockholders on the basis of the relative
number of shares of Registrable Securities owned by them; provided,
however, that if in any such underwritten offering Chartwell includes in
such registration statement less than 80% of the Registrable Securities
requested to be included therein by any Requesting Stockholder, then
such registration statement shall not be included as one of the
registrations which the Requesting Stockholders are entitled to request
pursuant to Section 3.1(a)(ii).
(b) Incidental Registration
(i) If Chartwell at any time proposes to register any of
its equity securities (the "Priority Securities") under the Securities
Act (other than a registration (A) relating to shares of Common Stock
issuable upon exercise of employee stock options or in connection with
any employee benefit or similar plan of Chartwell, (B) in connection
with an acquisition by Chartwell of another company or (C) pursuant to
Section 3.1(a) hereof) in a manner which would permit registration of
Registrable Securities for sale to the public under the Securities Act
(whether or not for sale for its own account), it shall each such time,
subject to the provisions of Section 3.1(b)(ii) hereof, give prompt
written notice to all holders of record of Registrable Securities of its
intention to do so and of such Stockholders' rights under this Section
3.1(b), at least 30 days prior to the anticipated filing date of the
registration statement relating to such registration. Such notice shall
offer all such Stockholders the opportunity to include in such
registration statement such number of Registrable Securities as each
such Stockholder may request. Upon the written request of any such
Stockholder made within 20 days after the receipt of Chartwell's notice
(which request shall specify the number of Registrable Securities
intended to be disposed of by such Stockholder and the intended method
of disposition thereof), Chartwell will use its best efforts to effect
the registration under the Securities Act of all Registrable Securities
which Chartwell has been so requested to register by the Stockholders
thereof; provided, that (A) if such registration involves an
underwritten offering, all holders of Registrable Securities requesting
to be included in Chartwell's registration must sell their Registrable
Securities to the underwriters selected by Chartwell on the same terms
and conditions as apply to Chartwell; and (B) if, at any time after
giving written notice of its intention to register any securities
pursuant to this Section 3.1(b)(i) and prior to the effective date of
the registration statement filed in connection with such registration,
Chartwell shall determine for any reason not to register such
securities, Chartwell shall give written notice to all holders of
Registrable Securities and shall thereupon be relieved of its obligation
to register any Registrable Securities in connection with such
registration (without prejudice, however, to rights of Stockholders
under Section 3.1(a) hereof). If a registration pursuant to this
Section 3.1(b)(i) involves an underwritten public offering, any holder
of Registrable Securities requesting to be included in such registration
may elect, in writing prior to the effective date of the registration
statement filed in connection with such registration, not to register
such Registrable Securities in connection with such registration. No
registration effected under this Section 3.1(b) shall relieve Chartwell
of its obligations to effect registrations upon request under Section
3.1(a) hereof. Chartwell shall pay all Registration Expenses in
connection with each registration of Registrable Securities requested
pursuant to this Section 3.1(b). However, each Stockholder shall pay
all underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Stockholder's Registrable
Securities pursuant to a registration statement effected pursuant to
this Section 3.1(b).
(ii) Priority in Incidental Registrations. If a
registration pursuant to this Section 3.1(b) involves an underwritten
offering and the managing underwriter advises Chartwell that, in its
good faith view, the number of equity securities (including all
Registrable Securities) which Chartwell, the Stockholders and any other
Persons intend to include in such registration exceeds the largest
number of securities which can be sold without having a material adverse
effect on such offering, including the price at which such Registrable
Securities can be sold, Chartwell will include in such registration (A)
first, all the Priority Securities to be sold for Chartwell's own
account; (B) second, to the extent that the number of Priority
Securities is less than the number of Registrable Securities which the
underwriter has advised Chartwell can be sold in such offering without
having the material adverse effect referred to above, as many
Registrable Securities requested to be included in such registration by
the Stockholders pursuant to Section 3.1(b)(i) hereof, provided that if
the number of Registrable Securities requested to be included in such
registration by the Stockholders pursuant to Section 3.1(b)(i) hereof,
together with the number of Priority Securities, exceeds the number
which Chartwell has been advised can be sold in such offering without
having the material adverse effect referred to above, the number of such
Registrable Securities requested to be included in such registration by
the Stockholders pursuant to Section 3.1(b)(i) hereof shall be allocated
pro rata among all such requesting Stockholders on the basis of the
relative number of Registrable Securities owned by them; and (C) third,
to the extent that the number of Priority Securities and Registrable
Securities, as contemplated by (A) and (B) above, is less than the
number of Registrable Securities which the underwriter has advised
Chartwell can be sold in such offering without having the material
adverse effect referred to above, the number of equity securities
requested to be included in such registration by Persons other than the
Stockholders shall be allocated among such other Persons on a basis as
determined (or to be determined) by Chartwell and such other Persons.
(c) Holdback Agreements.
(i) If any registration of Registrable Securities shall be
in connection with an underwritten public offering, upon the request of
the managing underwriter each holder of Registrable Securities agrees
not to effect any sale or distribution, including any private placement
or any sale pursuant to Rule 144 or any successor provision, under the
Securities Act, of any Registrable Securities, and not to effect any
such sale or distribution of any other equity security of Chartwell or
of any security convertible into or exchangeable or exercisable for any
equity security of Chartwell (in each case, other than as part of such
underwritten public offering) during the seven days prior to, and during
the 120 day period which begins on, the effective date of such
registration statement (except as part of such registration), provided
that each holder of Registrable Securities has received written notice
of such registration at least two Business Days prior to the anticipated
beginning of the seven day period referred to above.
(ii) If any registration of Registrable Securities shall be
in connection with an underwritten public offering, Chartwell agrees (A)
not to effect any sale or distribution of any of its equity securities
or of any security convertible into or exchangeable or exercisable for
any equity security of Chartwell (other than any such sale or
distribution of such securities in connection with any merger or
consolidation by Chartwell or any Affiliate or the acquisition by
Chartwell or an Affiliate of the capital stock or substantially all the
assets of any other Person or in connection with an employee stock
ownership or other benefit plan) during the seven days prior to, and
during the 120 day period which begins on, the effective date of such
registration statement (except as part of such registration) and (B)
that any agreement entered into after the date hereof pursuant to which
Chartwell issues or agrees to issue any privately placed equity
securities shall contain a provision under which the holders of such
securities agree not to effect any sale or distribution of any such
securities during the period referred to in the foregoing clause (i),
including any sale pursuant to Rule 144 under the Securities Act (except
as part of such registration, if permitted).
(d) Registration Procedures. In connection with any offering
of Registrable Securities registered pursuant to this Section 3.1, Chartwell
shall:
(i) Prepare and file with the SEC within 90 days after
receipt of a request for registration, a registration statement on any
form for which Chartwell then qualifies or which counsel for Chartwell
shall deem appropriate, and which form shall be available for the sale
of the Registrable Securities in accordance with the intended methods of
distribution thereof, and use its best efforts to cause such
registration statement to become and remain effective as provided
herein, provided that before filing with the SEC a registration
statement or prospectus or any amendments or supplements thereto,
Chartwell will (A) furnish to one counsel selected by the holders of a
majority of the Registrable Securities covered by such registration
statement copies of all such documents proposed to be filed for said
counsel's review and comment and (B) notify each Stockholder of
Registrable Securities covered by such registration statement of any
stop order issued or threatened by the SEC and take all reasonable
actions required to prevent the entry of such stop order or to remove it
if entered.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 180 days or such
shorter period which will terminate when all Registrable Securities
covered by such registration statement have been sold (but not before
the expiration of the 90 day period referred to in Section 4(3) and
Rule 174 of the Securities Act, or any successor thereto, if
applicable), and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth in
such registration statement.
(iii) Furnish to each holder and each underwriter, if any,
of Registrable Securities covered by such registration statement such
number of copies of such registration statement, each amendment and
supplement thereto (in each case including all exhibits thereto), and
the prospectus included in such registration statement (including each
preliminary prospectus), in conformity with the requirements of the
Securities Act, and such other documents as any Stockholder may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Stockholder.
(iv) Use its best efforts to register or qualify such
Registrable Securities under such other state securities or "blue sky"
laws of such jurisdictions as any holder, and underwriter, if any, of
Registrable Securities covered by such registration statement reasonably
requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Stockholder and each
underwriter, if any, to consummate the disposition in such jurisdictions
of the Registrable Securities owned by such Stockholder; provided that
Chartwell will not be required to (A) qualify generally to do business
in any jurisdiction where it would not otherwise be required to qualify
but for this clause (iv), (B) subject itself to taxation in any such
jurisdiction or (C) consent to general service of process in any such
jurisdiction.
(v) Use its best efforts to cause the Registrable
Securities covered by such registration statement to be registered with
or approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of Chartwell to
enable the holder or holders thereof to consummate the disposition of
such Registrable Securities.
(vi) Immediately notify each holder of such Registrable
Securities at any time when a prospectus relating thereto is required to
be delivered under the Securities Act of the happening of any event
which comes to Chartwell's attention if as a result of such event the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading; and Chartwell will promptly prepare and furnish
to such Stockholder a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
(vii) Use its best efforts to cause all such Registrable
Securities to be listed on a national securities exchange (including
NASDAQ) and on each securities exchange on which similar securities
issued by Chartwell may then be listed, and enter into such customary
agreements including a listing application and indemnification agreement
in customary form, and to provide a transfer agent and registrar for
such Registrable Securities covered by such registration statement no
later than the effective date of such registration statement.
(viii) Enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other
actions as the holders of a majority of the Registrable Securities being
covered by such registration statement or the underwriters retained by
such Stockholders, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities, including
customary representations, warranties, indemnities and agreements.
(ix) Make available for inspection by any holder of
Registrable Securities covered by such registration statement, any
underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent
retained by any such Stockholder or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of Chartwell and its subsidiaries, if any,
as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause Chartwell's and its Affiliates'
officers, directors and employees to supply all information and
respond to all inquiries reasonably requested by any such Inspector
in connection with such registration statement.
(x) Use its best efforts to obtain a "comfort" letter from
Chartwell's independent public accountants in customary form and
covering such matters of the type customarily covered by "comfort"
letters as the holders of a majority in interest of the Registrable
Securities being sold reasonably request.
(xi) Use its best efforts to obtain an opinion of outside
counsel for Chartwell covering substantially the same matters with
respect to such registration statement (and the prospectus included
therein) as are customarily covered in opinions of issuer's counsel
and delivered to underwriters in underwritten public offerings of
securities, and such other legal matters as the holders of a majority
in interest of the Registrable Securities being sold reasonably
request.
(xii) Otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to the
Stockholders, as soon as reasonably practicable, an earnings statement
covering a period of at least twelve months, beginning with the first
month after the effective date of the registration statement (as the
term "effective date" is defined in Rule 158(c) under the Securities
Act), which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder.
It shall be a condition precedent to the obligation of Chartwell
to take any action with respect to securities of a holder of Registrable
Securities that such Stockholder shall furnish to Chartwell such information
regarding the securities held by such Stockholder and the intended method of
disposition thereof as Chartwell shall reasonably request and as shall be
required in connection with the action taken by Chartwell.
Each holder of Registrable Securities agrees that, upon receipt
of any notice from Chartwell of the happening of any event of the kind
described in Section 3.1(d)(vi) hereof, such Stockholder will forthwith
discontinue disposition of Registrable Securities until such Stockholder's
receipt of the copies of the supplemented or amended prospectus contemplated
by Section 3.1(d) (vi) hereof, and, if so directed by Chartwell, such
Stockholder will deliver to Chartwell (at Chartwell's expense) all copies
(including, without limitation, any and all drafts), other than permanent file
copies, then in such Stockholder's possession of the existing prospectus
covering such Registrable Securities. In the event Chartwell shall give any
such notice, the period mentioned in Section 3.1(d)(ii) hereof shall be
extended by the greater of (A) three months or (B) the number of days during
the period from and including the date of the giving of such notice pursuant
to Section 3.1(d)(vi) hereof to and including the date when each Stockholder
of Registrable Securities covered by such registration statement shall have
received the copies of the supplemented or amended prospectus contemplated by
Section 3.1(d)(vi) hereof.
(e) Indemnification.
(i) Indemnification by Chartwell. In the event of any
registration of any securities of Chartwell under the Securities Act
pursuant to this Agreement, Chartwell will indemnify and hold harmless,
to the full extent permitted by law, each of the holders of any
Registrable Securities covered by such registration statement, their
respective directors and officers, general partners, limited partners
and managing directors, each other Person who participates as an
underwriter in the offering or sale of such securities and each other
Person, if any, who controls, is controlled by or is under common
control with any such Stockholder or any such underwriter within the
meaning of the Securities Act (and directors, officers, controlling
Persons, partners and managing directors of any of the foregoing),
against any and all losses, claims, damages or liabilities, joint or
several, and expenses (including any amounts paid in any settlement
effected with Chartwell's consent, which consent will not be
unreasonably withheld) to which such Stockholder, any such director or
officer or general or limited partner or managing director or any such
underwriter or controlling Person may become subject under the
Securities Act, state securities or "blue sky" laws, common law or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) or expenses arise out of or
are based upon (A) any untrue statement or alleged untrue statement of
any material fact contained, on the effective date thereof, in any
registration statement under which such securities were registered under
the Securities Act, any preliminary, final or summary prospectus
contained therein, or any amendment or supplement thereto, (B) any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, or (C) any violation or alleged violation by Chartwell of
any federal, state or common law rule or regulation applicable to
Chartwell and relating to action required of or inaction by Chartwell in
connection with any such registration. Chartwell shall reimburse each
such Stockholder and each such director, officer, general partner,
limited partner, managing director or underwriter and controlling Person
for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending such loss, claim, liability,
action or proceeding, provided, that Chartwell shall not be liable in
any such case to the extent that any such loss, claim, damage, liability
(or action or proceeding in respect thereof) or expense arises out of or
is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement or
amendment or supplement thereto or in any such preliminary, final or
summary prospectus in reliance upon and in conformity with written
information furnished to Chartwell through an instrument duly executed
by such Stockholder in its capacity as a Stockholder in Chartwell or any
such director, officer, general or limited partner, managing director or
underwriter specifically stating that it is for use in the preparation
thereof; and, provided further, that Chartwell shall not be liable to
any holder of Registrable Securities, any Person who participates as an
underwriter in the offering or sale of Registrable Securities, if any,
or any other Person, if any, who controls such underwriter within the
meaning of the Securities Act, pursuant to this Section with respect to
any preliminary prospectus or the final prospectus or the final
prospectus as amended or supplemented, as the case may be, to the extent
that any such loss, claim, damage or liability of such underwriter or
controlling Person results from the fact that such underwriter sold
Registrable Securities to a Person to whom there was not sent or given,
at or prior to the written confirmation of such sale, a copy of the
final prospectus or of the final prospectus as then amended or
supplemented, whichever is most recent, if Chartwell has previously
furnished copies thereof to such underwriter and such final prospectus,
as then amended or supplemented, had corrected any such misstatement or
omission. The indemnity provided for herein shall remain in full force
and effect regardless of any investigation made by or on behalf of such
Stockholder or any such director, officer, general partner, limited
partner, managing director, underwriter or controlling Person and shall
survive the transfer of such securities by such Stockholder.
(ii) Indemnification by the Stockholders and Underwriters.
Chartwell may require, as a condition to including any Registrable
Securities in any registration statement filed in accordance with the
provisions hereof, that Chartwell shall have received an undertaking
reasonably satisfactory to it from the holders of such Registrable
Securities (other than the State of Michigan Retirement System and the
Virginia Retirement System) or any underwriter, to indemnify and hold
harmless (in the same manner and to the same extent as set forth in
paragraph (i) above) Chartwell and its directors, officers, controlling
Persons and all other prospective sellers and their respective
directors, officers, general and limited partners, managing directors,
and their respective controlling Persons with respect to any statement
or alleged statement in or omission or alleged omission from such
registration statement, any preliminary, final or summary prospectus
contained therein, or any amendment or supplement, if such statement or
alleged statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to Chartwell
or its representatives through an instrument duly executed by or on
behalf of such Stockholder or underwriter specifically stating that it
is for use in the preparation of such registration statement,
preliminary, final or summary prospectus or amendment or supplement, or
a document incorporated by reference into any of the foregoing. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of Chartwell or any of the
Stockholders, underwriters, or any of their respective directors,
officers, general or limited partners, managing directors or controlling
Persons and shall survive the transfer of such securities by such
Stockholder, provided, however, that no such Stockholder shall be liable
in the aggregate for any amounts exceeding the product of the sale price
per Registrable Security and the number of Registrable Securities being
sold pursuant to such registration statement or prospectus by such
Stockholder.
(iii) Notices of Claims, Etc. Promptly after receipt by an
indemnified party hereunder of written notice of the commencement of any
action or proceeding with respect to which a claim for indemnification
may be made pursuant to this Section, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party,
promptly give written notice to the indemnifying party of the
commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve
the indemnifying party of its obligations under the preceding sections
of this Section, except to the extent that the indemnifying party is
actually materially prejudiced by such failure to give notice. In case
any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist in respect of such
claim, the indemnifying party will be entitled to participate in and,
jointly with any other indemnifying party similarly notified, to assume
the defense thereof, to the extent that it may wish, with counsel
reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof, unless in
such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties arises in respect of
such claim after the assumption of the defense thereof, and the
indemnifying party will not be subject to any liability for any
settlement made without its consent (which consent shall not be
unreasonably withheld). No indemnifying party will consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
such indemnified party of a release from all liability in respect to
such claim or litigation. An indemnifying party who is not entitled to,
or elects not to, assume the defense of a claim will not be obligated to
pay the fees and expenses of more than one counsel in any single
jurisdiction for all parties indemnified by such indemnifying party with
respect to such claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect
to such claim, in which event the indemnifying party shall be obligated
to pay the fees and expenses of such additional counsel or counsels as
may be reasonably necessary. Notwithstanding anything to the contrary
set forth herein, and without limiting any of the rights set forth
above, in any event any party will have the right to retain, at its own
expense, counsel with respect to the defense of a claim.
(iv) Other Indemnification. Indemnification similar to
that specified in the preceding Sections of this Section (with
appropriate modifications) shall be given by Chartwell and each holder
of Registrable Securities with respect to any required registration or
other qualification of securities under any federal or state law or
regulation or governmental authority other than the Securities Act.
(v) Contribution. In order to provide for just and
equitable contribution in circumstances in which the indemnity
agreement provided for in this Section is for any reason held to be
unenforceable although applicable in accordance with its terms,
Chartwell, the Stockholders and the underwriters shall contribute to
the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by such indemnity agreement incurred by
Chartwell, the Stockholders and the underwriters, in such proportions
that the underwriters are responsible for that portion represented by
the percentage that the underwriting discount appearing on the cover
page of the prospectus bears to the initial public offering price
appearing thereon and Chartwell and the Stockholders are responsible
for the balance; provided, however, that no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. As between
Chartwell and the Stockholders, such parties shall contribute to the
aggregate losses, liabilities, claims, damages and expenses of the
nature contemplated by such indemnity agreement in such proportion as
shall be appropriate to reflect (A) the relative benefits received by
Chartwell, on the one hand, and the holders of the Registrable
Securities included in the offering on the other hand, from the
offering of the Registrable Securities and any other securities
included in such offering, and (B) the relative fault of Chartwell,
on the one hand, and the holders of the Registrable Securities
included in the offering, on the other, with respect to the
statements or omissions which resulted in such loss, liability,
claim, damage or expense, or action in respect thereof, as well as
any other relevant equitable considerations. The relative benefits
received by Chartwell, on the one hand, and the holders of the
Registrable Securities on the other, with respect to such offering
shall be deemed to be in the same proportion as the sum of the total
purchase price paid to Chartwell in respect of the Registrable
Securities plus the total net proceeds from the offering of any
securities included in such offering (net of underwriting discounts
and commissions before deducting expenses) received by Chartwell
bears to the amount by which the total net proceeds from the offering
of Registrable Securities (net of underwriting discounts and
commissions before deducting expenses) received by the holders of the
Registrable Securities with respect to such offering exceeds the
purchase price paid to Chartwell in respect of the Registrable
Securities, and in each case the net proceeds received from such
offering shall be determined as set forth on the table to the cover
page of the prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission
to state a material fact relates to information supplied by Chartwell
or the holders of the Registrable Securities, the intent of the
parties and their relative access to information and Chartwell and
the holders of the Registrable Securities agree that it would not be
just and equitable if contribution pursuant to this Section were to
be determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable
considerations referred to herein. Notwithstanding anything to the
contrary contained herein, Chartwell and the Stockholders agree that
any contribution required to be made by a Stockholder pursuant to
this Section 3.1(e)(v) shall not exceed the net proceeds from the
offering of Registrable Securities (net of underwriting discounts and
commissions before deducting expenses) received by such Stockholder
with respect to such offering. For purposes of this Section, each
Person, if any, who controls a Stockholder or an underwriter within
the meaning of Section 15 of the Securities Act shall have the same
rights to contribution as such Stockholder or underwriter, and each
director of Chartwell, each officer of Chartwell who signed the
registration statement, and each Person, if any, who controls
Chartwell within the meaning of Section 15 of the Securities Act
shall have the same rights to contribution as Chartwell.
(vi) Rule 144. Chartwell agrees that it will file in a
timely manner all reports required to be filed by it pursuant to the
Exchange Act, and, if at any time Chartwell is not required to file such
reports, it will make available to the public, to the extent required to
permit the sale of shares by any Stockholder pursuant to Rule 144,
current information about itself and its activities as contemplated by
Rule 144 under the Securities Act, as such Rule may be amended from time
to time. Notwithstanding the foregoing, Chartwell may deregister any
class of its equity securities under Section 12 of the Exchange Act or
suspend its duty to file reports with respect to any class of its
securities pursuant to Section 15(d) of the Exchange Act if it is then
permitted to do so pursuant to the Exchange Act and the rules and
regulations thereunder. For purposes of this Agreement "Rule 144
Securities" are Registrable Securities which are of a class which is
registered under Section 12 of the Exchange Act and which may be
publicly sold pursuant to the provisions of Rule 144 under the
Securities Act.
ARTICLE IV
MISCELLANEOUS
SECTION 4.1. Effective Date. This Agreement shall become
effective as of the Effective Time of the Merger (each as defined in the
Merger Agreement).
SECTION 4.2. Headings. The headings in this Agreement are for
convenience of reference only and shall not control or affect the meaning or
construction of any provisions hereof.
SECTION 4.3. Entire Agreement; Further Assurances. This
Agreement constitutes the entire agreement and understanding of the parties
hereto in respect of the subject matter contained herein, and there are no
restrictions, promises, representations, warranties, covenants, or
undertakings with respect to the subject matter hereof, other than those
expressly set forth or referred to herein. This Agreement supersedes all
prior agreements and understandings between the parties hereto with respect
to the subject matter hereof. In the event that after the date hereof, any
further action by any party hereto is necessary to carry out the provisions
of this Agreement, each such party shall take all such necessary action.
SECTION 4.4. Notices. Any notice, request, instruction or
other document to be given hereunder by any party hereto to another party
hereto shall be in writing, shall be delivered personally, sent by registered
mail, postage prepaid, return receipt requested, by overnight courier service
or by facsimile transmission (with appropriate confirmation) to the address or
number of the party set forth below, or to such other address or number as the
party to whom notice is to be given may provide in a written notice to
Chartwell, a copy of which written notice shall be on file with the Secretary
of Chartwell. No notice shall be effective except upon actual delivery.
If to Chartwell:
Chartwell Re Corporation
300 Atlantic Street
Suite 400
Stamford, CT 06901
Attention: Chief Executive Officer
Fax: (203) 961-7310
With a copy to:
LeBoeuf, Lamb, Greene
& MacRae, L.L.P.
125 West 55th Street
New York, NY 10019
Attention: Peter R. O'Flinn
Fax: (212) 424-8500
If to a Stockholder or holder of Warrants, to the address for
such holder as set forth in the Schedule of Holders, with copies
to such other Persons as provided therein.
SECTION 4.5. Applicable Law. The laws of the State of Delaware
shall govern the interpretation, validity and performance of the terms of this
Agreement, regardless of the law that might be applied under applicable
principles of conflicts of law.
SECTION 4.6. Consent to Jurisdiction. Each party hereto agrees
to the non-exclusive jurisdiction of any state or Federal court within the
State of Delaware, with respect to any claim or cause of action, whether in
law or equity arising under or relating to this Agreement, and waives personal
service of any and all process upon it, and consents that all services of
process be made by registered mail, to the address of the party as set forth
in Section 4.4, or to such other address as the party to whom notice is to be
given may provide in a written notice to Chartwell, a copy of which written
notice shall be on file with the Secretary of Chartwell and service so made
shall be deemed to be completed when received. Each party hereto waives any
objection based on forum non conveniens and waives any objection to venue of
any action instituted hereunder. Each party hereto waives trial by jury in any
action brought hereunder. Each party hereto agrees that a final judgment in
any such action shall be conclusive and may be enforced in any other
jurisdiction by suit on the judgment or in any other manner provided by law.
Nothing in this paragraph shall affect the right of any party hereto to serve
legal process in any other manner permitted by law. To the extent that any
party hereto has or hereafter may acquire any immunity from jurisdiction of
any court or from any legal process with respect to itself or its property,
such party hereby waives such immunity in respect of its obligations
hereunder. The State of Michigan Retirement System shall not be bound by the
provisions of this Section 4.6.
SECTION 4.7. Severability. The invalidity, illegality or
unenforceability of one or more of the provisions of this Agreement in any
jurisdiction shall not affect the validity, legality or enforceability of the
remainder of this Agreement in such jurisdiction or the validity, legality or
enforceability of this Agreement, including any such provision, in any other
jurisdiction, it being intended that all rights and obligations of the parties
hereunder shall be enforceable to the fullest extent permitted by law.
SECTION 4.8. Agreement to be Filed. A copy of this Agreement
shall be filed with the Secretary of Chartwell and kept with the records of
Chartwell.
SECTION 4.9. Other Agreements. Nothing contained in this
Agreement shall be deemed to be a waiver of, or release from, any obligations
any party hereto may have under, or any restrictions on the transfer of the
Common Stock imposed by, any other agreement. The parties to the Original
Stockholders Agreement hereby acknowledge and agree that it shall terminate as
of the Effective Time and be of no further force or effect.
SECTION 4.10. Successors; Assigns; Transferees. The provisions
of this Agreement shall be binding upon and accrue to the benefit of the
parties hereto and, except as set forth below, their respective successors and
assigns. Notwithstanding the foregoing, neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by Chartwell or any Stockholder except concurrently with a transfer
of its Common Stock or Warrants (other than a transfer pursuant to a public
offering under the Securities Act or pursuant to Rule 144 under the Securities
Act) and then only if, at such time, the Person to whom such transfer is
proposed to be made shall execute a counterpart of this Agreement, and such
other documents as are necessary to confirm such Person's agreement to become
a party to, and to be bound by, all terms and conditions of this Agreement.
SECTION 4.11. Defaults. A default by any party to this
Agreement in such party's compliance with any of the conditions or covenants
hereof or performance of any of the obligations of such party hereunder shall
not constitute or excuse a default by any other party.
SECTION 4.12. Term. This Agreement shall terminate upon the
first to occur of (i) the liquidation or dissolution of Chartwell, or (ii) ten
years from the date of this Agreement to the extent the registration rights
hereunder have not theretofore been exercised.
SECTION 4.13. Amendments. This Agreement may be amended,
modified, waived or supplemented only by written instrument executed by
Chartwell and any Stockholder whose rights hereunder would be adversely
affected thereby; provided that the sale or transfer by a Stockholder or
holder of Warrants of Common Stock or Warrants (and, as a result, the
purchaser's or transferee's becoming a party hereto) shall not be deemed an
amendment, modification, waiver or supplement of this Agreement.
SECTION 4.14. Waiver and Consent. No action taken pursuant to
this Agreement, including, without limitation, any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties,
covenants or agreements contained herein. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed
as a waiver of any preceding or succeeding breach, and no failure by any party
to exercise any right or privilege hereunder shall be deemed a waiver of such
party's rights or privileges hereunder or shall be deemed a waiver of such
party's rights to exercise the same at any subsequent time or times hereunder.
SECTION 4.15. Recapitalization, Exchanges, and Similar Actions
Affecting the Common Stock. The provisions of this Agreement shall apply, to
the full extent set forth herein, with respect to the Common Stock and to any
and all shares of capital stock of Chartwell or any successor which may be
issued in respect of, in exchange for, or in substitution of the Common Stock.
SECTION 4.16. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
CHARTWELL RE CORPORATION
By:____________________________
Name:
Title:
WAND PARTNERS (CHARTWELL) L.P.
By: WAND PARTNERS INC.
General Partner
By:____________________________
Name: Bruce W. Schnitzer
Title: Chairman
Address: Mr. Bruce W. Schnitzer
Wand Partners Inc.
630 Fifth Avenue
Suite 2435
New York, NY 10111
SWISS AMERICAN CORPORATION
By:____________________________
Name: Salvatore R. DiDonna
Title: Secretary
Address: Mr. Salvatore R. DiDonna
Swiss American Corporation
100 Wall Street
New York, NY 10005
VIRGINIA RETIREMENT SYSTEM
By: Brinson Partners, Inc.
under Power of Attorney
By:____________________________
Name: Robert D. Blank
Title: Partner
Address: Mr. Robert D. Blank
Brinson Partners, Inc.
209 South LaSalle
12th Floor
Chicago, IL 60604
BRINSON TRUST COMPANY, AS
TRUSTEE OF THE INSTITUTIONAL
VENTURE CAPITAL FUND II
By:____________________________
Name: Robert D. Blank
Title: Assistant Trust Officer
Address: Mr. Robert D. Blank
Brinson Partners, Inc.
209 South LaSalle
12th Floor
Chicago, IL 60604
CANAAN CAPITAL LIMITED PARTNERSHIP
By: Canaan Capital Management L.P.
By:____________________________
Name: Stephen L. Green
Title: General Partner
Address: Mr. Stephen L. Green
Canaan Partners
105 Rowayton Avenue
Rowayton, CT 06853
CANAAN CAPITAL OFFSHORE
LIMITED PARTNERSHIP C.V.
By: Canaan Capital Management L.P.
By:____________________________
Name: Stephen L. Green
Title: General Partner
Address: Mr. Stephen L. Green
Canaan Partners
105 Rowayton Avenue
Rowayton, CT 06853
YEOMAN LIMITED
By:____________________________
Name:
Title:
Address: Mr. Gregory Kopchinsky
c/o Canaan Partners
105 Rowayton Avenue
Rowayton, CT 06853
QUAI LIMITED
By:____________________________
Name:
Title:
Address: Mr. Gregory Kopchinsky
c/o Canaan Partners
105 Rowayton Avenue
Rowayton, CT 06853
BELJAM HOLDINGS LTD.
By:____________________________
Name:
Title:
Address: Mr. Gregory Kopchinsky
c/o Canaan Partners
105 Rowayton Avenue
Rowayton, CT 06853
________________________________
LESLIE ABBEY
Address: Mr. Gregory Kopchinsky
c/o Canaan Partners
105 Rowayton Avenue
Rowayton, CT 06853
________________________________
JONATHAN ABBEY
Address: Mr. Gregory Kopchinsky
c/o Canaan Partners
105 Rowayton Avenue
Rowayton, CT 06853
MICHIGAN MUTUAL INSURANCE COMPANY
By:___________________________
Name: Donald R. Mandich
Title: President
Address: Mr. Donald R. Mandich
Michigan Mutual Insurance
Company
25200 Telegraph Road
Southfield, MI 48086
STATE TREASURER OF THE STATE
OF MICHIGAN CUSTODIAN OF
PUBLIC SCHOOL EMPLOYEES'
RETIREMENT SYSTEM; STATE
EMPLOYEES' RETIREMENT SYSTEM;
MICHIGAN STATE POLICE
RETIREMENT SYSTEM; JUDGES'
RETIREMENT SYSTEM
By:____________________________
Name:
Title:
Address: State of Michigan
Department of Treasury
Treasury Building
430 West Allegan
Lansing, MI 48992
FIMA FINANCE MANAGEMENT INC.
By:____________________________
Name:
Title:
Address: Mr. Gian Andrea Botta
FIMA Finance Management Co.
c/o EXOR America Inc.
375 Park Avenue
New York, NY 10152
FOREIGN & COLONIAL ENTERPRISE
TRUST PLC
By:____________________________
Name:
Title:
Address: Ms. Cecilia Astrup
Foreign & Colonial
Ventures
8th Floor
Exchange House
Primrose Street
London EC2A 2NY England
WAND/CHARTWELL INVESTMENTS L.P.
By: WAND PARTNERS (CHARTWELL) L.P.
General Partner
By: WAND PARTNERS INC.
General Partner
By:____________________________
Name: Bruce W. Schnitzer
Title: Chairman
Address: Mr. Bruce W. Schnitzer
Wand Partners Inc.
630 Fifth Avenue
Suite 2435
New York, NY 10111
_______________
Note: Piedmont Stockholders to consist of (i) those trusts, represented by an
aggregate of ten trustees, which are parties to the Voting Agreement among
Chartwell and the Piedmont Stockholders listed on the signature pages thereof,
dated as of the date of the Merger Agreement, (ii) the Center for Creative
Leadership and (iii) certain other significant individual stockholders
constituting the Richardson Stockholders (as defined in the Stockholders
Agreement).
Schedule of Holders
[TO COME]
Exhibit J
FIRST SUPPLEMENTAL INDENTURE (the "Supplemental Indenture"),
dated as of ____________ __, 1995, among Piedmont Management Company Inc., a
Delaware corporation (the "Company"), Chartwell Re Corporation, a Delaware
corporation ("Chartwell"), and [TRUSTEE], a national association, as trustee
under the Indenture referred to below (the "Trustee").
W I T N E S S E T H :
WHEREAS, pursuant to the Indenture (the "Indenture"), dated as
of ___________ __, 1995, between the Company and the Trustee, the Company has
duly issued its Contingent Interest Notes Due June 30, 2006 (collectively, the
"Securities"), which Securities consist of (i) an aggregate principal amount
of $1,000,000 plus interest accreting thereon from the date of issuance as
provided in the Indenture at a rate of 8.0% per annum, compounded annually;
WHEREAS, the Company and Chartwell have entered into an
Agreement and Plan of Merger dated as of August 7, 1995 (the "Merger
Agreement") pursuant to which, at the Effective Time (as defined in the Merger
Agreement), the Company will be merged with and into Chartwell, with Chartwell
being the surviving corporation (the "Merger");
WHEREAS, upon consummation of the Merger, all of the debts,
liabilities, duties and obligations of the Company will become the debts,
liabilities, duties and obligations of Chartwell, including, without
limitation, the debts, liabilities, duties and obligations of the Company
under the Indenture;
WHEREAS, Section 5.1 of the Indenture provides in pertinent
part that the Company may consummate the Merger subsequent to the issuance of
the Securities, and in the event of such Merger, Chartwell shall expressly
assume, by supplemental indenture, executed and delivered to the Trustee, all
of the obligations of the Company under the Indenture;
WHEREAS, Section 5.1 of the Indenture provides in pertinent
part that in connection with the Merger, the Company is required to deliver to
the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that the Merger and the supplemental indenture in respect thereto comply with
the provisions described in the Indenture and that all conditions precedent
provided for in the Indenture relating to such transaction have been complied
with;
WHEREAS, Section 5.2 of the Indenture provides in pertinent
part that upon the Merger, the successor Person into which the Company is
merged shall succeed to, and be substituted for, and may exercise every right
and power of the Company under the Indenture with the same effect as if such
successor Person had been named as the Company therein;
WHEREAS, Section 9.1 of the Indenture provides in pertinent
part that the Company and the Trustee may supplement the Indenture without the
consent of any Holder of a Security to provide for the assumption of the
Company's obligations under the Indenture to the Holders in the case of a
merger pursuant to Article 5 of the Indenture upon request of the Company
accompanied by a resolution of the Board of Directors of the Company
authorizing the execution of such supplemental indenture; and
WHEREAS, all things necessary to make this Supplemental
Indenture a valid and binding agreement of Chartwell in accordance with its
terms have been done;
NOW, THEREFORE, for and in consideration of the premises, it is
mutually covenanted and agreed for the equal and proportionate benefit of all
Holders of the Securities as follows:
SECTION 1. Chartwell hereby expressly assumes all of the
obligations of the Company under the Indenture, including the obligation to
make due and punctual payment of the Payment Amount and the performance of
every covenant, agreement and obligation on the part of the Company under the
Indenture.
SECTION 2. Pursuant to Section 5.2 of the Indenture, Chartwell
hereby succeeds to, and is substituted for, and may exercise every right and
power of the Company under the Indenture with the same effect as if Chartwell
had been named as the Company therein.
SECTION 3. After the execution and delivery of this
Supplemental Indenture, any Securities authenticated and delivered in
substitution for, or in lieu of, Securities then outstanding and all
Securities presented or delivered to the Trustee on and after such date for
such purpose shall be stamped, typed or otherwise affixed with a notation as
follows:
CHARTWELL RE CORPORATION, A DELAWARE CORPORATION, HAS EXPRESSLY
ASSUMED ALL OF THE OBLIGATIONS OF PIEDMONT MANAGEMENT COMPANY
INC. UNDER THE INDENTURE, INCLUDING THE OBLIGATION TO MAKE DUE
AND PUNCTUAL PAYMENT OF THE PAYMENT AMOUNT (AS DEFINED IN THE
INDENTURE) AND THE PERFORMANCE OF EVERY COVENANT, AGREEMENT AND
OBLIGATION ON THE PART OF PIEDMONT MANAGEMENT COMPANY INC.
UNDER THE INDENTURE. REFERENCE IS HEREBY MADE TO THE FIRST
SUPPLEMENTAL INDENTURE, DATED AS OF ____________ __, 1995,
COPIES OF WHICH ARE ON FILE WITH THE TRUSTEE.
SECTION 4. The Trustee accepts this Supplemental Indenture
and agrees to execute the trust created by the Indenture as hereby
supplemented upon the terms and conditions set forth in the Indenture,
including the terms and provisions defining and limiting the liabilities
and responsibilities of the Trustee, which terms and provisions shall in
like manner define and limit its liabilities and responsibilities in the
performance of the trust created by the Indenture as hereby supplemented.
SECTION 5. The Indenture, supplemented as hereinabove set
forth, is in all respects ratified and confirmed, and the terms and conditions
thereof, supplemented as hereinabove set forth, shall be and remain in full
force and effect.
SECTION 6. The recitals contained in this Supplemental
Indenture shall be taken as the statements of Chartwell and the Company, and
the Trustee shall have no responsibility for their correctness.
SECTION 7. This Supplemental Indenture shall become effective
upon, and simultaneously with, the Effective Date of the Merger.
SECTION 8. The internal laws of the State of New York shall
govern this Supplemental Indenture.
SECTION 9. This Supplemental Indenture may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
SECTION 10. Capitalized terms not otherwise defined herein are
defined as set forth in the Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed as of the date first above written.
PIEDMONT MANAGEMENT COMPANY
INC.
By:__________________________
Name:
Title:
[CORPORATE SEAL]
Attest:
By:_________________________
Name:
Title:
CHARTWELL RE CORPORATION
By:__________________________
Name:
Title:
[CORPORATE SEAL]
Attest:
By:_________________________
Name:
Title:
[TRUSTEE]
By:__________________________
Name:
Title:
[CORPORATE SEAL]
Attest:
By:_________________________
Name:
Title:
STATE OF _____________ )
)
COUNTY OF ____________ )
BEFORE ME, the undersigned authority, on this __ day of
________, 1995, personally appeared ____________, ____________ of Piedmont
Management Company Inc., a Delaware corporation, known to me (or proved to
me by introduction upon the oath of a person known to me) to be the person
and officer whose name is subscribed to the foregoing instrument, and
acknowledged to me that he/she executed the same as the act of such
corporation for the purposes and consideration herein expressed and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL THIS ____ DAY OF ________, 1995.
(SEAL)
________________________________
NOTARY PUBLIC, STATE OF ________
Print Name:_____________________
Commission Expires:_____________
STATE OF ___________ )
)
COUNTY OF ___________ )
BEFORE ME, the undersigned authority, on this __ day of
________, 1995, personally appeared ____________, ____________ of Chartwell
Re Corporation, a Delaware corporation, known to me (or proved to me by
introduction upon the oath of a person known to me) to be the person and
officer whose name is subscribed to the foregoing instrument, and
acknowledged to me that he/she executed the same as the act of such
corporation for the purposes and consideration herein expressed and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL THIS ____ DAY OF ________, 1995.
(SEAL)
________________________________
NOTARY PUBLIC, STATE OF ________
Print Name:_____________________
Commission Expires:_____________
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, on this _______ day of
________, 1995, personally appeared _________________, _______________ of
[Trustee], a national association, known to me (or proved to me by
introduction upon the oath of a person known to me) to be the person and
officer whose name is subscribed to the foregoing instrument, and
acknowledged to me that he/she executed the same as the act of such trust
for the purposes and consideration herein expressed and in the capacity
therein stated.
GIVEN UNDER MY HAND AND SEAL THIS _____ DAY OF ________, 1995.
(SEAL)
________________________________
NOTARY PUBLIC, STATE OF NEW YORK
Print Name:_____________________
Commission Expires:_____________
