UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[ X ] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 1996
or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from _____ to _____
Commission File Number 0-15458
MARKEL CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 54-0292420
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
4551 Cox Road, Glen Allen, Virginia 23060-3382
(Address of principal executive offices)
(Zip code)
(804) 747-0136
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [ X ] No [ ]
Number of shares of the registrant's common stock outstanding at July 27, 1996:
5,431,797
1
Markel Corporation
Form 10-Q
Index
Page
Number
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets--
June 30, 1996 and December 31, 1995 3
Consolidated Statements of Income--
Quarters and Six Months Ended June 30, 1996 and 1995 4
Consolidated Statements of Cash Flows--
Six Months Ended June 30, 1996 and 1995 5
Notes to Consolidated Financial Statements--
June 30, 1996 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 13
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
MARKEL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
<CAPTION>
June 30, December 31,
-------------------------
1996 1995
- -----------------------------------------------------------------------------------------------------------------
(dollars in thousands)
<S> <C>
ASSETS
Investments, available-for-sale, at estimated fair value
Fixed maturities (cost of $697,880 in 1996 and $683,568 in 1995) $ 692,417 $ 706,055
Equity securities (cost of $130,164 in 1996 and $104,538 in 1995) 164,713 134,346
Short-term investments (estimated fair value approximates cost) 51,782 68,182
- -----------------------------------------------------------------------------------------------------------------
Total investments, available-for-sale 908,912 908,583
- -----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 20,377 18,315
Receivables 62,880 47,210
Reinsurance recoverable on unpaid losses 158,070 159,141
Reinsurance recoverable on paid losses 16,900 20,404
Deferred policy acquisition costs 33,403 32,024
Prepaid reinsurance premiums 41,315 39,728
Property and equipment 26,356 27,729
Intangible assets 40,617 41,657
Other assets 45,763 19,746
- -----------------------------------------------------------------------------------------------------------------
Total assets $1,354,593 $1,314,537
=================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Unpaid losses and loss adjustment expenses $ 751,266 $ 734,409
Unearned premiums 178,821 170,697
Payables to insurance companies 34,591 17,247
Long-term debt (estimated fair value of $93,564 in 1996 and $109,189 in 1995) 99,665 106,689
Other liabilities 57,920 72,053
- -----------------------------------------------------------------------------------------------------------------
Total liabilities 1,122,263 1,101,095
- -----------------------------------------------------------------------------------------------------------------
Shareholders' equity
Common stock 23,199 23,118
Retained earnings 190,225 156,333
Net unrealized gains on fixed maturities and equity securities, net of taxes 18,906 33,991
- -----------------------------------------------------------------------------------------------------------------
Total shareholders' equity 232,330 213,442
- -----------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $1,354,593 $1,314,537
=================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<TABLE>
MARKEL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
(dollars in thousands, except per share data)
<S> <C>
Operating revenues
Earned premiums $ 71,393 $ 68,449 $ 148,190 $ 134,233
Net investment income 11,853 10,104 24,137 18,472
Net realized gains (losses) from investment sales (467) 3,050 2,507 4,613
Other 893 962 1,828 1,772
- ----------------------------------------------------------------------------------------------------------------------
Total operating revenues 83,672 82,565 176,662 159,090
- ----------------------------------------------------------------------------------------------------------------------
Operating expenses
Losses and loss adjustment expenses 46,327 46,011 100,879 88,034
Underwriting, acquisition and insurance expenses 24,089 22,074 48,819 44,679
Other 458 412 908 829
Amortization of intangible assets 660 590 1,335 1,293
- ----------------------------------------------------------------------------------------------------------------------
Total operating expenses 71,534 69,087 151,941 134,835
- ----------------------------------------------------------------------------------------------------------------------
Operating income 12,138 13,478 24,721 24,255
Interest expense 2,021 2,192 4,050 4,131
- ----------------------------------------------------------------------------------------------------------------------
Income before income taxes 10,117 11,286 20,671 20,124
Income taxes (benefit) (15,973) 2,934 (13,229) 5,232
- ----------------------------------------------------------------------------------------------------------------------
Net income $ 26,090 $ 8,352 $ 33,900 $ 14,892
======================================================================================================================
Earnings per share
Primary $ 4.61 $ 1.49 $ 5.99 $ 2.67
- ----------------------------------------------------------------------------------------------------------------------
Fully diluted $ 4.60 $ 1.49 $ 5.98 $ 2.66
======================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<TABLE>
MARKEL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<CAPTION>
Six Months Ended
June 30,
-------------------------
1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
<S> <C>
Operating Activities
Net income $ 33,900 $ 14,892
Adjustments to reconcile net income to net cash provided by operating activities 1,051 73,364
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 34,951 88,256
- -----------------------------------------------------------------------------------------------------------------------------------
Investing Activities
Proceeds from sales of fixed maturities and equity securities 209,900 289,730
Proceeds from maturities of fixed maturities 38,670 9,344
Cost of fixed maturities and equity securities purchased (288,856) (368,723)
Net change in short-term investments 16,400 (9,126)
Purchase of Lincoln Insurance Company - net of cash acquired -- (21,747)
Other (2,026) (2,238)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (25,912) (102,760)
- -----------------------------------------------------------------------------------------------------------------------------------
Financing Activities
Borrowings under credit facility -- 17,000
Repayment of long-term debt and credit facility (7,050) (50)
Other 73 34
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities (6,977) 16,984
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 2,062 2,480
Cash and cash equivalents at beginning of period 18,315 10,229
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 20,377 $ 12,709
===================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--June 30, 1996
1. Principles of Consolidation
The consolidated balance sheet as of June 30, 1996, the related consolidated
statements of income for the quarters and six months ended June 30, 1996 and
1995, and the consolidated statements of cash flows for the six months ended
June 30, 1996 and 1995, are unaudited. In the opinion of management, all
adjustments necessary for a fair presentation of such consolidated financial
statements have been included. Such adjustments consist only of normal recurring
items. Interim results are not necessarily indicative of results of operations
for the full year.
The consolidated financial statements and notes are presented as permitted by
Form 10-Q, and do not contain certain information included in the Company's
annual consolidated financial statements and notes.
2. Earnings per share
Earnings per share was determined by dividing net income, as adjusted below, by
the applicable shares outstanding (in thousands):
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
---------------------- ------------------------
1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net income, as reported $ 26,090 $ 8,352 $ 33,900 $ 14,892
Dividends on redeemable preferred stock (4) (4) (8) (8)
- -----------------------------------------------------------------------------------------------------------------------------------
Primary and fully diluted income $ 26,086 $ 8,348 $ 33,892 $ 14,884
===================================================================================================================================
Average common shares outstanding 5,428 5,406 5,426 5,397
Shares applicable to common stock equivalents 233 197 231 181
- -----------------------------------------------------------------------------------------------------------------------------------
Average primary shares outstanding 5,661 5,603 5,657 5,578
Additional dilution attributable to common
stock equivalents 8 8 10 24
- -----------------------------------------------------------------------------------------------------------------------------------
Average fully diluted shares outstanding 5,669 5,611 5,667 5,602
===================================================================================================================================
</TABLE>
6
3. Reinsurance
The table below summarizes the effect of reinsurance on premiums written and
earned (dollars in thousands):
<TABLE>
<CAPTION>
Quarter Ended June 30,
- ----------------------------------------------------------------------------------------------------------
1996 1995
- ----------------------------------------------------------------------------------------------------------
Written Earned Written Earned
<S> <C>
Direct $ 106,037 $ 91,381 $ 94,704 $ 82,441
Assumed 1,583 2,402 7,929 10,007
Ceded (25,809) (22,390) (26,861) (23,999)
- ----------------------------------------------------------------------------------------------------------
Net premiums $ 81,811 $ 71,393 $ 75,772 $ 68,449
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
- ----------------------------------------------------------------------------------------------------------
1996 1995
- ----------------------------------------------------------------------------------------------------------
Written Earned Written Earned
<S> <C>
Direct $ 198,154 $ 187,162 $ 175,250 $ 160,617
Assumed 3,642 6,578 17,487 17,717
Ceded (47,071) (45,550) (47,186) (44,101)
- ----------------------------------------------------------------------------------------------------------
Net premiums $ 154,725 $ 148,190 $ 145,551 $ 134,233
==========================================================================================================
</TABLE>
Incurred losses and loss adjustment expenses are net of reinsurance recoveries
of $11.1 million and $18.2 million for the quarters ended June 30, 1996 and
1995, respectively, and $23.7 million and $33.3 million for the six months ended
June 30, 1996 and 1995, respectively.
7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Quarter and Six Months ended June 30, 1996 compared to Quarter and Six Months
ended June 30, 1995
The Company underwrites specialty insurance products and programs to niche
markets. Significant areas of underwriting include professional and products
liability, excess and surplus lines, specialty programs and specialty personal
and commercial lines. Professional liability coverage is offered to physicians
and health professionals, insurance companies, directors and officers, attorneys
and architects and engineers. Special risk programs provide products liability
insurance for manufacturers and distributors and tailored coverages for other
unique exposures. Property/casualty insurance for nonstandard and hard-to-place
risks is underwritten on an excess and surplus lines basis. Specialty program
insurance includes coverage for camps, youth and recreation, child care, health
and fitness and agribusiness organizations, as well as accident and health
insurance for colleges. The Company also underwrites personal and commercial
property and liability coverages for watercraft, motorcycles, automobiles,
mobile homes, dwellings and commercial freight companies, and maintains
wholesale and retail brokerage operations that produce business primarily for
its insurance subsidiaries.
Following is a comparison of gross premium volume by significant underwriting
area:
<TABLE>
<CAPTION>
Gross Premium Volume
Quarter Ended June 30, Six Months Ended June 30,
- ----------------------------------------------------------------------------------------------------------------
1996 1995 (amounts in thousands) 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
$ 32,116 $ 34,923 Professional/Products Liability $ 63,311 $ 67,218
29,890 25,357 Excess & Surplus Lines 58,935 51,656
24,916 26,860 Specialty Program Insurance 45,662 50,531
20,528 10,237 Specialty Personal and Commercial Lines 34,090 18,409
3,488 6,076 Other 6,285 10,726
- ----------------------------------------------------------------------------------------------------------------
$110,938 $ 103,453 Total $ 208,283 $ 198,540
================================================================================================================
</TABLE>
Gross premium volume increased 7% to $110.9 million for the second quarter and
5% to $208.3 million for the six month period in 1996 from $103.5 million and
$198.5 million, respectively, for the same periods in 1995. Premiums from new
programs provided the majority of the growth for the quarter and six month
period in 1996.
Premiums from professional/products liability insurance were $32.1 million for
the second quarter and $63.3 million for the six month period compared to $34.9
million and $67.2 million, respectively, for the same periods last year. Growth
in the medical malpractice and directors' and officers' product lines was more
than offset by lower production from other lines, including specified medical
professions and the special risk programs due to changes in risk selection.
Excess and surplus lines second quarter gross premium volume grew 18% to $29.9
million from $25.4 million a year earlier. For the six month period, excess and
surplus lines gross premium volume rose 14% to $58.9 million from $51.7 million
in 1995. Production from the special property insurance program continued to
show significant growth. A new excess and umbrella program also contributed to
1996 growth.
8
Gross premiums from specialty program insurance premiums were $24.9 million for
the second quarter and $45.7 million for the six month period compared to $26.9
million and $50.5 million for the quarter and six month periods in 1995.
Increased competition in the youth and recreation and agribusiness programs
contributed to the decrease.
Specialty personal and commercial lines premiums rose sharply to $20.5 million
for the second quarter and $34.1 million for the six month period from $10.2
million and $18.4 million, respectively, during the same periods a year ago.
Several recently added programs, including property coverage for mobile homes
and low value dwellings, liability coverage for commercial autos and physical
damage coverage for personal autos, showed continued strong growth, contributing
$10.0 million and $21.0 million to quarterly and six month 1996 production.
Other gross premiums totaled $3.5 million for the second quarter and $6.3
million for the six month period compared to $6.1 million and $10.7 million,
respectively, for the same periods in 1995. Other gross premium volume included
production from the Company's wholesale brokerage operations and run-off
business related to Lincoln Insurance Company, a company acquired in May 1995.
The Company enters into reinsurance agreements in order to reduce its liability
on individual risks and enable it to underwrite policies with higher limits. The
Company's net retention of gross premium volume increased to 74% in the second
quarter and six month period from 73% for the same periods a year earlier. The
increase reflects higher retentions for the specialty program insurance lines.
Following is a comparison of earned premiums by significant underwriting area:
<TABLE>
<CAPTION>
Earned Premiums
Quarter Ended June 30, Six Months Ended June 30,
- ------------------------------------------------------------------------------------------------------------------
1996 1995 (amounts in thousands) 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
$26,455 $ 28,383 Professional/Products Liability $ 58,014 $ 55,730
17,075 17,080 Excess & Surplus Lines 35,214 33,737
15,663 15,210 Specialty Program Insurance 32,099 31,447
11,581 5,548 Specialty Personal and Commercial Lines 20,300 10,632
619 2,228 Other 2,563 2,687
- ------------------------------------------------------------------------------------------------------------------
$ 71,393 $ 68,449 Total $148,190 $ 134,233
==================================================================================================================
</TABLE>
Total operating revenues for the second quarter increased to $83.7 million from
$82.6 million in 1995. For the six month period, operating revenues rose 11% to
$176.7 million from $159.1 million a year ago. Earned premiums advanced to $71.4
million for the quarter and $148.2 million for the six month period from $68.4
million and $134.2 million, respectively, for the same periods in 1995. Higher
gross premium volume attributed to new products and increasing retentions in our
core products prompted the 4% quarterly and 10% year-to-date earned premium
increases. Although the property and casualty market remains competitive, the
Company will not sacrifice long term underwriting profits for premium growth.
9
Second quarter net investment income rose 17% to $11.9 million from $10.1
million a year ago. For the six month period, net investment income increased
31% to $24.1 million from $18.5 million in 1995. The increases were
primarily the result of the Company's larger investment portfolio over the past
year. The Company's invested assets were $908.9 million at June 30, 1996
compared to $797.5 million at June 30, 1995.
The Company reported realized investment losses of $0.5 million for the second
quarter and realized investment gains $2.5 million for six months compared to
realized investment gains of $3.1 million and $4.6 million, respectively, for
the same periods last year. Variability in the timing of realized investment
gains is to be expected and often results from interest rate volatility which
affects the market values of fixed maturity and equity investments.
Total operating expenses for the second quarter were $71.5 million compared to
$69.1 million in 1995. Total operating expenses for the six month period were
$151.9 million compared to $134.8 million a year ago. The 4% and 13% quarterly
and year-to-date increases, respectively, resulted primarily from higher
variable expenses associated with higher earned premiums.
Following is a comparison of selected data from the Company's operations (in
thousands):
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
- ----------------------------------------------------------------------------------------------------------------
1996 1995 (amounts in thousands) 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
$110,938 $ 103,453 Gross premium volume $208,283 $ 198,540
$ 81,811 $ 75,772 Net premiums written $154,725 $ 145,551
74% 73% Net retention 74% 73%
$ 71,393 $ 68,449 Earned premiums $148,190 $ 134,233
$ 46,327 $ 46,011 Losses and loss adjustment expenses $100,879 $ 88,034
Underwriting, acquisition, and
$ 24,089 $ 22,074 insurance expenses $ 48,819 $ 44,679
GAAP ratios
65% 67% Loss ratio 68% 66%
34% 32% Expense ratio 33% 33%
- ----------------------------------------------------------------------------------------------------------------
99% 99% Combined ratio 101% 99%
=================================================================================================================
</TABLE>
The second quarter combined loss and expense ratio was flat at 99% compared to
last year. For the six month period, the combined ratio increased to 101% from
99% in 1995. The quarterly loss ratio fell to 65% from 67% in 1995, while the
six month loss ratio increased to 68% from 66% a year ago. The second quarter
1996 decrease resulted from favorable development in various lines of business.
The increase in the loss ratio for the six month period was due to reserve
increases in the medical malpractice book of business and winter storm losses
from the first quarter of 1996. The expense ratio for the second quarter was 34%
compared to 32% in 1995. The increase is attributable to higher acquisition
costs and start-up costs in several new programs which were partially offset by
the recognition of contingent profit commissions. The expense ratio for the six
month period was flat at 33% when compared to 1995.
10
In evaluating its operating performance, the Company focuses on core
underwriting and investing results before consideration of realized gains or
losses from the sales of investments and expenses related to the amortization of
intangible assets. Management believes this is a better indicator of the
Company's operating performance because it reduces the variability in results
associated with realized investment gains or losses and eliminates the impact of
accounting conventions which do not reflect current operating costs. For the
second quarter of 1996, income from core underwriting and investing operations
increased 28% to $11.3 million from $8.8 million in 1995. Increased investment
income and underwriting profits fueled the growth. For the six month period,
income from core operations grew 16% to $19.5 million from $16.8 million last
year, primarily as a result of increased investment income.
The Company's effective tax rate for the second quarter and six month period was
(158%) and (64%) of income before income taxes, respectively, compared to 26% of
income before income taxes for the same periods last year. In the second quarter
of 1996, the Company recognized a nonrecurring benefit of $18.4 million related
to the realization of tax benefits attributable to certain differences between
financial reporting and tax bases of assets acquired in a prior period. This
benefit was recognized when management determined that estimated tax liabilities
were less than amounts previously accrued.
Second quarter 1996 net income rose to $26.1 million from $8.4 million in 1995.
For the six month period, net income advanced to $33.9 million from $14.9
million last year. The increase was primarily the result of the $18.4 million
nonrecurring benefit and higher net investment income, partially offset by lower
realized gains.
Financial Condition as of June 30, 1996
The Company's insurance operations collect premiums and pay current claims,
reinsurance commissions and operating expenses. Premiums collected and positive
cash flows from the insurance operations are invested primarily in short-term
investments and long-term bonds. The Company's short-term investments provide
liquidity for projected claims, reinsurance costs and operating expenses.
For the six month period ended June 30, 1996, the Company reported net cash
provided by operating activities of $35.0 million, compared to net cash provided
by operating activities of $88.3 million for the same period in 1995. Operating
cash flows reflected reinsurer commutations and other settlements of $1.0
million in 1996 compared to $45.0 million in 1995. The Company does not expect
commutations to be a significant source of operating cash flow in 1996 or future
years.
For the six month period ended June 30, 1996, the Company reported net cash used
by investing activities of $25.9 million compared to $102.8 million in 1995. The
difference is primarily attributable to lower reinsurer commutation activity and
other settlements in 1996. The Company's invested assets were $908.9 million at
June 30, 1996 compared to $908.6 million at December 31, 1995. The unrealized
appreciation of the Company's investment portfolio decreased $23.2 million since
December 31, 1995. As of June 30, 1996, the cost of the Company's fixed maturity
investments exceeded the estimated fair value by $5.5 million, while the
estimated fair value of its equity investments exceeded cost by $34.6 million.
11
At June 30, 1996, the Company's fixed maturity and equity investments comprised
approximately 76% and 18% of total investments, respectively. The Company
expects variability in its realized and unrealized investment gains due to
interest rate volatility as well as other economic conditions.
As of June 30, 1996 the unused balances available under the Company's revolving
credit facility totaled $40.0 million compared to $33.0 million at December 31,
1995. The Company repaid $7.0 million of the revolving credit facility in the
second quarter of 1996.
Shareholders' equity at June 30, 1996 was $232.3 million compared to $213.4
million at December 31, 1995. Book value per share rose to $42.78 at June 30,
1996 from $39.37 at December 31, 1995. During the six month period, net
unrealized investment gains, net of income taxes, decreased by $15.1 million.
Other Items
On May 16, 1996, the Company and Investors Insurance Group (IIG) jointly
announced that they had executed a definitive agreement for the acquisition of
Investors Insurance Holding Corporation and its subsidiaries for approximately
$38 million. IIG, a specialty property and casualty insurer, had total assets of
approximately $222 million and an investment portfolio of $139 million at
December 31, 1995. The Company is currently seeking regulatory approval of the
transaction and expects to complete the acquisition by the end of the third
quarter of 1996. The Company expects to finance the transaction with cash on
hand and bank financing.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The Corporation's Annual Meeting was held on May 7, 1996, in Richmond, Virginia.
At the Annual Meeting, shareholders elected directors for the ensuing year and
ratified the selection by the Board of Directors of KPMG Peat Marwick LLP as the
Company's independent auditors for the year ending December 31, 1996. The
results of the meeting were as follows:
Election of Directors For Withheld
- --------------------- --- --------
Alan I. Kirshner 4,385,855 43,455
Anthony F. Markel 4,385,855 43,455
Steven A. Markel 4,385,855 43,455
Darrell D. Martin 4,385,855 43,455
Leslie A. Grandis 4,385,855 43,455
Stewart M. Kasen 4,385,255 44,055
Gary L. Markel 4,385,855 43,455
V. Prem Watsa 4,385,855 43,455
12
Ratification of Selection of Auditors:
Abstentions and Brokers
For Against Non-Votes
--- ------- ---------
4,422,494 2,167 4,648
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The Exhibits to this Report are listed in the Exhibit Index.
(b) No reports on Form 8-K were filed during the quarter ended June 30, 1996.
13
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, thereunto duly authorized, this 30th day of July, 1996.
Markel Corporation
By Alan I. Kirshner
------------------------------------
Alan I. Kirshner
Chief Executive Officer
(Principal Executive Officer)
By Anthony F. Markel
------------------------------------
Anthony F. Markel
President
(Principal Operating Officer)
By Steven A. Markel
------------------------------------
Steven A. Markel
Vice Chairman
By Darrell D. Martin
------------------------------------
Darrell D. Martin
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
14
Exhibit Index
Number Description
10 Agreement and Plan of Merger among Markel Corporation, IIG
Acquisition Corp., Investors Insurance Holding Corp. and certain
shareholders of Investors Insurance Holding Corp. *
27 Financial Data Schedule *
* Filed electronically with the Commission's operational EDGAR system.
15
AGREEMENT AND PLAN OF MERGER
AMONG
MARKEL CORPORATION
IIG ACQUISITION CORP.
INVESTORS INSURANCE HOLDING CORP.
AND
CERTAIN SHAREHOLDERS OF INVESTORS INSURANCE HOLDING CORP.
Dated as of May 15, 1996
(i)
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
<S> <C>
1.1 Definitions.....................................................................................1
<CAPTION>
ARTICLE II
THE MERGER
<S> <C>
2.1 The Merger......................................................................................7
2.2 Effective Time..................................................................................7
2.3 Effects of the Merger...........................................................................7
2.4 Certificate of Incorporation and By-Laws........................................................8
2.5 Directors.......................................................................................8
2.6 Officers........................................................................................8
2.7 Conversion of Shares............................................................................8
2.8 Conversion of Sub Common Stock..................................................................9
2.9 Shareholders' Approval..........................................................................9
2.10 Exchange of Shares; Payment.....................................................................9
2.11 Stock Option and Other Plans...................................................................12
2.12 Closing........................................................................................13
<CAPTION>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
<S> <C>
3.1 Organization and Qualification.................................................................14
3.2 Capitalization of the Company; Validity of Shares..............................................14
3.3 Authority Relative to this Agreement...........................................................15
3.4 Investments and Subsidiaries...................................................................15
3.5 Consents and Approvals.........................................................................16
3.6 Non-Contravention..............................................................................16
3.7 Licenses.......................................................................................17
3.8 Compliance with Laws...........................................................................17
3.9 Statutory Financial Statements.................................................................18
3.10 GAAP Financial Statements......................................................................19
3.11 Investments....................................................................................20
3.12 Absence of Changes.............................................................................20
3.13 No Undisclosed Liabilities.....................................................................21
3.14 Litigation.....................................................................................21
(ii)
<PAGE>
3.15 Insurance Business.............................................................................22
3.16 Regulatory Filings.............................................................................22
3.17 Reinsurance, Coinsurance and Underwriting Management...........................................23
3.18 Agents and Brokers.............................................................................24
3.19 Real Property..................................................................................24
3.20 Personal Property..............................................................................24
3.21 Leases.........................................................................................25
3.22 Sufficiency of Assets..........................................................................26
3.23 Intellectual Property..........................................................................26
3.24 Material Contracts.............................................................................26
3.25 Insurance for the Benefit of the Company.......................................................29
3.26 Labor Matters..................................................................................29
3.27 Employee Benefit Plans.........................................................................30
3.28 Tax Matters....................................................................................34
3.29 Insider Interests..............................................................................36
3.30 Finders........................................................................................37
3.31 Full Disclosure................................................................................37
<CAPTION>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL SHAREHOLDERS
<S> <C>
4.1 Organization and Qualification.................................................................37
4.2 Authority Relative to this Agreement...........................................................37
4.3 Consents and Approvals.........................................................................38
4.4 Non-Contravention..............................................................................38
4.5 Ownership of Shares............................................................................38
4.6 Representations of the Company.................................................................38
<CAPTION>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
<S> <C>
5.1 Organization; Authority Relative to this Agreement.............................................39
5.2 Authority Relative to this Agreement...........................................................39
5.3 Consents and Approvals.........................................................................39
5.4 Non-Contravention..............................................................................40
5.5 Litigation.....................................................................................40
5.6 Finders........................................................................................40
5.7 Full Disclosure................................................................................40
<CAPTION>
ARTICLE VI
ADDITIONAL AGREEMENTS
<S> <C>
6.1 Conduct of Business of the Company.............................................................41
6.2 Forbearances by the Company....................................................................41
(iii)
<PAGE>
6.3 Negotiations with Others.......................................................................44
6.4 Investigation of Business and Properties.......................................................44
6.5 Confidentiality................................................................................44
6.6 HSR Filings....................................................................................46
6.7 Expenses.......................................................................................46
6.8 Public Announcements...........................................................................46
6.9 Subsequent Events..............................................................................47
6.10 Efforts to Consummate..........................................................................47
6.11 Resignations...................................................................................48
6.12 Voting Agreement...............................................................................48
6.13 Termination of Shareholders Agreements.........................................................48
6.14 Termination of Agreements with Principal Shareholders..........................................48
<CAPTION>
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYER
<S> <C>
7.1 Representations and Warranties.................................................................49
7.2 Performance of this Agreement..................................................................49
7.3 Consents and Approvals.........................................................................49
7.4 Material Changes...............................................................................50
7.5 Injunction, Litigation, etc....................................................................50
7.6 Legislation....................................................................................50
7.7 Proceedings; Certificates......................................................................51
7.8 Opinion of Counsel for the Company.............................................................51
7.9 Employment Agreement...........................................................................51
<CAPTION>
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF THE COMPANY
<S> <C>
8.1 Representations and Warranties.................................................................52
8.2 Performance of this Agreement..................................................................52
8.3 Consents and Approvals.........................................................................52
8.4 Injunction, Litigation, etc....................................................................52
8.5 Legislation....................................................................................53
8.6 Proceedings; Certificates......................................................................53
8.7 Opinion of Counsel for Buyer...................................................................53
<CAPTION>
ARTICLE IX
INDEMNIFICATION
<S> <C>
9.1 Indemnification by the Principal Shareholders..................................................53
9.2 Indemnification by Buyer.......................................................................54
9.3 Third Party Claims.............................................................................55
9.4 Direct Claims..................................................................................56
(iv)
<PAGE>
9.5 Limitations on Indemnification.................................................................57
9.6 Survival of Representations and Warranties.....................................................57
9.7 Exclusive Remedy...............................................................................58
<CAPTION>
ARTICLE X
TERMINATION
<S> <C>
10.1 Termination....................................................................................58
10.2 Procedure; Effect of Termination...............................................................59
<CAPTION>
ARTICLE XI
GENERAL PROVISIONS
<S> <C>
11.1 Notices........................................................................................60
11.2 Interpretation.................................................................................62
11.3 Entire Agreement...............................................................................62
11.4 Successors and Assigns.........................................................................63
11.5 Severability...................................................................................63
11.6 Amendment......................................................................................63
11.7 Extension; Waiver..............................................................................64
11.8 Specific Performance...........................................................................64
11.9 Counterparts...................................................................................64
11.10 Governing Law..................................................................................64
</TABLE>
(v)
<PAGE>
Exhibits
A - Form of Escrow Agreement
B - Form of Employment Agreement
Schedules
(vi)
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of May
15, 1996, is made among MARKEL CORPORATION, a Virginia corporation ("Buyer"),
IIG ACQUISITION CORP., a New Jersey corporation ("Sub"), INVESTORS INSURANCE
HOLDING CORP., a New Jersey corporation (the "Company") and the Persons
executing this Agreement as Shareholders of the Company (collectively, the
"Principal Shareholders").
RECITALS
A. This Agreement provides for the merger (the "Merger") of Sub into
the Company, with the Company as the surviving corporation in such merger, all
in accordance with the provisions of this Agreement.
B. The respective Boards of Directors of Buyer, Sub and the Company
have approved the Merger. The Company intends promptly to submit to its
shareholders the approval of the Merger and the approval and adoption of this
Agreement.
NOW THEREFORE, in consideration of the foregoing and the
representations, warranties, and agreements herein contained, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms, as used herein, have
the following meanings:
"Action" means (i) any complaint, claim, prosecution, indictment,
action, suit, arbitration or investigation or (ii) any proceeding by or before
any Governmental Authority.
"Affiliate" of a Person means a Person who, directly or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, such Person.
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"Allocable Portion" means, as to a Shareholder, the fraction, the
numerator of which is number of Shares held by such Shareholder and the
denominator of which is the aggregate number of outstanding Shares.
"Applicable Insurance Department" means as to (i) Investors Insurance
Company of America and Investors Special Risk Agency, Inc., the New Jersey
Department of Insurance, (ii) Carlisle Insurance Company, the California
Department of Insurance; and (iii) Investors Special Risk Insurance Company, the
Arizona Department of Insurance.
"Audited Financial Statements" has the meaning set forth in Section
3.10.
"BCA" means the New Jersey Business Corporation Act, as amended.
"Business" means the insurance business conducted by the Companies and
its Subsidiaries taken as a whole.
"Business Condition" has the meaning set forth in Section 3.1.
"CIC" means Carlisle Insurance Company.
"Closing" has the meaning set forth in Section 2.12.
"Closing Date" has the meaning set forth in Section 2.12.
"Company" has the meaning set forth in the Recitals.
"Covered Liabilities" means any and all debts, losses, liabilities,
claims, fines, royalties, deficiencies, damages, obligations, payments
(including those arising out of any demand, assessment, settlement, judgment or
compromise relating to any Action), costs and expenses (including interest and
penalties due and payable with respect thereto and reasonable attorneys' and
accountants' fees and any other out-of-pocket expenses incurred in
investigating, preparing, defending, avoiding or settling any Action or in
enforcing another
2
<PAGE>
party's obligations hereunder), matured or unmatured, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated, known or unknown, including
any of the foregoing arising under, out of or in connection with any Action,
order or consent decree of any Governmental Authority or award of any arbitrator
of any kind, or any law, rule, regulation, contract, commitment or undertaking.
"Effective Time" has the meaning set forth in Section 2.2.
"Employee Benefit Plans" has the meaning set forth in Section 3.27(a).
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means, with respect to any entity, trade or business,
any other entity, trade or business that is a member of a group described in
Section 414(b), (c), (m) or (o) of the Internal Revenue Code or Section
4001(b)(1) of ERISA that includes the first entity, trade or business, or that
is a member of the same "controlled group" as the first entity, trade or
business pursuant to Section 4001(A)(14) of ERISA.
"Escrow Agent" means The Northern Trust Company or such other Person
appointed as the escrow agent under the Escrow Agreement.
"Escrow Agreement" means the agreement entered into by or on behalf of
the Principal Shareholders, Buyer and the Escrow Agent, substantially in the
form of Exhibit A hereto.
"Escrow Amount" means $3 million.
"Escrow Fund" mean, at any time, the amount held under the Escrow
Agreement at such time.
3
<PAGE>
"Governmental Authority" means any federal, state, local, foreign,
supernational or supranational court or tribunal, governmental, regulatory or
administrative agency, department, bureau, authority or commission or arbitral
panel.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"IICA" means Investors Insurance Company of America, a New Jersey
corporation.
"Intellectual Property" means all right, title and interest of the
Company and its Subsidiaries in all trade names (including the name "Investors
Insurance"), trademarks and service marks, patents, patent rights, copyrights,
whether domestic or foreign, (as well as applications, registrations or
certificates for any of the foregoing), inventions, trade secrets, proprietary
processes, software and other industrial and intellectual property rights.
"Insurance Subsidiaries" means IICA, CIC and ISRIC.
"Interim Financial Statements" has the meaning set forth in Section
3.10.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"ISRA" means Investors Special Risk Agency, Inc., a New Jersey
corporation.
"ISRIC" means Investors Special Risk Insurance Company, an Arizona
corporation.
"Leases" has the meaning set forth in Section 3.21.
"Licenses" has the meaning set forth in Section 3.7.
"Material Contracts" has the meaning set forth in Section 3.24.
"Merger" has the meaning set forth in the Recitals.
"Merger Consideration" means $38,050,000.
"PBGC" means the Pension Benefit Guaranty Corporation.
4
<PAGE>
"Pension Plans" has the meaning set forth in Section 3.27.
"Permitted Encumbrances" means (i) statutory liens for current state
and local property taxes or assessments not yet due or delinquent; (ii)
mechanics', carriers', workers', repairers' and other similar liens arising or
incurred in the ordinary course of business relating to obligations as to which
there is no default on the part of the Company or its Subsidiaries, provided
that the same shall be fully discharged of record before the Closing; (iii)
exceptions shown on the surveys furnished by the Company to Buyer on or before
the date hereof and which do not materially affect the use or occupancy of such
Real Property; and (iv) such other recorded liens, imperfections in title,
charges, easements, restrictions and encumbrances which do not materially affect
the use or occupancy of such Real Property.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
governmental or political subdivision or an agency of instrumentality thereof.
"Principal Shareholders" means TBK Partners, L.P., a Delaware limited
partnership; Vanderbilt Partners, L.P., a Delaware limited partnership; Tweedy
Browne Company LP Profit Sharing Plan; Conning Insurance Capital Limited
Partnership, a Connecticut limited partnership; Conning Insurance Capital
International Partners, a Cayman Islands limited partnership; Conning Insurance
Capital Limited Partnership II, a Delaware limited partnership; Conning
Insurance Capital International Partners II, a Cayman Islands limited
partnership; Trenwick America Corporation, a Delaware corporation; The Board of
Regents of The University of Texas System, and The Permanent University Fund of
the State of Texas, each of which has executed this Agreement.
5
<PAGE>
"Shares" means shares of Common Stock, $1.00 par value, of the Company.
"Shareholders" means the holders of outstanding shares of Common Stock,
$1.00 par value, of the Company.
"Subsidiary" with respect to either of the parties of this Agreement
means any corporation or other business entity, whether or not incorporated, of
which at least 50% of the securities or interests having, by their terms,
ordinary voting power to elect members of the board of directors, or other
persons performing similar functions with respect to such entity, is held,
directly or indirectly, by such party.
"Survival Date" has the meaning set forth in Section 9.5.
"Tax Law" means the Internal Revenue Code, federal, state, county,
local, or foreign laws relating to Taxes and any regulations or official
administrative pronouncements released thereunder.
"Taxes" means (a) all federal, state, local, and foreign taxes or
assessments, including those relating to net income, gross receipts, gross
income, capital stock, franchise, profits, employees and payroll, withholding,
foreign withholding, social security, unemployment, disability, real property,
personal property, intangibles, stamp, excise, sales, use, transfer, occupation,
value added, ad valorem, customs, premium, windfall profits, alterative minimum
or estimated taxes, together with any interest, penalties or additions to tax or
additional amounts with respect to the foregoing, whether disputed or not and
(b) any obligations under any agreements or arrangements with respect to any
Taxes described in clause (a) hereof.
"Taxing Authority" means any governmental authority including social
security
6
<PAGE>
administration, domestic or foreign, having jurisdiction over the assessment,
determination, collection, or other imposition of Tax.
"Tax Returns" means any declaration, report, claim for refund,
information return, return or statement relating to Taxes, including any
schedules or attachments as well as any amendments (whether submitted on a
consolidated, combined, separate, or unitary basis).
ARTICLE II
THE MERGER
2.1 THE MERGER. Upon the terms and subject to the satisfaction or
waiver, if permissible, of the conditions hereof, and in accordance with the
BCA, at the Effective Time, Sub shall be merged with and into the Company.
Following the Merger, the separate corporate existence of Sub shall cease and
the Company, under the name Investors Insurance Holding Corp., shall continue as
the surviving corporation (the "Surviving Corporation").
2.2 EFFECTIVE TIME. As soon as practicable after the satisfaction or
waiver, if permissible, of all the conditions to the Merger, the parties shall
cause the Merger to be consummated by causing a certificate of merger with
respect to the Merger to be executed, filed and recorded in accordance with the
relevant provisions of the BCA. The Merger shall become effective at the time of
the filing with the Secretary of State of the State of New Jersey of such
certificate of merger in accordance with the relevant provisions of the BCA (the
"Effective Time").
2.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth
in Section 14A:10-6 of the BCA.
7
<PAGE>
2.4 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation of the Company, as in effect immediately prior to the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation.
The By-Laws of Sub, as in effect immediately prior to the Effective Time, shall
be the By-Laws of the Surviving Corporation.
2.5 DIRECTORS. The directors of Sub immediately prior to the Effective
Time shall be the initial directors of the Surviving Corporation and shall hold
office until their respective successors are duly elected and qualified, or
their earlier death, resignation or removal.
2.6 OFFICERS. The officers of Sub immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation and shall hold
office until their respective successors are duly elected and qualified, or
their earlier death, resignation or removal.
2.7 CONVERSION OF SHARES. (a) Each Share outstanding immediately prior
to the Effective Time (other than Shares, if any, held in the treasury of the
Company or owned by Buyer, Sub or any Subsidiary of the Company, Buyer or Sub)
shall, by virtue of the Merger and without any action on the part of the holder
thereof, automatically be converted into the right to receive, subject to
Section 2.10(d), the Merger Consideration upon surrender of the certificate
representing such Share as provided in Section 2.10.
(b) Each Share owned by Buyer, Sub or any Subsidiary of the
Company, Buyer or Sub held in the treasury of the Company immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, automatically be canceled and cease to exist at and
after the Effective Time and no consideration shall be paid with respect
thereto.
8
<PAGE>
2.8 CONVERSION OF SUB COMMON STOCK. Each share of common stock, $.01
par value, of Sub issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, automatically be converted into and thereafter represent one validly
issued, fully paid and nonassessable share of common stock, $1.00 par value, of
the Surviving Corporation, so that thereafter Buyer will be the sole and
exclusive owner of the outstanding capital stock of the Surviving Corporation.
2.9 SHAREHOLDERS' APPROVAL. The Company, acting through its Board of
Directors (which shall have recommended approval of the Merger and approval and
adoption of this Agreement to its shareholders), shall, in accordance with
applicable law, use its best efforts to obtain the approval of the merger and
the approval and adoption of this Agreement by the Shareholders.
2.10 EXCHANGE OF SHARES; PAYMENT. (a) First Jersey Bank (or such other
Person as may be selected by Buyer with the prior written consent of the
Company, which consent shall not be unreasonably withheld) shall act as Paying
Agent in the Merger (the "Paying Agent"). At the Effective Time, Buyer will take
all steps necessary to enable and cause Sub or the Surviving Corporation to
deposit an amount equal to the Merger Consideration minus the Escrow Amount with
the Paying Agent, in immediately available funds, for disbursement to the
Shareholders, in the manner set forth below. Such disbursement will be the
responsibility of the Paying Agent and not the Company.
(b) Prior to the Effective Time, the Company shall hand
deliver or mail to each Shareholder of record of an outstanding certificate or
certificates representing any Shares (or each such holder's duly authorized
attorney-in-fact), a form letter of transmittal (which
9
<PAGE>
shall specify that delivery shall be effected, and risk of loss of, and title
to, such certificate shall pass, only upon proper delivery of such certificate
to the Paying Agent and instructions for use of such letter of transmittal in
effecting the surrender of any such certificate and obtaining payment therefor
of the Shareholder's Allocable Portion of the Merger Consideration, as provided
in this Section 2.10. Subject to Section 2.10(d) hereof and the Paying Agent's
agreement to such procedures, upon the later of the Effective Time and surrender
to the Paying Agent of a certificate which immediately prior to the Effective
Time represented Shares (a "Certificate"), together with such letter of
transmittal duly executed, such Certificate shall in exchange therefor be
entitled to receive an amount, in immediately available funds, equal to the
product of the number of Shares represented by such Certificate multiplied by
the quotient obtained by dividing the portion of the Merger Consideration by the
aggregate number of outstanding Shares. No interest will be paid or accrued on
any amount payable upon the surrender of a Certificate. If payment is to be made
to a Person other than the Person in whose name a Certificate surrendered is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the Person requesting such payment shall pay transfer or other taxes
required by reason of the payment to a Person other than the registered holder
of the Certificate surrendered, or establish to the satisfaction of the Paying
Agent that such tax has been paid or is not applicable, or provide assurances
satisfactory to the Paying Agent that any such tax will be paid by such Person.
Until surrendered in accordance with the provisions of this Section 2.10, each
Certificate representing any Shares (other than Certificates representing Shares
held in the treasury of the Company or owned by Buyer, Sub
10
<PAGE>
or any Subsidiary of the Company, Buyer or Sub) shall represent for all purposes
only the right to receive, as provided by this Agreement, their Allocable
Portion of the Merger Consideration (subject to Section 2.10(d) hereof), and
shall have no other rights. Any funds (including interest earned on funds on
deposit with the Paying Agent) remaining with the Paying Agent one year
following the Effective Time shall be returned to Buyer or the Surviving
Corporation, as specified by Buyer, after which time former stockholders of the
Company, subject to applicable law, shall look only to the Surviving Corporation
for payment of their Allocable Portion of the Merger Consideration, without
interest thereon, and shall have no greater rights against the Surviving
Corporation than may be accorded to general creditors of the Surviving
Corporation under New Jersey law.
(c) After the Effective Time, there shall be no transfers on
the stock transfer books of the Surviving Corporation of Shares. If, after the
Effective Time, Certificates are presented to the Surviving Corporation, they
shall be canceled and exchanged as provided in this Section 2.10.
(d) Notwithstanding anything to the contrary set forth herein,
the amount of merger consideration to be received by each Shareholder upon
surrender to the Paying Agent of a Certificate or Certificates representing
Shares and any other required documents, as provided in this Section 2.10, shall
be reduced by (i) the amount, if any, the Paying Agent is required to deduct and
withhold with respect to the making of such payment under the Internal Revenue
Code, or any provision of state, local or foreign Tax law; provided that if any
amounts are so deducted and withheld, such amounts shall be treated as having
been paid to the holder of such Certificate, and (ii) as to the Principal
Shareholders, the Escrow
11
<PAGE>
Amount multiplied by a fraction, the numerator of which is the number of Shares
held by such Principal Shareholder and the denominator of which is the aggregate
number of Shares held by all Principal Shareholders.
2.11 STOCK OPTION AND OTHER PLANS. Prior to the Effective Time, the
Board of Directors of the Company (or, if appropriate, any Committee thereof)
shall adopt appropriate resolutions and take all other actions necessary to
provide for the cancellation, effective at the Effective Time of all the
outstanding stock options to purchase Common Stock (the "Options") heretofore
granted under any stock option plan of the Company (the "Stock Plans").
Immediately prior to the Effective Time, each Option, whether or not then vested
or exercisable, shall no longer be exercisable for the purchase of shares of
Common Stock but shall entitle each holder thereof, in cancellation and
settlement therefor, to payments in cash (subject to any applicable withholding
taxes, the "Cash Payment"), at the Effective Time, equal to the product of (x)
the total number of shares of Common Stock subject to such Option, whether or
not then vested or exercisable, and (y) the excess, if any, of the Merger
Consideration over the exercise price per share of Common Stock subject to such
Option, each such Cash Payment, if any, to be paid to each holder of an
outstanding Option at the Effective Time. Any then outstanding stock
appreciation rights or limited stock appreciation rights shall be canceled as of
immediately prior to the Effective Time without any payment therefor. As
provided herein, the Stock Plans and any other plan, program or arrangement
providing for the issuance or grant of any other interest in respect of the
capital stock of the Company or any of its Subsidiaries (collectively with the
Stock Plans, referred to as the "Stock Incentive Plans") shall terminate as of
the Effective Time. The Company will take all
12
<PAGE>
steps to ensure that neither the Company nor any of its subsidiaries is or will
be bound by any Options, other options, warrants, rights or agreements which
would entitle any Person, other than Buyer or its affiliates, to own any capital
stock of the Surviving Corporation or any of its subsidiaries or to receive any
payment in respect thereof. The Company will use its best efforts to obtain all
necessary consents to ensure that after the Effective Time, the only rights of
the holders of Options to purchase shares of Common Stock in respect of such
Options will be to receive the Cash Payment, if any, in cancellation and
settlement thereof.
2.12 CLOSING. On the date which is the third business day after the
satisfaction of the conditions set forth in Sections 7.3, 7.7 and 8.4 hereof (or
such other time as the parties may mutually agree) (the "Scheduled Closing
Date"), a closing (the "Closing") will be held at the offices of McGuire, Woods,
Battle & Boothe, L.L.P., Richmond, Virginia (or such other place as the parties
may agree) for the purpose of confirming all of the foregoing; provided, that
nothing herein shall be deemed to affect (i) the conditions to the respective
parties' obligations hereunder contained in Articles VII and VIII hereof or (ii)
Article X hereof. Notwithstanding the foregoing, the date and time at which such
Closing actually occurs are herein referred to as the "Closing Date." As soon as
practicable after the satisfaction or, if permissible, waiver of the conditions
set forth in Articles VII and VIII hereof, the Company and Sub shall execute in
the manner required by the BCA and deliver to the Secretary of State of the
State of New Jersey a duly executed and verified certificate of merger and the
parties shall take such other and further actions as may be required by law to
make the Merger effective.
13
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer the following:
3.1 ORGANIZATION AND QUALIFICATION. Each of the Company and its
Subsidiaries is a corporation or other entity (as listed in Schedule 3.1) duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, and has corporate or other power
and authority to own all of its properties and assets and to carry on its
business as now being conducted. Each of the Company and its Subsidiaries is
duly qualified and in good standing to transact business in each jurisdiction in
which the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be in good standing or to be duly qualified would not, individually or in the
aggregate, have or reasonably be expected to have a material adverse effect on
the business, assets, liabilities, prospects, condition (financial or otherwise)
or results of operations (collectively, the "Business Condition") of the
Business. Each jurisdiction in which each of the Company and its Subsidiaries is
qualified to do business is set forth in Schedule 3.1. Buyer has been provided
complete and correct copies of the Certificates of Incorporation and Bylaws of
the Company and its Subsidiaries, as currently in effect.
3.2 CAPITALIZATION OF THE COMPANY; VALIDITY OF SHARES. The authorized
capitalization of the Company and the amount of such stock which is outstanding
is set forth in Schedule 3.2. The Shares constitute all of the issued and
outstanding capital stock of the Company. The Shares have been duly authorized,
are validly issued, fully paid and nonassessable, and were not issued in
violation of any preemptive rights. Except as set forth
14
<PAGE>
in Schedule 3.2, the Company has no commitments to issue or sell any shares of
its capital stock or any securities or obligations convertible into or
exchangeable for, or giving any person any right to acquire from the Company,
any shares of its capital stock and no such securities or obligations are
outstanding.
3.3 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by the Company of
this Agreement, and the consummation by it of the transactions contemplated
hereby, have been duly authorized by the Board of Directors of the Company, and
except for obtaining the approval of the Shareholders, no other corporate
proceedings on the part of the Company are necessary with respect thereto.
Assuming that Buyer has duly authorized the execution and delivery of this
Agreement, this Agreement constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms.
3.4 INVESTMENTS AND SUBSIDIARIES. Except for the Insurance Subsidiaries
and ISRA, there are no corporations, partnerships and other entities in which
the Company owns or has any right to acquire 5% or more of the outstanding
capital stock or other equity or partnership interests. The authorized
capitalization of each of the Company's Subsidiaries and the amount of such
stock which is outstanding is set forth in Schedule 3.4. The Company owns all of
the issued and outstanding shares of capital stock in IICA and ISRA, IICA owns
all of the issued and outstanding shares of capital stock in CIC and CIC owns
all of the issued and outstanding shares of capital stock in ISRIC, in each case
free and clear of any and all covenants, conditions, restrictions, voting trust
arrangements, security interests, liens, charges,
15
<PAGE>
encumbrances, options and adverse or equitable claims or rights whatsoever.
There are no Subsidiaries of the Company other than IICA, CIC, ISRIC and ISRA.
All of the issued and outstanding shares of capital stock of the Company's
Subsidiaries are duly authorized, validly issued, fully paid and nonassessable,
and were not issued in violation of any preemptive rights. None of the Company's
Subsidiaries has any commitments to issue or sell any shares of its capital
stock or any securities or obligations convertible into or exchangeable for, or
giving any person any right to acquire from such Subsidiary, any shares of its
capital stock and no such securities or obligations are outstanding.
3.5 CONSENTS AND APPROVALS. Except as set forth in Schedule 3.5, there
is no requirement applicable to the Company or any of its Subsidiaries to make
any filing with, or to obtain any permit, authorization, consent or approval of
any public body as a condition to the lawful consummation of the transactions
contemplated by this Agreement. Except as set forth in Schedule 3.5, there is no
requirement that any party to any Material Contract, Lease, license or permit
for the use of Intellectual Property or loan agreement to which the Company or
any of its Subsidiaries is a party or by which either of them is bound, consent
to the execution of this agreement by the Company or consummation of the
transactions contemplated by this Agreement.
3.6 NON-CONTRAVENTION. The execution and delivery by the Company of
this Agreement does not, and the consummation of the transactions contemplated
hereby will not, (i) violate or result in a breach of any provision of the
Certificate of Incorporation or Bylaws of the Company or its Subsidiaries, (ii)
result in a default (or give rise to any right of termination, cancellation or
acceleration) under the terms, conditions or provisions of any
16
<PAGE>
note, bond, mortgage, indenture, license, agreement, lease or other instrument
or obligation to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries may be bound, or (iii) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any of its Subsidiaries.
3.7 LICENSES. The Company and each of its Subsidiaries has obtained all
licenses, certificates of authority, permits, authorizations, orders and
approvals of, and has made all registrations or filings with, all Governmental
Authorities as required in connection with the conduct of the Business as
currently conducted, and with respect to which a failure to so obtain would have
a material adverse effect on the Business Condition of the Business
(collectively, the "Licenses"). Schedule 3.7 lists the jurisdictions in which
the Company possess licenses or other approvals to conduct an insurance business
(an "Insurance License"). The Company has heretofore made available to the Buyer
true and complete copies of all of such Insurance Licenses as are currently in
effect. All Licenses and Insurance Licenses are valid and in full force and
effect. No notice of a violation of any such License or Insurance License has
been received by the Company or any of its Subsidiaries, or to the knowledge of
the Company, recorded or published, and no proceeding is pending or, to the
knowledge of the Company threatened, to revoke or limit any of them. The Company
has no reason to believe that the Licenses and Insurance Licenses in effect on
the date hereof will not be renewed.
3.8 COMPLIANCE WITH LAWS. Except as set forth in Schedule 3.8, and in
addition to the representations and warranties contained in Section 3.7 relating
to Licenses and Insurance Licenses, the Company and its Subsidiaries have been
operated in compliance with
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all laws, regulations, orders, policies, guidelines, judgments or decrees of any
Governmental Authority applicable to the Company and its Subsidiaries or the
Business including, without limitation, those related to antitrust and trade
matters, civil rights, zoning and building codes, public health and safety,
worker health and safety and labor and nondiscrimination, the failure to comply
with which, individually or in the aggregate, could reasonably be expected to
have a material adverse effect on the Business Condition of the Business.
Furthermore, except as is disclosed in Schedule 3.8, neither the Company nor any
of its Subsidiaries has received any notice alleging non-compliance with any of
the aforementioned laws, regulations, policies, guidelines, orders, judgments or
decrees. Neither the Company nor any of its Subsidiaries, nor any agent,
employee, sales representative, Affiliate or other representative of the Company
or any of its Subsidiaries, nor any other Person on behalf of the Company or any
of its Subsidiaries, has made any offer of payment, payment or gift to any
Person for corrupt business purposes or otherwise engaged in illegal business
practices.
3.9 STATUTORY FINANCIAL STATEMENTS. The Company has heretofore
delivered to the Buyer true and complete copies of the Annual Statements of the
Insurance Subsidiaries as filed with the Applicable Insurance Department for the
years ended December 31, 1993, 1994 and 1995, and has delivered or will deliver
before the Closing, true and complete copies of each Quarterly Statement of the
Insurance Subsidiaries as filed with the Applicable Insurance Department for
each calendar quarter ended or ending before the Closing Date (the "Quarterly
Statements"). The balance sheets of each of the Insurance Subsidiaries as of
December 31, 1995, and the related statements of income and cash flow for the
year then ended, included in the Annual Statement for the year ended December
31, 1995, were prepared in conformity
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with statutory accounting practices prescribed or permitted by the Applicable
Insurance Department ("Statutory Accounting Principles") consistently applied,
except as otherwise noted therein, for the period covered thereby and fairly
present the statutory financial position of such Insurance Subsidiary as at the
date thereof and the results of operations and cash flow of such Insurance
Subsidiary for the period then ended. The balance sheets of the Insurance
Subsidiaries and the related statements of income and cash flow included in the
Quarterly Statements were or will be prepared in conformity with Statutory
Accounting Principles applicable to interim financial statements consistently
applied during the period involved, except as otherwise noted therein, subject
to normal year-end adjustments, and fairly present or will fairly present the
statutory financial position of such Insurance Subsidiary as at the dates
thereof and the results of operations and cash flow of such Insurance Subsidiary
for the periods then ended.
3.10 GAAP FINANCIAL STATEMENTS. The Company has previously furnished
Buyer with true and complete copies of the audited consolidated financial
statements, including the notes thereto, of the Company and its Subsidiaries for
the years ended December 31, 1993, 1994 and 1995 (the "Audited Financial
Statements"), together with the reports on such statements of the Company's
auditors and has delivered or will deliver before the Closing, true and complete
copies of the unaudited financial statements for the Company for each calendar
quarter ended or ending before the Closing Date (the "Interim Financial
Statements"). Such financial statements present fairly or will present fairly
the consolidated financial position of the Company and its Subsidiaries as of
the dates thereof and the results of their operations and changes in cash flows
for the periods then ended and have been or will be
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prepared in accordance with generally accepted accounting principles applied on
a consistent basis, subject, in the case of the Interim Financial Statements, to
normal year-end adjustments.
3.11 INVESTMENTS. Except as disclosed in Schedule 3.11, The Company and
each of its Subsidiaries has good and marketable title, free and clear of all
liens, claims, charges, options or encumbrances, to all of its investment assets
reflected in its Annual Convention Statement for the year ended December 31,
1995, or acquired after December 31, 1995, other than investment assets that
have been sold or disposed of in the normal course of business. All such
investments are properly treated and valued as admitted assets in accordance
with the regulations of the Applicable Insurance Department and the National
Association of Insurance Commissioners.
3.12 ABSENCE OF CHANGES. Except as set forth in Schedule 3.12, since
December 31, 1995:
(i) the Business has been operated only in the
ordinary and usual course and in a manner consistent with past
practices;
(ii) there has not been any change, or development
involving a prospective change, including any damage, destruction, loss
or abandonment (whether or not covered by insurance) which,
individually or in the aggregate, has or, to the knowledge of the
Company, can reasonably be expected to have, a material adverse effect
on the Business Condition of the Business;
(iii) neither the Company nor any of any of its
Subsidiaries has taken any action, which if taken as of the date hereof
through the Closing, would violate any of clause (i) through (xix) of
Section 6.2 (and there have not been any changes
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required by generally accepted accounting principles referred to in
clause (xix) of Section 6.2); and
(iv) neither the Company nor any of any of its
Subsidiaries has entered into any agreement to do any of the things
described in the preceding clauses of this Section 3.12
3.13 NO UNDISCLOSED LIABILITIES. None of the Company or any of its
Subsidiaries has any liabilities or obligations of any nature, whether known or
unknown, absolute, accrued, contingent or otherwise and whether due or to become
due, including any uninsured liabilities, except (i) as and to the extent set
forth in the balance sheet included in the Audited Statements, (ii) liabilities
and obligations incurred after December 31, 1995 in the ordinary course of
business consistent with past practice and not prohibited by this Agreement and
which could not have a material adverse effect on the Business Condition of the
Business and (iii) as set forth in Schedule 3.13.
3.14 LITIGATION. Except as set forth in Schedule 3.14, there are
no Actions pending or, to the knowledge of the Company, threatened, against the
Company or any of its Subsidiaries, which (i) have, or, if adversely determined,
could reasonably be expected to have a material adverse effect on the Business
Condition of the Business, (ii) seek specifically to prevent, restrict or delay
consummation of the transactions contemplated hereby or fulfillment of any of
the conditions of this Agreement or (iii) involve claims of bad faith, extra
contractual or punitive damages or errors or omissions with respect to the
Company's or any of its Subsidiary's handling or resolution of any insurance or
reinsurance claims. Except
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as set forth in Schedule 3.14, there are no judgments, decrees or orders of any
Governmental Authority outstanding against the Company or any of its
Subsidiaries.
3.15 INSURANCE BUSINESS. All policies of insurance issued by the
Insurance Subsidiaries and in force on the date hereof are, and on the Closing
Date will be, to the extent required by applicable law, on forms approved by
applicable insurance regulatory authorities or which have been filed with and
not objected to by such authorities within the period provided for such
objection. Any premium rates required to be filed with or approved by insurance
regulatory authorities have been so filed or approved and the premiums charged
conform thereto.
3.16 REGULATORY FILINGS. The Company has provided to Buyer all material
registrations, filings or submissions (other than policy filings or rate
filings) made by or on behalf of the Company or any of its Subsidiaries with or
to any insurance regulatory authority and all reports of examination issued by
any insurance regulatory authority since January 1, 1993. The Company and its
Subsidiaries have filed all reports, statements, documents, registrations,
filings or submissions required to be filed with any Governmental Authority,
except with respect to which the failure to file individually or in the
aggregate does not adversely affect their respective licenses or authority as an
insurance company in any jurisdiction or does not otherwise have a materially
adverse effect on any of them. Except as shown in Schedule 3.16, all such
registrations, filings and submissions were in material compliance with
applicable law when filed, and no material deficiencies have been asserted with
respect thereto.
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3.17 REINSURANCE, COINSURANCE AND UNDERWRITING MANAGEMENT. (a) Schedule
3.17 contains a list of all coinsurance and reinsurance treaties or agreements
to which any Insurance Subsidiary is a party or beneficiary and which were in
force at any time after December 31, 1995. All such treaties or agreements are
in full force and effect and except as set forth in Schedule 3.17, the Company
has no knowledge that any reinsurer or coinsurer intends to terminate or does
not intend to renew such treaties or agreements on substantially the same terms
as presently exist. None of the Insurance Subsidiaries, nor to the knowledge of
the Company, any other party thereto, is in default as to any provision thereof,
and no such treaty or agreement contains any provision to the effect that the
other party thereto may terminate the treaty or agreement by reason of the
transactions contemplated by this Agreement. To the knowledge of the Company,
except as set forth on Schedule 3.17, there is no reason to believe that the
financial condition of any other party to any such treaty or agreement is
impaired such that a default thereunder may reasonably be anticipated.
(b) Schedule 3.17 contains a list of all agreements to which
the Company or any of its Subsidiaries is or was a party pursuant to which the
Company or any of its Subsidiaries served or serves as, or received or receives
services from, a managing general agent or underwriting manager or pursuant to
which any of them continues to be obligated to provide any services. All such
agreements are in full force and effect and except as set forth in Schedule
3.17, the Company has no knowledge that any other party to any such agreements
intends to terminate or does not intend to renew such agreements on
substantially the same terms as presently exist, except those agreements which
have terminated but for which the Company or any of its Subsidiaries maintains
servicing obligations. Neither the Company or
23
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any of its Subsidiaries, nor to the knowledge of the Company, any other party
thereto, is in default as to any provision thereof, and no such agreement
contains any provision to the effect that the other party thereto may terminate
the agreement by reason of the transactions contemplated by this Agreement. To
the knowledge of the Company, except as set forth in Schedule 3.17, there is no
reason to believe that the financial condition of any other party to any such
agreement is impaired such that a default thereunder may reasonably be
anticipated.
3.18 AGENTS AND BROKERS. Each of the contracts between the Insurance
Subsidiaries and their respective agents and brokers is valid, binding and in
full force and effect in accordance with its terms. Except for the managing
general agent agreements listed in Schedule 3.17, all agreements with agents or
brokers are terminable by the Insurance Subsidiaries, as the case may be,
without cause upon not more than thirty (30) days' written notice.
3.19 REAL PROPERTY. Neither the Company nor any of its Subsidiaries
owns any real property.
3.20 PERSONAL PROPERTY. Except as set forth in Schedule 3.20, the
Company and its Subsidiaries have good and valid title to all of the personal
property, tangible and intangible, which they own, including all tangible and
intangible personal property reflected in the balance sheet in the Interim
Financial Statements or acquired since such date (except as may be disposed of
in the ordinary course of business after such date and which could not have a
material adverse effect on the Business Condition of the Business), in each case
free of liens, security interests or other encumbrances, except liens, security
interests and other
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encumbrances which could not, individually or in the aggregate, have a material
adverse effect on the Business Condition of the Business.
3.21 LEASES. (a) Schedule 3.21 sets forth a complete list of each
agreement to lease to which the Company or any of its Subsidiaries is a party,
whether as lessor or lessee, which relates to either real or personal property,
other than monthly leases of personal property which may be canceled upon not
more than 30 days' notice and require the payment of not more than $1,000 per
month. The agreements listed in Schedule 3.21 are referred to herein as
"Leases." Except as set forth in Schedule 3.21, (i) each such Lease is in full
force and effect and is a binding obligation of the parties thereto, and (ii) to
the knowledge of the Company, no event has occurred which, with the giving of
notice or the passage of time, or both, would permit the termination,
modification or acceleration of any such Lease by any party thereto. Subject to
obtaining any necessary consents by the other party or parties to any Lease
(which consents are listed in Schedule 3.21) none of the rights of the Company
and its Subsidiaries under any Lease is subject to termination or modification
as a result or the transactions contemplated hereby. Complete copies of all of
the Leases have been made available to Buyer.
(b) None of the Company or any of its Subsidiaries has
received any notice from any Governmental Authority of any zoning, land use,
building, fire or health code or other legal violation in respect of the leased
real property, other than violations which have been corrected or which could
not, individually or in the aggregate, have a material adverse effect on the use
of such leased real property as it is now being used in the Business.
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(c) To the knowledge of the Company, there are no pending or
threatened condemnation proceedings or other litigation or administrative
actions relating to the leased real property or other matters affecting
adversely the current use or occupancy thereof.
3.22 SUFFICIENCY OF ASSETS. The real property and the personal property
that will be owned or leased by the Company and its Subsidiaries on the Closing
Date constitute all of the properties and assets used or held for use in
connection with, the Business.
3.23 INTELLECTUAL PROPERTY. Except as set forth in Schedule 3.23, the
Company and its Subsidiaries own or are licensed or otherwise have the full and
exclusive right to use, free and clear of conditions, adverse claims or other
restrictions or any requirement of any past, present or future royalty payments,
all such Intellectual Property. There is no Action pending or, to the knowledge
of the Company, threatened, against the Company or any of its Subsidiaries
asserting that the Company's or any of its Subsidiaries' use of any Intellectual
Property infringes the rights of any third party or otherwise contesting their
rights with respect to any Intellectual Property, and, to the knowledge of the
Company and except as set forth in Schedule 3.23, there are no grounds for any
such assertion and no third party is infringing upon the rights of the Companies
or any of its Subsidiaries in the Intellectual Property. All letters, patents,
registrations and certificates issued by any governmental agency relating to the
Intellectual Property are valid and subsisting and have been properly
maintained. The consummation of the transactions contemplated by this Agreement
will not alter, impair or extinguish any of the Company's or any of its
Subsidiaries' Intellectual Property.
3.24 MATERIAL CONTRACTS. Schedule 3.24 sets forth a complete and
correct list of each contract, agreement or commitment of the Company, other
than Leases:
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(i) upon which any substantial part of the Business
is dependent or which, if breached, could reasonably be expected to
have a material adverse effect on the Business Condition of the
Business;
(ii) which provides for aggregate future payments by
the Company or any of its Subsidiaries of more than $50,000, except for
purchase orders or sales orders arising in the ordinary and usual
course of business, in which case they are listed only if any party
thereto is obligated to make payments pursuant thereto aggregating more
than $100,000;
(iii) which extends more than one year from the date
hereof and is not cancelable by either party on not more than 30 days'
notice;
(iv) which provides for the sale or lease, after the
date hereof of any of the assets of the Company or its Subsidiaries
other than in the ordinary course of business;
(v) which relates to the employment, retirement or
termination of the services of any officer, director or employee or
former officer, director or employee of the Company or its
Subsidiaries;
(vi) which establishes a partnership, agency, joint
venture or other similar contract, arrangement or agreement;
(vii) which relates to indebtedness for borrowed
money or the deferred purchase price of property (whether incurred,
assumed, guaranteed or secured by any asset);
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(viii) which creates or relates to a license of
Intellectual Property, royalty or franchise agreement or agreement in
respect of similar rights granted to, from or held by the Company or
its Subsidiaries;
(ix) which is an agreement among shareholders;
(x) which provides for future payments that are
conditioned, in whole or in part, on a change in control of the Company
or its Subsidiaries (including a transfer of all or part of its
assets); or
(xi) which restricts the right of the Company or any
of its Subsidiaries to compete in any way with any other Person or
which contains covenants pursuant to which any person has agreed not to
compete, or otherwise restricts a person's ability to engage freely, in
any part of the Business or not disclose to others information
concerning the Business.
Each of the foregoing is referred to in this Agreement as a "Material Contract."
All of the Material Contracts are in full force and effect, and to the knowledge
of the Company, each is legal, valid, binding and enforceable against each other
party thereto. No Material Contract has been breached by the Company or its
Subsidiaries and, to the knowledge of the Company, no Material Contract has been
breached by any other party thereto and no event has occurred with respect to
any Material Contract, which, with the giving of notice or the passage of time,
or both, would constitute a breach thereof by any party thereto. No other party
to any Material Contract has given written or, to the knowledge of the Company,
oral notice (i) that such Material Contract has been breached, (ii) of
termination or cancellation of such Material
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Contract or (iii) that such party intends to terminate or cancel such Material
Contract. Complete copies of all the Material Contracts have been made available
to Buyer.
3.25 INSURANCE FOR THE BENEFIT OF THE COMPANY. The insurance maintained
by the Company and its Subsidiaries is believed by the Company to be adequate.
Such policies are in full force and effect, all premiums due thereon have been
paid, and neither the Company nor any Subsidiary of the Company is in default in
any material respect under any provision of any such policy nor has it failed to
give notice or present any material claim thereunder in a timely manner so as to
bar recovery of any valid claim. Neither the Company nor any of its Subsidiaries
has received any written notice of cancellation or non-renewal of any such
insurance policy or that any insurance premiums will be increased materially or
that the insurance coverage presently in force will not be available in the
future on substantially the same terms as now in effect.
3.26 LABOR MATTERS. (a) There are no labor unions or other
organizations representing, purporting to represent or attempting to represent
any employees of the Companies or its Subsidiaries, and there has been no such
attempt since January 1, 1990. Schedule 3.26 sets forth a true and complete list
of all salaried employees to whom the Companies and its Subsidiaries are paying
compensation, disability, workman's compensation and/or pension benefits, and
sets forth the current annual rate of compensation for each such employee
together with bonuses and incentives.
(b) Except as set forth in Schedule 3.26, there are no
controversies pending or, to the knowledge of the Company, threatened between
the Company or any of its Subsidiaries and any of its employees. Since January
1, 1990, there has not occurred or, to the knowledge
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of the Company, been threatened, any strike, slowdown, picketing, work stoppage,
concerted refusal to work overtime, grievance, claim of unfair labor practice or
other similar labor activity with respect to employees of the Company or its
Subsidiaries.
3.27 EMPLOYEE BENEFIT PLANS. (a) Schedule 3.27(a) includes a complete
list of all employee benefit plans, programs, policies, practices, and other
arrangements providing benefits to any employee or former employee or
beneficiary or dependent thereof, whether or not written, and whether covering
one person or more than one person, sponsored or maintained by the Company or
its Subsidiaries or to which the Company or its Subsidiaries contribute or are
obligated to contribute (collectively, "Employee Benefit Plans"). "Employee
Benefit Plans" includes all employee welfare benefit plans within the meaning of
Section 3(1) of ERISA and all employee pension benefit plan within the meaning
of Section 3(2) of ERISA.
(b) With respect to each Employee Benefit Plan, there has been
made available to Buyer a true, correct and complete copy of: (i) each writing
constituting a part of such Employee Benefit Plan, including all plan documents,
benefit schedules, participant agreements, trust agreements, and insurance
contracts and other funding vehicles; (ii) the three most recent Annual Reports
(Form 5500 Series where applicable) and accompanying schedules, if any; (iii)
the current summary plan description, if any; (iv) the most recent annual
financial report, if any; and (v) the most recent determination letter from the
Internal Revenue Service or other relevant Taxing Authority, if any. All
financial statements and actuarial reports for each Employee Benefit Plan have
been prepared in accordance with generally accepted accounting principles and
actuarial principles, applied on a uniform and
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consistent basis. Except as specifically provided in the foregoing documents
made available to Buyer, there are no amendments to any Employee Benefit Plan
that have been adopted.
(c) Schedule 3.27(a) identifies each Employee Benefit Plan
that is intended to be a "qualified plan" satisfying the requirements of Section
401(a) of the Code (a "Pension Plan").
(d) All Employee Benefit Plans which are "employee benefit
plans," as defined in Section 3(3) of ERISA, in all material respects are in
compliance with and have been administered in compliance with all applicable
requirements of law, including the Internal Revenue Code and ERISA, and all
contributions required to be made to each such plan under the terms of such
plan, ERISA or the Internal Revenue Code for all periods of time prior to
December 31, 1995 or the Closing Date, as the case may be, have been or, as
applicable, will by the Closing Date be timely made or paid in full or, to the
extent not required to be made or paid on or before December 31, 1995, have been
fully reflected on the balance sheet in the Audited Financial Statements.
(e) A favorable Internal Revenue Service determination letter
as to the qualification of each Pension Plan under Section 401(a) of the
Internal Revenue Code has been issued and remains in effect and the related
trust has been determined to be exempt from taxation under Section 501(a) of the
Internal Revenue Code and any amendment made or event relating to such Pension
Plan subsequent to the date of such determination letter has not adversely
affected the qualified status of such Pension Plan. No issue concerning
qualification of any Pension Plan is pending before or, to the knowledge of
Company, threatened by, the Internal Revenue Service. Each Pension Plan has been
administered in accordance with its
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terms, except for those terms which are inconsistent with the changes required
by the Internal Revenue Code and any regulations and rulings promulgated
thereunder for which changes are not yet required to be made, in which case each
Pension Plan has been administered in accordance with the provisions of the
Internal Revenue Code and such regulations and rulings, and neither the Company
and its Subsidiaries, nor any fiduciary of any Pension Plan has done anything
which would adversely affect the qualified status of any Pension Plan or related
trust. The Company and its Subsidiaries have performed all material obligations
required to be performed by them under, and are not in default under or in
violation of, the terms of any of the Employee Benefit Plans in any material
respect. None of the Company or its Subsidiaries or any other "disqualified
person" (as defined in Section 4975 of the Code) or "party-in-interest" (as
defined in Section 3(14) of ERISA) has engaged in any "prohibited transaction"
(as such term is defined in Section 4975 of the Code or Section 406 of ERISA),
which could subject any Employee Benefit Plan (or its related trust), the
Company or its Subsidiaries or any officer, director or employee of the Company
or its Subsidiaries to the tax or penalty imposed under Section 4975 of the
Internal Revenue Code or section 502(i) of ERISA; all "fiduciaries," as defined
in Section 3(21) of ERISA, with respect to the Employee Benefit Plans have
complied in all respects with the requirements of Section 404 of ERISA; and no
"reportable event" within the meaning of Section 4043 of ERISA has occurred with
respect to any Pension Plan. The Company and its Subsidiaries have not incurred,
and do not reasonably expect to incur, any material liability to the PBGC
(except for required premium payments, which payments have been made when due).
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(f) None of the Employee Benefit Plans that are subject to
Section 412 of the Internal Revenue Code ("Section 412 Plans") have incurred any
"accumulated funding deficiency," as that term is defined in Section 412 of the
Internal Revenue Code, whether or not waived. Contributions to all Section 412
Plans have been made in the manner, amount, and at the times prescribed by
Section 412 of the Internal Revenue Code. None of the Employee Plans is or has
ever been a "top-heavy plan" within the meaning of Section 416 of the Internal
Revenue Code. No Employee Benefit Plan is subject to Title IV of ERISA.
(g) No Employee Benefit Plans is a "multi-employer plan"
within the meaning of Section 4001(a)(3) of ERISA or a plan that has two or more
contributing sponsors at least two of whom are not under common control, within
the meaning of Section 4063 of ERISA (a "Multiple Employer Plan"), nor have the
Company or its Subsidiaries or any ERISA Affiliate of the Company or its
Subsidiaries, at any time contributed to or been obligated to contribute to any
Multiple Employer Plan.
(h) The Company and its Subsidiaries have no liability for
life, health, medical or other welfare benefits to former employees or
beneficiaries or dependents thereof, except for health continuation coverage as
required by Section 4980B of the Internal Revenue Code or Part 6 of Title I of
ERISA, and at no expense to the Company or its Subsidiaries.
(i) Except as set forth on Schedule 3.27(i) hereto, no
compensation or benefit that is or will be payable in connection with the
execution and delivery of this Agreement or in connection with the transactions
contemplated under this Agreement will be characterized as an "excess parachute
payment" within the meaning of Sections 280G and 4999 of the Internal Revenue
Code.
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3.28 TAX MATTERS. (a) Except as set forth in Schedule 3.28(a) all Tax
Returns required to be filed by, or with respect to any activities of, the
Company or its Subsidiaries have been or will be filed in accordance with all
applicable laws, and all Taxes shown to be due on such Income Tax Returns have
been or will be paid. All such Tax Returns were correct and complete in all
material respects..
(b) Schedule 3.28(b) sets forth the states in which the
Company or any of its Subsidiaries files Tax Returns, indicates the Tax Returns
in such states that have been audited, and indicates those Tax Returns in such
states that currently are subject of audit. Except as set forth in Schedule
3.28(b), no claim has ever been made by any authority in a jurisdiction where
the Company or its Subsidiaries do not file Tax Returns that any of the Company
or its Subsidiaries are or may be subject to taxation by that jurisdiction.
Except for Taxes for which appropriate reserves are established (all of which
are identified in Schedule 3.28(b)), all Taxes owed by any of the Company and
its Subsidiaries (whether or not shown on any Tax Return) have (or by the
Closing Date will have) been duly and timely paid. The unpaid Taxes of the
Company and its Subsidiaries did not, as of December 31, 1995, exceed the
reserve for tax liabilities made on the books of any of the Company or its
Subsidiaries and set forth in the Audited Financial Statements. All Taxes
required to be withheld by or on behalf of the Company and its Subsidiaries have
been withheld, and such withheld Taxes have been duly and timely paid to the
proper Governmental Authorities.
(c) Except as set forth on Schedule 3.28(c), no agreement or
other document extending, or having the effect of extending, the period of
assessment, payment or collection of any Taxes for which the Company or its
Subsidiaries or any of their predecessors may be
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held liable and no power of attorney with respect to any such Taxes have been
executed or filed with the Internal Revenue Service or any other Taxing
Authority.
(d) There have been made available to Buyer complete and
accurate copies of all Tax Returns that are or have been required to be filed
for all taxable periods for which the statute or limitations has not run,
examination reports, and statements of deficiencies assessed against or agreed
to by the Company or its Subsidiaries or any of their predecessors. No lien
exists with respect to any asset of the Company or its Subsidiaries that arose
in connection with any failure to pay Taxes. There are no Taxes for which the
Company or its Subsidiaries could be held liable which have been asserted in
writing by any Governmental Authority to be due. Except as set forth on Schedule
3.28(d), there are no pending audits, examinations, or investigations with
respect to Taxes of the Company or its Subsidiaries. No unresolved issue has
been raised in writing by any Governmental Authority in the course of any audit
or examination with respect to Taxes for which the Company or its Subsidiaries
could be held liable. The most recent Return for which an audit has been
completed by the relevant Taxing Authority for each jurisdiction in which the
Company and its Subsidiaries do business is set forth on Schedule 3.28(d).
(e) No consent or election has been made to have the
provisions of Section 341(f) of the Code apply to any of the Company or its
Subsidiaries.
(f) None of the Company or its Subsidiaries is party to or
bound by any tax sharing, tax indemnity, tax allocation or similar agreement or
arrangement.
(g) None of the Company or its Subsidiaries has either agreed
to or is required to make any adjustment under Section 481 of the Internal
Revenue Code (or any comparable
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provision of state, local or foreign law) by reason of a change in accounting
method or otherwise.
(h) None of the Company or its Subsidiaries has made any
payment, is obligated to make any payment, and or is a party to any agreement
that could obligate it to make any payments, that will not be deductible under
Section 280G of the Internal Revenue Code.
(i) Buyer will not be required to deduct and withhold any
amounts pursuant to Section 1445(a) of the Internal Revenue Code upon
consummation of the Merger.
3.29 INSIDER INTERESTS. Except as disclosed in Schedule 3.29, no
Affiliate of the Company or any of its Subsidiaries, or any officer, director
(who is also an employee) or employee of the Company or any of its Subsidiaries,
or any member of their immediate family (i) competes with, is involved with or
has any direct or indirect interest in any business entity which competes with
the Business, (ii) has any interest, direct or indirect, in any property, real
or personal, tangible or intangible, including Intellectual Property, used in or
pertaining to the Business, or (iii) provides or causes to be provided to, or
receives from, any Company or Subsidiary any assets, loans, advances, services
or facilities. Except as disclosed in Schedule 3.29, no Principal Shareholder or
Affiliate of a Principal Shareholder (i) has any interest, direct or indirect,
in any property, real or personal, tangible or intangible, including
Intellectual Property, used in or pertaining to the Business, or (ii) provides
or causes to be provided to, or receives from, any Company or Subsidiary any
assets, loans, advances, services or facilities.
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3.30 FINDERS. No broker, finder, investment banker or any other person
or entity is entitled to any fee or commission from the Company for services
rendered on behalf of the Company in connection with the transactions
contemplated by this Agreement.
3.31 FULL DISCLOSURE. None of the representations and warranties of the
Company made in this Article III (a representation and warranty being deemed to
include for the purpose of the Section to which it is referenced and not for the
purpose of any other Section, the information contained in any schedule
referenced therein) contains untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL SHAREHOLDERS
Each of the Principal Shareholders represents and warrants to Buyer the
following:
4.1 ORGANIZATION AND QUALIFICATION. Such Shareholder is a corporation
or other entity (as listed in Schedule 4.1) duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation or
organization, and has corporate or other power and authority to own all of its
properties and assets and to carry on its business as now being conducted.
4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Such Shareholder has
corporate and other power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery by such Shareholder of this Agreement, and the consummation by it of
the transactions contemplated hereby, have been duly authorized by the Board of
Directors or other governing body of such Shareholder, no
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other corporate or other proceedings on the part of such Shareholder being
necessary with respect thereto. Assuming that Buyer has duly authorized the
execution and delivery of this Agreement, this Agreement constitutes a valid and
binding obligation of such Shareholder, enforceable in accordance with its
terms.
4.3 CONSENTS AND APPROVALS. Except as set forth in Schedule 4.3, there
is no requirement applicable to such Shareholder to make any filing with, or to
obtain any permit, authorization, consent or approval of any public body or
third party as a condition to the lawful consummation of the transactions
contemplated by this Agreement.
4.4 NON-CONTRAVENTION. The execution and delivery by such Shareholder
of this Agreement does not, and the consummation of the transactions
contemplated hereby will not, (i) violate or result in a breach of any provision
of its certificate of incorporation or bylaws or other organizational documents,
(ii) result in a default (or give rise to any right of termination, cancellation
or acceleration) under the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, agreement, lease or other instrument or obligation
to which such Shareholder is a party or by which it may be bound, or (iii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to such Shareholder.
4.5 OWNERSHIP OF SHARES. Such Shareholder has good and valid title to,
sole record and beneficial ownership of, and sole right to vote, the number of
Shares set forth after its name in Schedule 4.5.
4.6 REPRESENTATIONS OF THE COMPANY. The representations and warranties
of the Company set forth in Article III are true and correct; provided that the
representation set forth in this Section 4.6 is qualified and limited to the
best knowledge of such Shareholder with
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respect to the representations and warranties set forth in Sections 3.7 through
3.27, 3.29 and 3.31.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants the following:
5.1 ORGANIZATION; AUTHORITY RELATIVE TO THIS AGREEMENT. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Virginia.
5.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Buyer has corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery by Buyer of this Agreement, and
the consummation of the transactions contemplated hereby, have been duly
authorized by the Board of Directors of Buyer and no other corporate proceedings
on the part of Buyer are necessary with respect thereto. Assuming that the
Company has duly authorized the execution and delivery of this Agreement, this
Agreement constitutes a valid and binding obligation of Buyer, enforceable in
accordance with its terms.
5.3 CONSENTS AND APPROVALS. Except as set forth in Schedule 5.3, there
is no requirement applicable to Buyer to make any filing with, or to obtain any
permit, authorization, consent or approval of any public body as a condition to
the consummation of the transactions contemplated by this Agreement. Except as
set forth in Schedule 5.3, there is no requirement that any party to an
agreement to which Buyer is a party or by which it is bound consent to the
consummation of the transactions contemplated by this Agreement.
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5.4 NON-CONTRAVENTION. The execution and delivery by Buyer of this
Agreement and the consummation of the transactions contemplated hereby will not
(i) violate or result in a breach of any provision of the Articles of
Incorporation or Bylaws of Buyer, (ii) result in a default (or give rise to any
right of termination, cancellation or acceleration) under the terms, conditions
or provisions of any note, bond, mortgage, indenture, license, agreement, lease
or other instrument or obligation to which Buyer is a party or by which Buyer,
or the business conducted by it, may be bound, or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Buyer or to the
business conducted by it.
5.5 LITIGATION. No Action is pending or, to the knowledge of Buyer,
threatened against Buyer which seeks to prevent, restrict or delay consummation
of the transactions contemplated by this Agreement.
5.6 FINDERS. No broker, finder or investment banker is entitled to any
fee or commission from Buyer for services rendered on behalf of Buyer in
connection with transactions contemplated by this Agreement.
5.7 FULL DISCLOSURE. None of the representations and warranties of
Buyer made in this Article V (a representation and warranty being deemed to
include, for the purpose of the Section to which it is referenced and not for
the purpose of any other Section, the information contained in a schedule
referenced therein) contains an untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 CONDUCT OF BUSINESS OF THE COMPANY. From the date hereof until the
Closing, the Company and its Subsidiaries will (i) conduct their business only
in the ordinary and usual course and in a manner consistent with past practices
and (ii) use their best efforts to preserve intact their relationships with
agents, customers, reinsurers and others having business relationships with them
and keep available their present officers and employees. The management of the
Company will meet with Buyer on a regular and frequent basis to discuss the
general status of the ongoing operations of the Company and its Subsidiaries and
any problems relating to the conduct of the Business. The Company will notify
Buyer (i) of any emergency or change in the normal conduct of the Business or
operations of the Company, (ii) of any event, occurrence, fact, condition,
change or effect that, individually or in the aggregate, would have or result in
a material adverse effect on the Business Condition of the Business, (iii) of
the threat of, or initiation of, any litigation against the Company or its
Subsidiaries, or (iv) of the initiation of any investigation of the Company or
its Subsidiaries by any party, whether private or governmental, and will keep
Buyer fully informed of developments with respect to such events and afford
Buyer's representatives access to all materials in its possession relating
thereto.
6.2 FORBEARANCES BY THE COMPANY. Except as contemplated by this
Agreement or as set forth in Schedule 6.2, the Company and its Subsidiaries will
not, from the date hereof until the Closing, without the written consent of
Buyer:
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(i) sell, lease or otherwise dispose of any of its
assets, including Intellectual Property, except in the ordinary course
of business consistent with past practice;
(ii) mortgage, pledge or otherwise encumber, or
permit to exist any new security interest, lien or encumbrance on, any
of its assets;
(iii) except in accordance with the ordinary and
usual course of its business and in a manner consistent with past
practices, enter into, amend, modify or cancel any Material Contract or
Lease;
(iv) incur any obligation or liability for borrowed
money;
(v) make any material investment in, purchase any
material assets or securities of, or merge with any Person;
(vi) assume, guarantee, endorse or otherwise become
responsible for the obligations of any Person, or make loans or
advances to any Person;
(vii) increase in any manner the compensation of any
of the directors, officers or other employees of the Company or its
Subsidiaries other than increases in compensation of employees who are
not officers or directors in the ordinary course of business consistent
with past practice and which are not material in the aggregate;
(viii) pay or agree to pay any pension or retirement
allowance not required by an existing plan or agreement to any
director, officer or employee, whether past or present, of the Company
or its Subsidiaries, or enter into or amend any employment agreement or
any incentive compensation, profit sharing, stock purchase, stock
option, stock appreciation rights, savings, consulting, deferred
compensation,
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severance, retirement, pension or other benefit plan or arrangement
with or for the benefit of any of its directors, officers, employees or
of any other person, or approve or grant any stock options, stock
appreciation rights or similar awards to any person;
(ix) declare, set aside or pay any dividend in cash
or property, repurchase or otherwise make any distribution, with
respect to its capital stock;
(x) split, combine or otherwise similarly change its
capital stock, or redeem any of its capital stock;
(xi) authorize the creation or issuance of, or issue
or sell, any shares of its capital stock or any securities or
obligations convertible into or exchangeable for, or giving any person
any right to acquire from it, any shares of its capital stock;
(xii) enter into any joint venture, partnership or
other similar arrangement;
(xiii) enter into any agreement or arrangement with
an Affiliate of the Company or any of its Subsidiaries or with an
Affiliate of any Principal Shareholder;
(xiv) enter into any agreement which restricts in
any way its ability to compete with any other Person;
(xv) amend its Certificates of Incorporation or
Bylaws;
(xvi) cancel or compromise any indebtedness owed to
it;
(xvii) close any of its facilities;
(xviii) cancel or allow any of its existing insurance
policies to lapse;
(xix) alter in any way the manner in which it has
regularly and customarily maintained its books of account and records,
or change any of its
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accounting principles or the methods by which such principles are
applied for tax or reporting purposes; or
(xx) agree or commit to do any of the things
described in clauses (i) through (xix) above.
6.3 NEGOTIATIONS WITH OTHERS. From the date hereof until the Closing,
neither the Company nor any Principal Shareholder will, directly or indirectly,
without the written consent of Buyer, (i) solicit any inquiries or proposals
for, or enter into discussions with respect to, or enter into any agreement with
respect to, any merger, any sale of any Shares, any shares of capital stock of
any Subsidiary of the Company, or all, or a substantial part, of the assets of
the Company or its Subsidiaries, or similar transaction involving the Business
with, or (ii) furnish or cause to be furnished any non-public information
concerning the Business to, any Person other than the parties hereto and their
agents and representatives.
6.4 INVESTIGATION OF BUSINESS AND PROPERTIES. From the date hereof
until the Closing, the Company will afford Buyer and its attorneys, accountants,
financial advisors and other representatives complete access at all reasonable
times to its officers, employees, properties, contracts, and books and records.
In addition, the Company will furnish Buyer with such financial, operating and
additional data as Buyer may reasonably request concerning the business,
operations, properties and personnel and the Company.
6.5 CONFIDENTIALITY. (a) Pursuant to the provisions of this Agreement,
the Company has supplied and will supply Buyer with certain documents and
information for use in investigating the business of the Company. Such material
is hereinafter referred to as "Evaluation Material." Buyer agrees to hold in
confidence any Evaluation Material it has
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received or will receive and not to disclose all or any part of such material to
anyone except its officers, directors, employees or other representatives who
need such information to perform their respective duties and who have been
informed of the confidential nature of such material and directed to treat it
confidentially. If this Agreement is terminated, Buyer will return to the
Company, or cause to be destroyed and will not retain the originals or any
copies of any documents constituting a part of the Evaluation Material furnished
to it and after termination Buyer will continue to honor the confidentiality
agreement contained herein and will not use or disclose, directly or indirectly,
any information obtained from the Evaluation Material. The confidentiality
agreement contained in this Section 6.5 will terminate only upon consummation of
the transactions contemplated hereby. Notwithstanding the foregoing, Buyer may
use and disclose any such information to the extent that (i) it had acquired
such information on a non-confidential basis prior to receipt thereof from the
Company, (ii) such information has become generally available to the public,
(iii) such information is provided Buyer by a third party who has obtained such
information other than as a result of a breach of this Agreement, or (iv) such
information is independently developed by Buyer. Furthermore, Buyer may disclose
such information to the extent that it is required to do so in order to comply
with a governmental or judicial order or decree, but upon receiving notice that
any such order or decree is being sought, it will promptly notify the Company
and will, at the Company's expense, cooperate with the Company's efforts, if
any, to contest the issuance of such order or decree. It is understood that
Buyer will be deemed to have satisfied its obligation to hold information
confidential, pursuant to the provisions of this Section 6.5, if it
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exercises the same care with regard to such information as it takes to preserve
confidentiality for its own similar information.
(b) Each of the Principal Shareholders agrees to hold in
confidence any non-public information related to the Company or the Business,
including any Evaluation Material, it has received or will receive, and not to
use for their own benefit or disclose to any third party all or any part of such
material. Upon consummation of the Merger and at the Company's request, each
Principal Shareholder will return to the Company, or cause to be destroyed and
will not retain the originals or any copies of any non-public information and
any documents constituting a part of the Evaluation Material furnished to it and
will not use or disclose, directly or indirectly, any of such information.
6.6 HSR FILINGS. The Company and Buyer will each file, within thirty
days of the date hereof, with the United States Federal Trade Commission and the
Antitrust Division of the United States Department of Justice, pursuant to the
HSR Act, all requisite documents and notifications in connection with the
transactions contemplated by this Agreement. The Buyer and the Company shall
each pay one-half of the fee payable in connection with such filings.
6.7 EXPENSES. Except as otherwise provided in this Agreement, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby will be paid by the party incurring such costs and expenses.
6.8 PUBLIC ANNOUNCEMENTS. Prior to Closing, except for filings required
by law, neither party will issue any press releases or otherwise make any public
statements with respect to this Agreement and the transactions contemplated
hereby without having first obtained the approval of the other party, which
approval shall not be unreasonably withheld.
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6.9 SUBSEQUENT EVENTS. At all times prior to the Closing, each party
shall promptly notify the other party in writing of any fact, condition, event
or occurrence, whether or not existing on the date hereof, that will or may
result in the failure of any of the conditions set forth in Articles VII and
VIII, including the failure of the representations and warranties set forth in
Articles III, IV and V to be true and correct.
6.10 EFFORTS TO CONSUMMATE. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate, as promptly as practicable,
the transactions contemplated hereby, including the obtaining of all necessary
consents, waivers, authorizations, orders and approvals of third parties,
whether private or governmental, required of it to enable it to comply with the
conditions precedent to consummating the transactions contemplated by this
Agreement. Each party agrees to cooperate fully with the other party in
assisting it to comply with this Section 6.10 and the Company agrees to take
such steps as may be necessary to remove any Liens (other than Permitted
Encumbrances) which affect the assets of the Company and its Subsidiaries.
Notwithstanding the foregoing, neither party shall be required to initiate any
litigation, make any substantial payment or incur any material economic burden,
except for payments a party presently is contractually obligated to make, to
obtain any consent, waiver, authorization, order or approval, and if, despite
such efforts, either party is unable to obtain any consent, waiver,
authorization, order of approval the other party may terminate this Agreement
and shall have no liability therefor except as is provided in Section 10.2.
Without limiting the foregoing, Buyer shall not be required to enter into any
agreement, understanding,
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consent order or decree with any Governmental Authority which Buyer, in its sole
discretion, determines to be burdensome or unfavorable.
6.11 RESIGNATIONS. At the Closing, the Company shall cause to be
delivered to Buyer duly signed resignations, effectively immediately after the
Closing, of all directors and officers of all of the Company and its
Subsidiaries (other than those directors and officers designated in writing by
Buyer to the Company at least five days before the Closing Date), or shall take
such other action as is necessary to ensure that such parties are not directors
or officers of the Company or its Subsidiaries after the Closing. The Company
further agrees to change or revoke, at or prior to the Closing, the (i)
authorizations of persons permitted access or control over the Company's or its
Subsidiaries' accounts and safe deposit boxes at banks and other financial
institutions and (ii) powers of attorney, in each case as requested by Buyer.
6.12 VOTING AGREEMENT. Each Principal Shareholder covenants and
agrees to vote all Shares held by it in favor of the Merger.
6.13 TERMINATION OF SHAREHOLDERS AGREEMENTS. The Company and the
Principal Shareholders shall terminate all agreements among shareholders of the
Company which relate to the governance of the Company or relations among
shareholders and take all such other action as shall be necessary or appropriate
to cause there to be no continuing effect thereunder following the Effective
Time.
6.14 TERMINATION OF AGREEMENTS WITH PRINCIPAL SHAREHOLDERS. The
Company and the Principal Shareholders shall terminate all agreements between a
Principal Shareholder or an Affiliate and the Company or any of its Subsidiaries
and take all such other action as
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shall be necessary or appropriate to cause there to be no obligation or
liability of the Company or any of its Subsidiaries thereunder following the
Effective Time.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYER
The obligation of Buyer to consummate the transactions contemplated by
this Agreement shall be subject, to the extent not waived, to the following
conditions.
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company and the Principal Shareholders contained in this Agreement shall
be true and correct in all respects (in the case of any representation or
warranty containing any materiality qualification) and in all material respects
(in the case of any representation or warranty without any materiality
qualification) as of the date of this Agreement and as of the Closing Date, and
Buyer shall have received certificates to that effect signed by the President
and Chief Financial Officer of the Company and by each of the Principal
Shareholders, as the case may be.
7.2 PERFORMANCE OF THIS AGREEMENT. The Company and the Principal
Shareholders shall have performed all covenants and agreements and complied with
all conditions required by this Agreement to be performed or complied with prior
to or on the Closing Date, and Buyer shall have received certificates to that
effect signed by the President and Chief Financial Officer of the Company and by
each of the Principal Shareholders, as the case may be.
7.3 CONSENTS AND APPROVALS. All registrations, filings, applications,
notices, consents, orders, approvals, qualifications or waivers of regulatory
authorities and other
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Persons which must be obtained to consummate the Merger and for Buyer to become
the owner of the Company and its Subsidiaries and to continue to conduct the
Business consistent with the manner in which it presently is being conducted
shall have been filed, made or obtained and all waiting periods specified by law
with respect thereto shall have expired or been terminated.
7.4 MATERIAL CHANGES. There shall not have been any material adverse
change in Business Condition of the Business since December 31, 1995, nor any
occurrence or circumstance that with the passage of time might reasonably be
expected to result in such change, nor shall there be any material liability not
shown in the Audited Financial Statements or otherwise disclosed herein. Buyer
shall have received a certificate dated the Closing Date signed by the President
and Chief Financial Officer of the Company certifying to the fulfillment of this
condition.
7.5 INJUNCTION, LITIGATION, ETC. No order of any court or governmental
agency shall be in effect which restrains or prohibits the consummation of the
transactions contemplated by this Agreement or which would limit or affect the
ability of Buyer to own or control of the Company and its Subsidiaries, and
there shall not have been threatened, nor shall there be pending, any action or
proceeding by or before any such court or governmental agency seeking to
prohibit or delay or challenging the validity of the transactions contemplated
by this Agreement.
7.6 LEGISLATION. No statute, rule or regulation shall have been
proposed or enacted which prohibits or might prohibit, restrict or delay the
consummation of the transactions
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contemplated by this Agreement, or which might have a material adverse effect on
the Business Condition of the Business.
7.7 PROCEEDINGS; CERTIFICATES. All corporate proceedings of the Company
and its Subsidiaries that are required in connection with the transactions
contemplated by this Agreement shall be reasonably satisfactory in form and
substance to Buyer and its counsel, and Buyer and its counsel shall have
received such evidence of such corporate proceedings, certified if required, as
may be reasonably requested and customary in transactions of the nature
contemplated hereby.
7.8 OPINION OF COUNSEL FOR THE COMPANY. Buyer shall have received an
opinion from Cole, Schotz, Meisel, Forman & Leonard, counsel for the Company, in
form and substance reasonably acceptable to Buyer and its counsel.
7.9 EMPLOYMENT AGREEMENT. Jeremy D. Cooke shall have executed and
delivered an employment agreement with Buyer or the Surviving Corporation in the
form attached hereto as Exhibit A, and the existing employment agreement between
the Company and Mr. Cooke shall have been terminated.
7.10 REPAYMENT OF INDEBTEDNESS; AFFILIATE AGREEMENTS. Except as set
forth in Schedule 7.10, all indebtedness of any Principal Shareholder or any
employee, officer or director of the Company or any of its Subsidiaries or any
Affiliate of any of the foregoing to the Company or any of its Subsidiaries
shall have been paid in full. Each agreement between any Principal Shareholder
or Affiliate of a Principal Shareholder or the Company or any of its Affiliates
and the Company or any of its Affiliates shall have been terminated.
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ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligation of the Company to consummate the transactions
contemplated by this Agreement shall be subject, to the extent not waived, to
the satisfaction of each of the following conditions.
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Buyer contained in this Agreement shall be true and correct in all respects
(in the case of any representation or warranty containing any materiality
qualification) and in all material respects (in the case of any representation
or warranty without any materiality qualification) as of the date of this
Agreement and as of the Closing Date, and Buyer shall have delivered to the
Company a certificate to that effect signed by the Vice Chairman or Chief
Financial Officer of Buyer.
8.2 PERFORMANCE OF THIS AGREEMENT. Buyer shall have performed all
covenants and agreements and complied with all conditions required by this
Agreement to be performed or complied with by it prior to or on the Closing
Date, and Buyer shall have delivered to the Company a certificate to that effect
signed by the Vice Chairman or Chief Financial Officer of Buyer.
8.3 CONSENTS AND APPROVALS. All consents, authorizations, orders or
approvals of governmental or regulatory authorities and of individuals or
business entities which Buyer is required to obtain in order to be able to
consummate the Merger, shall have been obtained by Buyer and all waiting periods
specified by law with respect thereto shall have passed.
8.4 INJUNCTION, LITIGATION, ETC. No order of any court or governmental
agency shall be in effect which restrains or prohibits the consummation of the
transactions
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contemplated by this Agreement and there shall not have been threatened, nor
shall there be pending, any action or proceeding by or before any such court or
governmental agency seeking to prohibit or delay or challenging the validity of
any of the transactions contemplated by this Agreement.
8.5 LEGISLATION. No statute, rule or regulation shall have been
proposed or enacted which prohibits or might prohibit, restrict or delay the
consummation of the transactions contemplated hereby.
8.6 PROCEEDINGS; CERTIFICATES. All corporate proceedings of Buyer and
Sub that are required in connection with the transactions contemplated by this
Agreement shall be reasonably satisfactory in form and substance to the Company
and its counsel, and the Company and its counsel shall have received such
evidence of such corporate proceedings, certified if required, as may be
reasonably requested and customary in transactions of the nature contemplated
hereby.
8.7 OPINION OF COUNSEL FOR BUYER. The Company shall have received an
opinion from McGuire Woods Battle & Boothe, L.L.P., counsel for Buyer, in form
and substance reasonably acceptable to the Company and its counsel.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE PRINCIPAL SHAREHOLDERS. Subject to the
limitations contained in this Article IX, the Principal Shareholders, severally,
but not jointly, will indemnify and hold harmless Buyer, its Affiliates, each of
their respective partners, directors, officers, employees and agents, and each
of the heirs, executors, successors and assigns of any
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of the foregoing (collectively, the "Buyer Indemnified Parties") from and
against, and pay or reimburse the Buyer Indemnified Parties for, any and all
Covered Liabilities (and the costs and expenses, including attorneys' fees and
expenses, of enforcing the Shareholders' obligations hereunder) incurred by or
asserted against any of the Buyer Indemnified Parties in connection with or
arising from:
(i) any inaccuracy contained in, omission from or
breach of, a representation and warranty made by such Principal
Shareholder in this Agreement, determined without regard to any
materiality qualification contained in or otherwise applicable to such
representation or warranty; provided that the Buyer Indemnified Parties
shall not be entitled to indemnification pursuant to this clause by
reason of a breach of a representation arising from adverse development
of the Company's reserves for losses and loss adjustment expenses; and
(ii) the breach of any covenant or agreement of the
Company or such Principal Shareholder contained in this Agreement.
9.2 INDEMNIFICATION BY BUYER. Subject to the limitations contained in
this Article IX, Buyer will indemnify and hold harmless the Principal
Shareholders, each of their respective partners, directors, officers, employees
and agents, and each of the heirs, executors, successors and assigns of any of
the foregoing (collectively, the "Shareholder Indemnified Parties") from and
against, and pay or reimburse the Shareholder Indemnified Parties for, any and
all Covered Liabilities (and the costs and expenses, including attorneys' fees
and expenses, of enforcing the Buyer's obligations hereunder) incurred by or
asserted against any of the Shareholder Indemnified Parties in connection with
or arising from:
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(i) any inaccuracy contained in, omission from or
breach of, a representation and warranty made by Buyer in this
Agreement, determined without regard to any materiality qualification
contained in or otherwise applicable to such representation or
warranty; and
(ii) the breach of any covenant or agreement of Buyer
contained in this Agreement.
9.3 THIRD PARTY CLAIMS. The obligations and liabilities of a
party from which indemnification is sought (an "indemnifying party") to a party
seeking indemnification (an "indemnified party") under this Article IX with
respect to claims resulting from the assertion of liability by those not parties
to this Agreement (including governmental claims for penalties, fines and
assessments) shall be subject to the following conditions:
(i) The indemnified party shall give prompt written
notice to the indemnifying party of the nature of the assertion of
liability by a third party and the amount thereof to the extent known.
(ii) If any Action is brought by a third party
against an indemnified party, the Action shall be defended by the
indemnifying party and such defense shall include all appeals or
reviews which counsel for the indemnifying party shall deem
appropriate. Until the indemnifying party shall have assumed the
defense of any such Action, or if the indemnified party shall have
reasonably concluded that there are likely to be defenses available to
the indemnified party that are different from or in addition to those
available to the indemnifying party (in which case the indemnifying
party shall not be entitled to assume the defense of such Action and
the defense may
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be handled by the indemnified party), all legal or other expenses
reasonably incurred by the indemnified party shall be borne by the
indemnifying party.
(iii) In any Action initiated by a third party and
defended by the indemnifying party (w) the indemnified party shall have
the right to be represented by advisory counsel and accountants at its
own expense, (x) the indemnifying party shall keep the indemnified
party fully informed as to the status of such Action at all stages
thereof, whether or not the indemnified party is represented by its own
counsel, (y) the indemnifying party shall make available to the
indemnified party, and its attorneys, accountants and other
representatives, all books and records of the indemnifying party
relating to such Action and (z) the parties shall render to each other
such assistance as may be reasonably required in order to ensure the
proper and adequate defense of such Action.
(iv) In any Action initiated by a third party and
defended by the indemnifying party, the indemnifying party shall not
make any settlement of any claim without the written consent of the
indemnified party, which consent shall not be unreasonably withheld.
Without limiting the generality of the foregoing, it shall not be
deemed unreasonable to withhold consent to a settlement involving
injunctive or other equitable relief against the indemnified party or
its assets, employees or business.
9.4 DIRECT CLAIMS. An indemnified party shall notify the indemnifying
party in writing of any claim which the indemnified party has determined has
given rise to a right to indemnification under this Article IX. Such notice
shall be given within a reasonable (taking into account the nature of the claim)
period of time after the indemnified party has actual
56
<PAGE>
notice thereof. The indemnifying party shall satisfy its obligations under this
Article IX within thirty days after receipt of subsequent notice from the
indemnified party if an amount is specified therein, or promptly following
receipt of subsequent notice specifying the amount of such claim or additions
thereto. Failure to provide a notice of claim within the time period referred to
in this Section 9.4 shall not constitute a defense to a claim or release the
indemnifying party from any obligation hereunder to the extent that such failure
does not prejudice the position of the indemnifying party.
9.5 LIMITATIONS ON INDEMNIFICATION. Notwithstanding the foregoing
provisions of this Article IX, the Principal Shareholders shall not be liable
under Section 9.1(i), and Buyer shall not be liable under Section 9.2(i), unless
and until the aggregate amount of liability (after taking into account the
present value of any insurance proceeds actually received by the indemnified
party with respect thereto and appropriate adjustment to account for the
difference in time between the incurrence of loss, liability or expense and the
realization or receipt of such insurance proceeds or indemnity payment)
thereunder exceeds $250,000 (the "Deductible"), and thereafter the indemnified
party shall be entitled to indemnification thereunder only for the aggregate
amount of such liability in excess of $250,000 up to a total amount of the
Escrow Fund (the "Escrow Cap"); provided that with respect to the liability for
a breach by a Principal Shareholder of the representation and warranty in
Section 4.5, neither the Deductible nor the Escrow Cap shall apply and instead
such liability shall be limited to the Merger Consideration multiplied by a
fraction, the numerator of which is the aggregate number of Shares held by such
Principal Shareholder and the denominator of which is the total number of Shares
issued and outstanding, in each case as of the date of this Agreement;
57
<PAGE>
and provided further that with respect to the liability for a breach by a
Principal Shareholder of the representation and warranty in Section 4.6 as it
relates to the Company's representation and warranty in Section 3.30, the
Deductible shall not apply.
9.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the parties contained in this Agreement shall survive any
investigation by any party and shall not terminate until the 24-month
anniversary of the Closing; provided that (i) the representations and warranties
set forth in Sections 3.2, 3.3, 3.4, 3.27, 3.29, 3.30, 4.1 through 4.5 and 4.6
(in so far as such representation relates to Sections 3.2, 3.3, 3.4, 3.27, 3.29
and 3.30) of this Agreement shall survive until the expiration of the applicable
statute of limitations period and (ii) the representations and warranties in
Section 3.28 and 4.6 (in so far as such representation relates to Section 3.28)
of this Agreement shall survive until the expiration of the last of the
limitation periods contained in the Internal Revenue Code or applicable Tax law
during which an assessment or reassessment can be made (the respective dates
after which the representations and warranties hereunder cease to survive are
hereinafter referred to as the "Survival Date"). Notwithstanding the provisions
of the preceding sentence, any representation or warranty in respect of which
indemnification may be sought under Section 9.1 or 9.2 shall survive the
Survival Date if written notice, given in good faith, of the specific breach
thereof is given to the indemnifying party on or prior to the Survival Date,
whether or not liability has actually been incurred.
9.7 EXCLUSIVE REMEDY. Except as provided in Section 10.2, the
indemnification provided in this Article IX shall constitute the exclusive
remedy following the Effective Time for breach of this Agreement.
58
<PAGE>
ARTICLE X
TERMINATION
10.1 TERMINATION. This Agreement may be terminated at any time prior
to the Closing:
(i) by mutual consent of Buyer and the Company; or
(ii) by either Buyer or the Company if there has been
a material breach by the other of a representation, warranty or
agreement contained herein or if any condition to Closing which must be
met by the other becomes impossible to fulfill.
(iii) by Buyer if any change has occurred since
December 31, 1995, which has or can reasonably be expected to have a
material adverse effect on the Business Condition of the Business; or
(iv) by either Buyer or the Company if the Closing
has not occurred by 11:59 p.m. Richmond, Virginia time on September 30,
1996; provided that the failure to consummate the transactions
contemplated hereby on or before such date did not result from the
failure by the party seeking termination of this Agreement to fulfill
any undertaking or commitment provided for herein that is required to
be fulfilled before Closing.
10.2 PROCEDURE; EFFECT OF TERMINATION. If this Agreement is terminated
as provided in Section 10.1 written notice thereof shall forthwith be given by
the terminating party to the other party, and this Agreement shall thereupon
terminate and become void and of no further force and effect and there shall be
no further liability or obligation on the part of either party hereto except to
pay such expenses as are required of it and to comply with the
59
<PAGE>
confidentiality provisions of Section 5.5; provided that such termination shall
not relieve any party of any liability for breach of this Agreement; provided,
further that in the event the Company enters into a definitive agreement
concerning a Control Transfer within 120 days after the date of termination of
this Agreement with any Person other than Buyer, the Company shall pay to Buyer
a fee in the amount of $1 million on the date of execution of such agreement,
and to pay to Buyer on the date of closing of such Control Transfer an amount
equal to the out of pocket expenses incurred by Buyer in connection with the
transactions contemplated by this Agreement, including the fees and expenses of
its counsel, accountants and investment advisers; provided further that in the
event Buyer terminates this Agreement pursuant to Section 10.1(ii) by reason of
a material breach by the Company or a Principal Shareholder of a representation,
warranty or agreement contained herein the Company shall pay to Buyer an amount
equal to the out of pocket expenses incurred by Buyer in connection with the
transactions contemplated by this Agreement, including the fees and expenses of
its counsel, accountants and investment advisers. For purposes of this Section
10.2, "Control Transfer" means any sale of the stock or assets or merger of the
Company or its Subsidiaries.
ARTICLE XI
GENERAL PROVISIONS
11.1 NOTICES. All notices required to be given hereunder shall be in
writing and shall be deemed to have been given if (i) delivered personally or by
documented courier or delivery service, (ii) transmitted by facsimile during
normal business hours or (iii) mailed by registered or certified mail (return
receipt requested and postage prepaid) to the following listed persons at the
addresses and facsimile numbers specified below, or to such other
60
<PAGE>
persons, addresses or facsimile numbers as a party entitled to notice shall
give, in the manner hereinabove described, to the others entitled to notice:
(a) If to the Company, to:
Investors Insurance Group
200 Schulz Drive
Red Bank, New Jersey 07701
Attention: Jeremy D. Cooke
Facsimile No.: (908) 741-9562
with a copy to:
Cole, Schotz, Meisel, Forman & Leonard
Court Plaza North
25 Main Street
Hackensack, New Jersey 07602-0800
Attention: Michael H. Forman
Facsimile No.: (201) 489-1536
(b) If to a Principal Shareholder, to the address of such
Principal Shareholder set forth in Schedule 11.1.
(c) If to Buyer or Sub, to:
Markel Corporation
4551 Cox Road
Glen Allen, Virginia 23060
Attention: Steven A. Markel
Facsimile No.: (804) 527-3810
with a copy to:
Gregory B. Nevers, Esquire
Markel Corporation
4551 Cox Road
Glen Allen, Virginia 23060
Facsimile No.: (804) 965-1600
and to:
61
<PAGE>
McGuire, Woods, Battle & Boothe, L.L.P.
One James Center
901 E. Cary Street
Richmond, Virginia 23219
Attention: Leslie A. Grandis
Facsimile No.: 804-775-1061
If given personally or by documented courier or delivery service or transmitted
by facsimile, a notice shall be deemed to have been given when it is received.
If given by mail, it shall be deemed to have been given on the third business
day following the day on which it was posted.
11.2 INTERPRETATION. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement. For purposes of this Agreement, the words
"includes" and "including" shall mean "including without limitation." When any
representation or warranty in Article III or IV is made to the knowledge of the
Company or a Principal Shareholder, such term shall mean the actual knowledge of
the Company's executive officers or the Principal Shareholder's executive
officers, as the case may be, after due inquiry in good faith of the executive
officers of the Company and its Subsidiaries. All accounting terms not defined
in this Agreement shall have the meaning determined by generally accepted
accounting principles. All capitalized terms defined herein are equally
applicable to both the singular and plural forms.
11.3 ENTIRE AGREEMENT. This Agreement (including the other agreements
referred to herein) and the Schedules and Exhibits hereto contain the entire
agreement between the parties with respect to the subject matter hereof and
there are no agreements, understandings, representations or warranties between
the parties other than those set forth or referred to herein. Except for
Sections 9.1, 9.2 and 9.3, which are intended to benefit, and to be
62
<PAGE>
enforceable by, any of the Buyer Indemnified Parties or the Shareholder
Indemnified Parties, as the case may be, this Agreement is not intended to
confer and shall not confer upon any person not a party hereof (and their
successors and assigns permitted by Section 11.4) any rights or remedies
hereunder.
11.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided that no party hereto will assign its rights or delete its
obligations under this Agreement without the express prior written consent of
each other party hereto, except that buyer may assign any or all of its right,
title and interest under this Agreement to any one or more Affiliates, provided,
that in the event of such assignment, Buyer shall not be released from any
obligations under this Agreement.
11.5 SEVERABILITY. In the event that this Agreement, or any of its
provisions, or the performance of any provision, is found to be illegal or
unenforceable under applicable law now or hereafter in effect, the parties shall
be excused from performance of such portions of this Agreement as shall be found
to be illegal or unenforceable under the applicable laws or regulations without
affecting the validity of he remaining provisions of the Agreement; provided
that (i) the remaining provisions of the Agreement shall in their totality
constitute a commercially reasonable agreement, and (ii) should any method
termination of this Agreement or a portion thereof be found to be illegal or
unenforceable, such method shall be reformed to comply with the requirements of
applicable law so as, to the greatest extent possible, to allow termination by
that method. Nothing herein shall be construed as a waiver of any party's right
to challenge the validity of such law.
63
<PAGE>
11.6 AMENDMENT. This Agreement and the Exhibits and Schedules hereto
may be amended at any time prior to the fifth business day before the Closing;
provided that any such amendment is approved in writing by each of the parties
hereto. All representations and warranties of the Company and Buyer which are
true and correct as modified and approved shall be deemed true and correct for
the purposes of Sections 7.1 and 8.1.
11.7 EXTENSION; WAIVER. At any time prior to the Closing either party
to this Agreement may (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive a breach of a representation
or warranty of the other party hereto, or (iii) waive compliance by the other
party hereto with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid if set forth in a written instrument signed
by the party giving the extension or waiver.
11.8 SPECIFIC PERFORMANCE. The parties agree that irreparable damage
would occur in the event any party breaches it covenants and agreements
contained in this Agreement or fails to consummate the transactions contemplated
hereby, and that the parties shall be entitled to specific performance in such
event, in addition to any other remedy at law or in equity.
11.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.10 GOVERNING LAW. This Agreement shall be governed in all respects
by the laws of the Commonwealth of Virginia without regard to its laws or
regulations relating to choice of laws.
64
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed and their corporate seals to be hereto affixed and attested by their
duly authorized officers.
MARKEL CORPORATION
By_________________________________
Title______________________________
IIG ACQUISITION CORP.
By_________________________________
Title______________________________
INVESTORS INSURANCE HOLDING CORP.
By_________________________________
Title______________________________
PRINCIPAL SHAREHOLDERS:
TBK PARTNERS, L.P.
By_________________________________
Title______________________________
65
<PAGE>
VANDERBILT PARTNERS, L.P.
By_________________________________
Title______________________________
TWEEDY BROWNE COMPANY
LP PROFIT SHARING PLAN
By_________________________________
Title________________________________
CONNING INSURANCE CAPITAL
LIMITED PARTNERSHIP
By_________________________________
Title______________________________
CONNING INSURANCE CAPITAL
LIMITED PARTNERSHIP II
By_________________________________
Title______________________________
CONNING INSURANCE CAPITAL
INTERNATIONAL PARTNERS
By_________________________________
Title______________________________
66
<PAGE>
CONNING INSURANCE CAPITAL
INTERNATIONAL PARTNERS II
By_________________________________
Title______________________________
TRENWICK AMERICA CORPORATION
By_________________________________
Title______________________________
THE BOARD OF REGENTS OF
THE UNIVERSITY OF TEXAS SYSTEM
By_________________________________
Title______________________________
THE PERMANENT UNIVERSITY FUND
OF THE STATE OF TEXAS
By___________________________________
Title__________________________________
67
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND> This schedule contains summary financial information extracted from the
financial statements contained in the Form 10-Q for the quarterly period ended
June 30, 1996 for Markel Corporation and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 692,417
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 164,713
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 908,912
<CASH> 20,377
<RECOVER-REINSURE> 16,900
<DEFERRED-ACQUISITION> 33,403
<TOTAL-ASSETS> 1,354,593
<POLICY-LOSSES> 751,266
<UNEARNED-PREMIUMS> 178,821
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 99,665
0
0
<COMMON> 23,199
<OTHER-SE> 209,131
<TOTAL-LIABILITY-AND-EQUITY> 1,354,593
148,190
<INVESTMENT-INCOME> 24,139
<INVESTMENT-GAINS> 2,507
<OTHER-INCOME> 1,828
<BENEFITS> 100,879
<UNDERWRITING-AMORTIZATION> 36,204
<UNDERWRITING-OTHER> 12,615
<INCOME-PRETAX> 20,671
<INCOME-TAX> (13,229)
<INCOME-CONTINUING> 33,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,900
<EPS-PRIMARY> 5.99
<EPS-DILUTED> 5.98
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
