SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 1, 1996
NATIONAL RE CORPORATION
(Exact name of registrant as specified in charter)
State of Delaware 1-10961 75-2300920
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
777 Long Ridge Road, Stamford, CT 06904-2167
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 329-7700
Not Applicable
(Former name or former address, if changed since last report)
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Item 5. Other Events.
On July 1, 1996, National Re Corporation, a Delaware corporation (the
"Company"), entered into an Agreement and Plan of Merger (the "Merger
Agreement") with General Re Corporation, a Delaware corporation ("Gen Re"),
and N Acquisition Corporation, a Delaware corporation ("Sub"), pursuant to
which the Company will merge with and into Sub (the "Merger"). As a result of
the Merger, the outstanding shares of the Company's common stock, no par value
("Company Common Stock"), will be converted into the right to receive, at each
stockholder's election, (a) $53 per share in Gen Re common stock; provided
that Gen Re shall not issue more than 0.39259 nor less than 0.32121 shares of
Gen Re common stock per share of Company Common Stock or (b) $53 per share in
cash. The Merger is conditioned upon, among other things, approval by holders
of a majority of the Company Common Stock and upon receipt of certain
regulatory and governmental approvals. The Merger Agreement is attached as
Exhibit 2 hereto and is incorporated herein by reference.
In addition, pursuant to certain stockholders agreements dated as of
July 1, 1996 between certain stockholders of the Company, who
collectively own 22% of the outstanding Company Common Stock (the
"Major Stockholders"), and Gen Re, the Major Stockholders have
agreed to vote their shares of Company Common Stock in favor of the
Merger.
A copy of the Press Release issued by the Company relating to the
Merger Agreement is attached as Exhibit 99 and is incorporated herein
by reference.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(c) Exhibits:
Exhibit Number
(Referenced to Item 601
of Regulation S-K) Description of Exhibit
2 Agreement and Plan of Merger dated as of July 1, 1996
between National Re Corporation and General Re Corporation.
99 Press Release dated July 1, 1996
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Date: July 8, 1996
NATIONAL RE CORPORATION
By:/s/ Mary Ellen Burns
-------------------------
Name: Mary Ellen Burns
Title: Senior Vice President
and General Counsel
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EXHIBIT INDEX
Exhibit number
(Referenced to Page Number in Rule 0-3(b)
Item 601 of sequential numbering system
Regulation S-K) where Exhibit can be found
Description of Exhibit
2 Agreement and Plan of Merger dated as of July 1, 1996 between
National Re Corporation and General Re Corporation.
99 Press Release dated July 1, 1996
Exhibit 2
AGREEMENT AND PLAN OF MERGER
by and among
GENERAL RE CORPORATION,
N ACQUISITION CORPORATION
and
NATIONAL RE CORPORATION
dated as of
July 1, 1996
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TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER........................ 2
Section 1.1 The Merger.................................... 2
Section 1.2 Effective Time................................ 2
Section 1.3 Closing....................................... 3
Section 1.4 Directors and Officers of the Surviving
Corporation................................... 3
Section 1.5 Stockholders' Meeting......................... 3
ARTICLE II
CONVERSION OF SHARES; ELECTION PROCEDURES........ 4
Section 2.1 Conversion of Shares.......................... 4
Section 2.2 Election Procedure............................ 5
Section 2.3 Issuance of Parent Common Stock and Payment
of Cash Consideration; Proration.............. 7
Section 2.4 Issuance of Parent Common Stock............... 10
Section 2.5 Payment of Cash Consideration................. 10
Section 2.6 Treatment of Company Stock Options............ 11
Section 2.7 Stock Transfer Books.......................... 12
Section 2.8 Shares of Dissenting Stockholders............. 12
Section 2.9 Tax Opinion Adjustment........................ 13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY...... 14
Section 3.1 Organization.................................. 14
Section 3.2 Capitalization................................ 15
Section 3.3 Corporate Authorization; Validity of Agreement;
Company Action................................ 16
Section 3.4 Consents and Approvals; No Violations......... 17
Section 3.5 SEC Reports and Financial Statements.......... 18
Section 3.6 Absence of Certain Changes.................... 20
Section 3.7 No Undisclosed Liabilities.................... 20
Section 3.8 Information in Proxy Statement/Prospectus..... 21
Section 3.9 Employee Benefit Plans; ERISA................. 21
Section 3.10 Litigation; Compliance with Law............... 24
Section 3.11 No Default.................................... 24
Section 3.12 Taxes......................................... 24
Section 3.13 Contracts..................................... 26
Section 3.14 Transactions with Affiliates. ................ 26
Section 3.15 Opinion of Financial Advisor.................. 26
Section 3.16 Lincoln National Contract..................... 26
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB..... 27
Section 4.1 Organization.................................. 27
Section 4.2 Capitalization................................ 27
Section 4.3 Corporate Authorization; Validity of Agreement;
Necessary Action.............................. 28
Section 4.4 Consents and Approvals; No Violations......... 28
Section 4.5 SEC Reports and Financial Statements.......... 29
Section 4.6 Absence of Certain Changes.................... 30
Section 4.7 No Undisclosed Liabilities.................... 30
Section 4.8 Information in Proxy Statement/Prospectus..... 31
Section 4.9 Litigation; Compliance with Law............... 31
Section 4.10 Taxes......................................... 32
Section 4.11 Financing..................................... 32
Section 4.12 Opinion of Financial Advisor.................. 32
ARTICLE V
COVENANTS........................ 33
Section 5.1 Interim Operations of the Company............. 33
Section 5.2 Interim Operations of Parent.................. 36
Section 5.3 Access to Information......................... 37
Section 5.4 Consents and Approvals........................ 37
Section 5.5 Employee Matters.............................. 38
Section 5.6 No Solicitation............................... 39
Section 5.7 Additional Agreements......................... 41
Section 5.8 Publicity..................................... 41
Section 5.9 Notification of Certain Matters............... 41
Section 5.10 Directors' and Officers' Insurance and
Indemnification............................... 42
Section 5.11 Rule 145 Affiliates........................... 43
Section 5.12 Proxy Statement/Prospectus.................... 43
Section 5.13 Tax-Free Reorganization....................... 44
Section 5.14 Existing Stockholder Agreements and
Registration Rights Agreement................. 44
ARTICLE VI
CONDITIONS........................ 45
Section 6.1 Conditions to the Obligations of Each Party... 45
Section 6.2 Conditions to the Obligations of Parent and Sub 46
Section 6.3 Conditions to the Obligations of the Company.. 46
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ARTICLE VII
TERMINATION....................... 48
Section 7.1 Termination................................... 48
Section 7.2 Effect of Termination......................... 50
ARTICLE VIII
MISCELLANEOUS...................... 51
Section 8.1 Fees and Expenses............................. 51
Section 8.2 Finders' Fees................................. 51
Section 8.3 Amendment and Modification.................... 52
Section 8.4 Nonsurvival of Representations and Warranties. 52
Section 8.5 Notices....................................... 52
Section 8.6 Interpretation................................ 53
Section 8.7 Counterparts.................................. 54
Section 8.8 Entire Agreement; No Third Party Beneficiaries;
Rights of Ownership........................... 54
Section 8.9 Severability.................................. 54
Section 8.10 Specific Performance.......................... 54
Section 8.11 Governing Law................................. 54
Section 8.12 Assignment.................................... 54
Exhibit A Form of Tax Representation Letter of Company
Exhibit B Form of Tax Representation Letter of Parent
Exhibit C Form of Affiliate Agreement
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 1, 1996, by
and among General Re Corporation, a Delaware corporation ("Parent"), N
Acquisition Corporation, a Delaware corporation and wholly-owned
subsidiary of Parent ("Sub"), and National Re Corporation, a Delaware
corporation (the "Company").
WHEREAS, the Boards of Directors of Parent, Sub and the
Company have approved, and deem it advisable and in the best interests
of their respective stockholders to consummate, the acquisition of the
Company by Parent upon the terms and subject to the conditions set forth
herein;
WHEREAS, as a condition and inducement to Parent's and Sub's
entering into this Agreement and incurring the obligations set forth
herein, concurrently with the execution and delivery of this Agreement,
Parent and Sub are entering into Stockholder Agreements (collectively,
the "Stockholder Agreements") with Keystone Inc., Acadia Partners, L.P.,
William D. Warren, Peter A. Cheney, Robert W. Eager, Jr., and Timothy T.
McCaffrey (collectively, the "Stockholders"), pursuant to which, among
other things, such stockholders have agreed to vote the shares of common
stock, with no par value, of the Company (the "Company Common Stock" or
"Shares") then owned by such stockholders in favor of the Merger (as
herein defined) provided for herein;
WHEREAS, the Board of Directors of the Company has approved
the transactions contemplated by this Agreement and the Stockholder
Agreements in accordance with the provisions of Section 203 of the
Delaware General Corporation Law (the "DGCL") and has resolved to
recommend the approval of the Merger by the holders of shares of Company
Common Stock; and
WHEREAS, for United States federal income tax purposes, it is
intended that the Merger provided for herein shall qualify as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code");
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NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set
forth herein and in the Stockholder Agreements, the parties hereto agree
as follows:
ARTICLE 1
THE MERGER
Section 1.1 THE MERGER. (a) Subject to the terms and
conditions of this Agreement and in accordance with the DGCL, at the
Effective Time (as herein defined), the Company and Sub shall consummate
a merger (the "Merger") pursuant to which (i) the Company shall be
merged with and into Sub and the separate corporate existence of the
Company shall thereupon cease, and (ii) Sub shall be the surviving
corporation (the "Surviving Corporation") in the Merger and shall
continue to be governed by the laws of the State of Delaware. Pursuant
to the Merger, (x) the Certificate of Incorporation of Sub, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as
provided by law and such Certificate of Incorporation, and (y) the By-
laws of Sub, as in effect immediately prior to the Effective Time, shall
be the By-laws of the Surviving Corporation until thereafter amended as
provided by law, the Certificate of Incorporation of the Surviving
Corporation and such By-laws. The Merger shall have the effects set
forth in the DGCL.
Section 1.2 EFFECTIVE TIME. Parent, Sub and the Company will
cause a Certificate of Merger (the "Certificate of Merger") with respect
to the Merger to be executed and filed on the date of the Closing (as
defined in Section 1.3) (or on such other date as Parent and the Company
may agree) with the Secretary of State of the State of Delaware as
provided in the DGCL. The Merger shall become effective on the date on
which the Certificate of Merger has been duly filed with the Secretary
of State of the State of Delaware or such time as is agreed upon by the
parties and specified in the Certificate of Merger, and such time is
hereinafter referred to as the "Effective Time".
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Section 1.3 CLOSING. The closing of the Merger (the
"Closing") will take place at 10:00 a.m., New York City time, on a date
to be specified by the parties, which shall be no later than two New
York Stock Exchange ("NYSE") trading days after satisfaction or waiver
of all of the conditions set forth in Article VI hereof (the "Closing
Date"), at the offices of Skadden, Arps, Slate, Meagher & Flom, 919
Third Avenue, New York, New York, unless another time, date or place is
agreed to in writing by the parties hereto.
Section 1.4 DIRECTORS AND OFFICERS OF THE SURVIVING
CORPORATION. The directors and officers of Sub at the Effective Time
shall, from and after the Effective Time, be the initial directors and
officers, respectively, of the Surviving Corporation until their
successors shall have been duly elected or appointed or qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and By-laws.
Section 1.5 STOCKHOLDERS' MEETING. In order to consummate
the Merger, the Company, acting through its Board of Directors, shall,
in accordance with applicable law duly call, give notice of, convene and
hold a special meeting of its stockholders (the "Company Special
Meeting"), as soon as practicable after the Registration Statement on
Form S-4 (together with all amendments, schedules, and exhibits thereto)
to be filed by Parent in connection with the registration of the shares
of common stock, $.50 par value, of Parent ("Parent Common Stock") and
the associated Preferred Stock Purchase Rights of Parent (the "Parent
Rights") to be issued by Parent in the Merger (the "Registration
Statement") is declared effective, for the purpose of considering and
taking action upon this Agreement. (Unless the context otherwise
requires, all references in this Agreement to Parent Common Stock shall
include the corresponding Parent Rights.) The Company shall include in
the joint proxy statement/prospectus forming a part of the Registration
Statement (the "Proxy Statement/Prospectus") the recommendation of the
Board of Directors of the Company that stockholders of the Company vote
in favor of the approval of the Merger and the adoption of this
Agreement; PROVIDED that the Company may withdraw, modify or change such
recommendation only to the extent that the Board of Directors of the
Company determines, after having re-
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ceived the advice of outside legal
counsel to the Company and the advice of the Company's financial
advisor, that the failure to withdraw, modify or change such
recommendation is reasonably likely to result in a breach of the Board
of Directors' fiduciary duties under applicable law.
ARTICLE 2
CONVERSION OF SHARES; ELECTION PROCEDURES
Section 2.1 CONVERSION OF SHARES. (a) Each share of Company
Common Stock issued and outstanding immediately prior to the Effective
Time (other than Shares to be cancelled pursuant to Section 2.1(c)
hereof and Dissenting Shares (as herein defined)) shall, at the
Effective Time, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into the right to receive, at
the election of the holder as provided in and subject to the limitations
set forth in this Article II, either (A) a fraction (the "Conversion
Fraction") of a validly issued, fully paid and nonassessable share of
Parent Common Stock, determined by dividing $53 by the average (without
rounding) of the closing prices per share of Parent Common Stock on the
NYSE as reported on the NYSE Composite Tape for the ten (10) consecutive
NYSE trading days ending on the second NYSE trading day immediately
preceding the Closing Date (the "Average Parent Share Price") and
rounding the result to the nearest one one-hundred thousandth of a
share; PROVIDED, that Parent shall issue not more than .39259 nor less
than .32121 shares of Parent Common Stock per Share (the "Stock
Consideration") or (B) $53 in cash, without any interest thereon (the
"Cash Consideration").
(b) Each share of Common Stock, par value $.01 per
share, of Sub issued and outstanding immediately prior to the Effective
Time shall, at the Effective Time, by virtue of the Merger and without
any action on the part of Parent, be converted into one fully paid and
nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation.
(c) All shares of Company Common Stock that are owned by
the Company as treasury stock and any shares of Company Common Stock
owned by Parent, Sub or
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any other direct or indirect wholly owned
Subsidiary (as defined in Section 3.1 hereof) of Parent shall, at the
Effective Time, be cancelled and retired and shall cease to exist and no
Parent Common Stock or cash consideration shall be delivered in exchange
therefor.
(d) On and after the Effective Time, holders of
certificates which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates") shall cease to have any rights
as stockholders of the Company, except the right to receive the
consideration set forth in this Article II (the "Merger Consideration")
for each Share held by them.
Section 2.2 ELECTION PROCEDURE. Each holder of Shares (other
than holders of Shares to be cancelled as set forth in Section 2.1(c)
and Dissenting Shares) shall have the right, subject to the limitations
set forth in this Article II, to submit a request specifying the number
of Shares that such holder desires to have converted into the Stock
Consideration in the Merger and the number of Shares that such holder
desires to have converted into the Cash Consideration in the Merger in
accordance with the following procedures:
(a) Each holder of Shares may specify in a request made
in accordance with the provisions of this Section 2.2 (herein called an
"Election") (i) the number of Shares owned by such holder that such
holder desires to have converted into the right to receive the Stock
Consideration in the Merger (a "Stock Election") and (ii) the number of
Shares owned by such holder that such holder desires to have converted
into the right to receive the Cash Consideration in the Merger (a "Cash
Election").
(b) Parent shall prepare a form reasonably acceptable to
the Company (the "Form of Election") which shall be mailed to the
Company's stockholders entitled to vote at the Company Special Meeting
so as to permit the Company's stockholders to exercise their right to
make an Election prior to the Election Deadline (as defined in Section
2.2(d)).
(c) Parent shall use all reasonable efforts to make the
Form of Election initially available to all stockholders of the Company
at least twenty busi-
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ness days prior to the Election Deadline and shall
use all reasonable efforts to make available on a prompt basis a Form of
Election to any stockholder of the Company who requests such Form
following the initial mailing of the Forms of Election and prior to the
Election Deadline.
(d) Any Election shall have been made properly only if
the person authorized to receive Elections and to act as exchange agent
under this Agreement, which person shall be designated by Parent and
shall be reasonably satisfactory to the Company (the "Exchange Agent"),
shall have received, by 5:00 p.m. local time in the city in which the
principal office of such Exchange Agent is located, on the date of the
Election Deadline, a Form of Election properly completed and signed and
accompanied by certificates for the Shares to which such Form of
Election relates (or by an appropriate guarantee of delivery of such
certificates, as set forth in such Form of Election, from a member of
any registered national securities exchange or of the National
Association of Securities Dealers, Inc. or a commercial bank or trust
company in the United States provided such certificates are in fact
delivered to the Exchange Agent by the time required in such guarantee
of delivery). Failure to deliver Shares covered by such a guarantee of
delivery within the time set forth on such guarantee shall be deemed to
invalidate any otherwise properly made Election. As used herein,
"Election Deadline" means the date mutually agreed to by Parent and
Company, in a news release delivered to the Dow Jones News Service, as
the last day on which Forms of Election will be accepted; PROVIDED, that
such date shall be a business day no earlier than twenty business days
prior to the Effective Time and no later than the date on which the
Effective Time occurs and shall be at least ten business days following
the date of such news release and, unless the Company and Parent
otherwise agree, shall not precede the date of the Company Special
Meeting; PROVIDED, FURTHER, that Parent shall have the right to set a
later date of, or to extend, the Election Deadline so long as such later
date is no later than the date on which the Effective Time occurs.
(e) Any Company stockholder may at any time prior to the
Election Deadline change his or her Election by written notice received
by the Exchange Agent
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prior to the Election Deadline accompanied by a
properly completed and signed, revised Form of Election.
(f) Any Company stockholder may, at any time prior to
the Election Deadline, revoke his or her Election by written notice
received by the Exchange Agent prior to the Election Deadline or by
withdrawal prior to the Election Deadline of his or her certificates for
Shares, or of the guarantee of delivery of such certificates, previously
deposited with the Exchange Agent. All Elections shall be revoked
automatically if the Exchange Agent is notified in writing by Parent or
the Company that this Agreement has been terminated. Any Company
stockholder who shall have deposited certificates for Shares with the
Exchange Agent shall have the right to withdraw such certificates by
written notice received by the Exchange Agent and thereby revoke his
Election as of the Election Deadline if the Merger shall not have been
consummated prior thereto.
(g) Parent shall have the right to make rules, not
inconsistent with the terms of this Agreement, governing the validity of
the Forms of Election, the manner and extent to which Elections are to
be taken into account in making the determinations prescribed by Section
2.3, the issuance and delivery of certificates for Parent Common Stock
into which Shares are converted in the Merger and the payment of cash
for Shares converted into the right to receive the Cash Consideration in
the Merger.
Section 2.3 ISSUANCE OF PARENT COMMON STOCK AND PAYMENT OF
CASH CONSIDERATION; PRORATION. The manner in which each Share (other
than Shares to be cancelled as set forth in Section 2.1(c) and
Dissenting Shares) shall be converted into the right to receive either
the Stock Consideration or the Cash Consideration on the Effective Date
shall be as set forth in this Section 2.3. All references to
"outstanding" Shares in this Section 2.3 shall mean (i) all Shares
outstanding immediately prior to the Effective Time minus (ii) Shares
owned by Parent or by any direct or indirect wholly-owned subsidiary of
Parent.
(a) In the event that, between the date of this
Agreement and the Effective Time, the issued and outstanding shares of
Parent Common Stock shall have been
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affected or changed into a different
number of shares or a different class of shares as a result of a stock
split, reverse stock split, stock dividend, spin-off, extraordinary
dividend, recapitalization, reclassification or other similar
transaction with a record date within such period, the Conversion
Fraction shall be appropriately adjusted.
(b) As is more fully set forth below, the Total Cash
Consideration in the Merger pursuant to this Agreement shall not be more
than 50% of the value of all outstanding Shares. "Total Cash
Consideration" shall mean the sum of (1) the fair market value of Shares
to be converted into the right to receive the Cash Consideration, (2)
cash paid in lieu of fractional Shares, and (3) cash paid for Dissenting
Shares. For these purposes, cash paid for Dissenting Shares shall be
computed as if holders of Dissenting Shares had made the Cash Election.
(c) Each Share for which a Stock Election has been
received and each Share as to which an Election is not in effect at the
Election Deadline (a "Non-Electing Share") shall be converted into the
right to receive the Stock Consideration in the Merger.
(d) If the Total Cash Consideration is 50% or less of
the value of the outstanding Shares, each Share covered by a Cash
Election shall be converted in the Merger into the right to receive the
Cash Consideration.
(e) If the Total Cash Consideration is more than 50% of
the value of the outstanding Shares, the Shares for which Cash Elections
have been received shall be converted into the right to receive the Cash
Consideration and the Stock Consideration in the following manner:
(1) The Exchange Agent will distribute with respect
to Shares as to which a Cash Election has been made
the Cash Consideration with respect to a fraction of
such Shares, the numerator of which fraction shall
be 50% of the value (based on the closing price of
the Shares on the last full trading day prior to the
Effective Time) of the outstanding Shares and the
denominator of which shall be the sum of (A) the
value (based on the closing price of the Shares on
the last full trading day prior to the Effec-
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tive Time) of the aggregate number of Shares covered by
Cash Elections, (B) cash to be paid in lieu of
fractional Shares and (C) cash to be paid for
Dissenting Shares (computed as if holders of
Dissenting Shares had made the Cash Election) and
(2) Shares covered by a Cash Election and not fully
converted into the right to receive the Cash
Consideration as set forth in clause (1) above shall
be converted in the Merger into the right to receive
the Stock Consideration.
(f) If Parent and the Company shall determine that any
Election is not properly made with respect to any Shares, such Election
shall be deemed to be not in effect, and the Shares covered by such
Election shall, for purposes hereof, be deemed to be Non-Electing
Shares.
(g) No certificates or scrip representing fractional
shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution with respect to
shares shall be payable on or with respect to any fractional share and
such fractional share interests shall not entitle the owner thereof to
vote or to any other rights of a stockholder of Parent. In lieu of any
such fractional share of Parent Common Stock, Parent shall pay to each
former stockholder of the Company who otherwise would be entitled to
receive a fractional share of Parent Common Stock an amount in cash
determined by multiplying (i) the Average Parent Share Price but not
more than $165.00 nor less than $135.00 by (ii) the fractional interest
in a share of Parent Common Stock to which such holder would otherwise
be entitled.
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Section 2.4 ISSUANCE OF PARENT COMMON STOCK. Immediately
following the Effective Time, Parent shall deliver, in trust, to the
Exchange Agent, for the benefit of the holders of Shares, certificates
representing an aggregate number of shares of Parent Common Stock as
nearly as practicable equal to the product of the Conversion Fraction
and the number of Shares to be converted into Parent Common Stock as
determined in Section 2.3. As soon as practicable after the Effective
Time, each holder of Shares converted into Parent Common Stock in the
Merger, upon surrender to the Exchange Agent (to the extent not
previously surrendered with a Form of Election) of one or more
certificates for such Shares for cancellation, shall be entitled to
receive certificates representing the number of shares of Parent Common
Stock into which such Shares shall have been converted in the Merger.
No dividends or distributions that have been declared will be paid to
persons entitled to receive certificates for shares of Parent Common
Stock until such persons surrender their certificates for Shares, at
which time all such dividends shall be paid. In no event shall the
persons entitled to receive such dividends be entitled to receive
interest on such dividends. If any certificate for such Parent Common
Stock is to be issued in a name other than that in which the certificate
for Shares surrendered in exchange therefor is registered, it shall be a
condition of such exchange that the person requesting such exchange
shall pay to the Exchange Agent any transfer or other Taxes (as herein
defined) required by reason of issuance of certificates for such Parent
Common Stock in a name other than the registered holder of the
certificate surrendered, or shall establish to the reasonable
satisfaction of the Exchange Agent that such Tax has been paid or is not
applicable. Notwithstanding the foregoing, neither the Exchange Agent
nor any party hereto shall be liable to a holder of Shares for any
Parent Common Stock or dividends thereon delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
Section 2.5 PAYMENT OF CASH CONSIDERATION. At the Closing,
Parent shall deposit in trust with the Exchange Agent, for the benefit
of the holders of Shares, an amount in cash equal to the Cash
Consideration multiplied by the number of Shares to be converted into
the right to receive the Cash Consideration as determined in Section
2.3. As soon as practicable after the Effective
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Time, the Exchange
Agent shall distribute to holders of Shares converted into the right to
receive the Cash Consideration, upon surrender to the Exchange Agent (to
the extent not previously surrendered with a Form of Election) of one or
more certificates for such Shares for cancellation, a bank check for an
amount equal to the Cash Consideration times the number of Shares so
converted. In no event shall the holder of any such surrendered
certificates be entitled to receive interest on any of the Cash
Consideration to be received in the Merger. If such check is to be
issued in the name of a person other than the person in whose name the
certificates for the Shares surrendered for exchange therefor are
registered, it shall be a condition of the exchange that the person
requesting such exchange shall pay to the Exchange Agent any transfer or
other Taxes required by reason of issuance of such check to a person
other than the registered holder of the certificates surrendered, or
shall establish to the reasonable satisfaction of the Exchange Agent
that such Tax has been paid or is not applicable. Notwithstanding the
foregoing, neither the Exchange Agent nor any party hereto shall be
liable to a holder of Shares for any amount paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
Section 2.6 TREATMENT OF COMPANY STOCK OPTIONS. (a) Each
option granted to a Company employee to acquire shares of Company Common
Stock ("Company Stock Option") that is outstanding on the Effective
Time, whether or not then vested or exercisable, shall, effective as of
the Effective Time, become and represent an option for the number of
shares of Parent Common Stock (a "Substitute Option"), rounded up to the
nearest whole share, determined by multiplying (i) the number of shares
of Company Common Stock subject to such Company Stock Option immediately
prior to the Effective Time by (ii) the Conversion Fraction at an
exercise price per share of Parent Common Stock (decreased to the
nearest whole cent) equal to the exercise price per share of such
Company Stock Option divided by the Conversion Fraction; PROVIDED,
HOWEVER, that in the case of any Company Stock Option to which Section
421 of the Code applies by reason of its qualification as an incentive
stock option under Section 422 of the Code, the conversion formula shall
be adjusted if necessary to comply with Section 424(a) of the Code.
After the Effective Time, except as provided above in
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this Section 2.6,
each Substitute Option shall be exercisable upon the same terms and
conditions as were applicable to the related Company Stock Option
immediately prior to the Effective Time. Notwithstanding the foregoing
provisions of this Section 2.6(a) or any other provision of this
Agreement, the Company and the holder of any Company Stock Option may
amend such Company Stock Option so that the holder of such Company Stock
Option (if it is outstanding at the Effective Time) may elect to
receive, in settlement thereof, an amount in cash equal to the excess of
$53 over the exercise price of such Company Stock Option multiplied by
the number of Shares subject to such Company Stock Option.
(b) Prior to the Effective Time, the Company shall use
all reasonable efforts to (i) obtain any consents from holders of
Company Stock Options and (ii) amend the terms of its equity incentive
plans or arrangements, in each case as is necessary to give effect to
the provisions of paragraph (a) of this Section 2.6.
(c) Prior to the Effective Time, Parent shall (i) file
with the Securities and Exchange Commission ("SEC") a registration
statement on Form S-8 or another appropriate form for the registration
of shares of Parent Common Stock issuable pursuant to all Substitute
Options and (ii) amend the terms of its equity incentive plans or
arrangements, in each case as is necessary to give effect to the
provisions of paragraph (a) of this Section 2.6.
Section 2.7 STOCK TRANSFER BOOKS. At the Effective Time, the
stock transfer books of the Company shall be closed and there shall be
no further registration of transfers of Shares on the records of the
Company. If, after the Effective Time, certificates representing Shares
are presented to the Surviving Corporation, they shall be cancelled and
exchanged for cash and/or certificates representing Parent Common Stock
pursuant to this Article II.
Section 2.8 SHARES OF DISSENTING STOCKHOLDERS.
Notwithstanding anything in this Agreement to the contrary, any shares
of Company Common Stock that are issued and outstanding as of the
Effective Time and that are held by a stockholder who has properly
exercised his appraisal rights (the "Dissenting Shares") under the DGCL
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shall not be converted into the right to receive the Merger
Consideration unless and until the holder shall have failed to perfect,
or shall have effectively withdrawn or lost, his right to dissent from
the Merger under the DGCL and to receive such consideration as may be
determined to be due with respect to such Dissenting Shares pursuant to
and subject to the requirements of the DGCL. If any such holder shall
have so failed to perfect or have effectively withdrawn or lost such
right, each share of such holder's Company Common Stock shall thereupon
be deemed to have been converted into and to have become, as of the
Effective Time, the right to receive, without any interest thereon, the
Stock Consideration or the Cash Consideration or a combination thereof
as determined by Parent in its sole discretion. The Company shall give
Parent (i) prompt notice of any notice or demands for appraisal or
payment for shares of Company Common Stock received by the Company and
(ii) the opportunity to participate in and direct all negotiations and
proceedings with respect to any such demands or notices. The Company
shall not, without the prior written consent of Parent, make any payment
with respect to, or settle, offer to settle or otherwise negotiate, any
such demands.
Section 2.9 TAX OPINION ADJUSTMENT. Subject to the
limitation of, and the proviso of Section 2.1(a), if either (i) the tax
opinion referred to in Section 6.3(e) cannot be rendered (as reasonably
determined by nationally recognized tax counsel to the Company) or (ii)
the tax opinion of nationally recognized tax counsel to Parent referred
to Section 6.2(d) cannot be rendered (as reasonably determined by
nationally recognized tax counsel to Parent), in either case as a result
of the Merger potentially failing to satisfy continuity of interest
requirements under applicable federal income tax principles relating to
reorganizations under Section 368(a) of the Code, then Parent shall
reduce the Cash Consideration to the minimum extent necessary to enable
the relevant tax opinion or opinions, as the case may be, to be
rendered, and correspondingly increase the Stock Consideration.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as
follows:
Section 3.1 ORGANIZATION. Each of the Company and its
Subsidiaries is a corporation, partnership or other entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, and has all requisite
corporate or other power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power,
authority and governmental approvals would not have a material adverse
effect (as defined below) on the Company and its Subsidiaries taken as a
whole. Each of the Company and its Subsidiaries is duly qualified or
licensed to do business and in good standing in each jurisdiction in
which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed
and in good standing would not, in the aggregate, have a material
adverse effect on the Company and its Subsidiaries taken as a whole. As
used in this Agreement, the word "Subsidiary" means, with respect to any
party, any corporation or other organization, whether incorporated or
unincorporated, of which (i) such party or any other Subsidiary of such
party is a general partner (excluding such partnerships where such party
or any Subsidiary of such party do not have a majority of the voting
interest in such partnership) or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting
power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other organization
is directly or indirectly owned or controlled by such party or by any
one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries. As used in this Agreement, any reference to any event,
change or effect having a material adverse effect on or with respect to
any entity (or group of entities taken as a whole) means such event,
change or effect, in the aggregate with such other events, changes,
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or effects, which is materially adverse to the financial condition,
business or results of operations of such entity. Section 3.1 of the
Disclosure Schedule delivered by the Company to Parent on or prior to
the date hereof (the "Disclosure Schedule") sets forth a complete list
of the Company's Subsidiaries.
Section 3.2 CAPITALIZATION. (a) The authorized capital
stock of the Company consists of 41,000,000 shares consisting of
40,000,000 shares of Company Common Stock and 1,000,000 shares of
Preferred Stock, $.01 par value (the "Preferred Stock"). (i) As of
June 28, 1996, 16,616,894 shares of Company Common Stock are issued and
outstanding and 599,400 shares of Company Common Stock are held in the
treasury of the Company, (ii) as of the date hereof, no Shares of
Preferred Stock are issued and outstanding, and (iii) as of the date
hereof, options to acquire an aggregate of 1,143,000 shares of Company
Common Stock have been issued pursuant to Company Stock Options. All
the outstanding shares of the Company's capital stock are duly
authorized, validly issued, fully paid and non-assessable. There are no
bonds, debentures, notes or other indebtedness having voting rights (or
convertible into securities having such rights) ("Voting Debt") of the
Company or any of its Subsidiaries issued and outstanding. Except as
set forth above, as set forth on Section 3.2 of the Disclosure Schedule,
and for the transactions contemplated by this Agreement, (i) there are
no shares of capital stock of the Company authorized, issued or
outstanding and (ii) there are no existing options, warrants, calls,
pre-emptive rights, subscriptions or other rights, convertible
securities, agreements, arrangements or commitments of any character,
relating to the issued or unissued capital stock of the Company or any
of its Subsidiaries, obligating the Company or any of its Subsidiaries
to issue, transfer or sell or cause to be issued, transferred or sold
any shares of capital stock or Voting Debt of, or other equity interest
in, the Company or any of its Subsidiaries or securities convertible
into or exchangeable for such shares or equity interests or obligations
of the Company or any of its Subsidiaries to grant, extend or enter into
any such option, warrant, call, subscription or other right, convertible
security, agreement, arrangement or commitment. Except as set forth in
Section 3.2 of the Disclosure Schedule, there are no outstanding
contractual obligations of the Company or any of its Subsidiaries to
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repurchase, redeem or otherwise acquire any Shares or the capital stock
of the Company or any Subsidiary or affiliate of the Company or to
provide funds to make any investment (in the form of a loan, capital
contribution or otherwise) in any Subsidiary or any other entity.
Except as set forth in Section 3.2 of the Disclosure Schedule, and as
permitted by this Agreement, following the Merger, neither the Company
nor any of its Subsidiaries will have any obligation to issue, transfer
or sell any shares of its capital stock other than pursuant to employee
benefit plans.
(b) All of the outstanding shares of capital stock of
each of the Subsidiaries are beneficially owned by the Company, directly
or indirectly, and all such shares have been validly issued and are
fully paid and nonassessable and are owned by either the Company or one
of its Subsidiaries free and clear of all liens, charges, security
interests, options, claims or encumbrances of any nature whatsoever.
(c) Except as set forth in Section 3.2(c) of the
Disclosure Schedule, there are no voting trusts or other agreements or
understandings to which the Company or any of its Subsidiaries is a
party with respect to the voting of the capital stock of the Company or
any of the Subsidiaries. None of the Company or its Subsidiaries is
required to redeem, repurchase or otherwise acquire shares of capital
stock of the Company, or any of its Subsidiaries, respectively, as a
result of the transactions contemplated by this Agreement.
(d) At the Effective Time, the number of shares of
Company Common Stock outstanding shall not exceed 17,859,894.
Section 3.3 CORPORATE AUTHORIZATION; VALIDITY OF AGREEMENT;
COMPANY ACTION. (a) The Company has full corporate power and authority
to execute and deliver this Agreement and, subject to obtaining any
necessary approval of its stockholders as contemplated by Section 1.5
hereof with respect to the Merger, to consummate the transactions
contemplated hereby. The execution, delivery and performance by the
Company of this Agreement, and the consummation by it of the
transactions contemplated hereby, have been duly and validly authorized
by its Board of Directors and, except for obtaining the approval
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of its stockholders as contemplated by Section 1.5 hereof with respect to the
Merger, no other corporate action or proceedings on the part of the
Company is necessary to authorize the execution and delivery by the
Company of this Agreement, and the consummation by it of the
transactions contemplated hereby. This Agreement has been duly executed
and delivered by the Company and, assuming this Agreement constitutes a
valid and binding obligation of Parent and Sub, constitutes a valid and
binding obligation of the Company enforceable against the Company in
accordance with its terms, except that (i) such enforcement may be
subject to applicable bankruptcy, insolvency or other similar laws, now
or hereafter in effect, affecting creditors' rights generally, and (ii)
the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought.
(b) The Board of Directors of the Company has duly and
validly approved and taken all corporate action required to be taken by
the Board of Directors for the consummation of the transactions
contemplated by this Agreement and the Stockholder Agreements,
including, but not limited to, all actions necessary to render the
provisions of Section 203 of the DGCL inapplicable to this Agreement and
the Stockholder Agreements. The affirmative vote of the holders of a
majority of the Shares is the only vote of the holders of any class or
series of Company capital stock necessary to approve the Merger.
Section 3.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as
set forth in Section 3.4 of the Disclosure Schedule and for all filings,
permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act (as
defined herein), the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), the state securities or "blue sky"
laws, state takeover laws, state and foreign insurance regulatory laws
and commissions, and for the approval of this Agreement by the Company's
stockholders and the filing and recordation of the Certificate of Merger
as required by the DGCL, neither the execution, delivery or performance
of this Agreement nor the consummation by the Company of the
transactions contemplated hereby nor compliance by the
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Company with any
of the provisions hereof will (i) conflict with or result in any breach
of any provision of the Certificate of Incorporation or by-laws or
similar organizational documents of the Company or of any of its
Subsidiaries, (ii) require any filing with, or permit, authorization,
consent or approval of, any court, arbitral tribunal, administrative
agency or commission or other governmental or other regulatory
authority, commission or agency (a "Governmental Entity"), except where
the failure to obtain such permits, authorizations, consents or
approvals or to make such filings would not have a material adverse
effect on the Company and its Subsidiaries taken as a whole and would
not, or would not be reasonably likely to, materially impair the ability
of the Company to consummate the Merger or the other transactions
contemplated hereby, (iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, guarantee, other
evidence of indebtedness (collectively, the "Debt Instruments"), lease,
license, contract, agreement or other instrument or obligation to which
the Company or any of its Subsidiaries is a party or by which any of
them or any of their properties or assets may be bound (a "Company
Agreement") or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company, any of its
Subsidiaries or any of their properties or assets, except in the case of
clauses (iii) and (iv) for violations, breaches or defaults which would
not have a material adverse effect on the Company and its Subsidiaries
taken as a whole.
Section 3.5 SEC REPORTS AND FINANCIAL STATEMENTS. (a) The
Company has filed with the SEC and has heretofore made available to
Parent true and complete copies of, all forms, reports, schedules,
statements and other documents required to be filed by it and its
Subsidiaries since January 1, 1994 under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and the Securities Act of 1933, as
amended (the "Securities Act") (as such documents have been amended
since the time of their filing, collectively, the "Company SEC
Documents"). As of their respective dates or, if amended, as of the
date of the last such amendment, the Company SEC Documents, including,
without limitation, any financial
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statements or schedules included
therein (a) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading and (b) complied in all
material respects with the applicable requirements of the Exchange Act
and the Securities Act, as the case may be, and the applicable rules and
regulations of the SEC thereunder. Each of the consolidated financial
statements included in the Company SEC Documents have been prepared
from, and are in accordance with, the books and records of the Company
and/or its consolidated Subsidiaries, comply in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in
accordance with United States generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present in
all material respects the consolidated financial position and the
consolidated results of operations and cash flows (and changes in
financial position, if any) of the Company and its consolidated
Subsidiaries as at the dates thereof or for the periods presented
therein (subject, in the case of unaudited interim financial statements,
to normal year end adjustments).
(b) The Annual Statements and Quarterly Statement of
National Reinsurance Corporation, a wholly owned subsidiary of the
Company ("National Re"), as filed with the departments of insurance for
all applicable domiciliary states for the years ended December 31, 1995
and December 31, 1994 (the "Annual Statutory Statements") and the
quarter ended March 31, 1996 (the "Quarterly Statutory Statement"),
respectively, together with all exhibits and schedules thereto (all
Annual Statutory Statements and the Quarterly Statutory Statement,
together with all exhibits and schedules thereto, referred to as the
"Statutory Financial Statements"), have been prepared in accordance with
the accounting practices prescribed or permitted by the departments of
insurance for all applicable domiciliary states for purposes of
financial reporting to the state's insurance regulators ("State
Statutory Accounting Principles"), and such accounting practices have
been applied on a basis consistent with State Statutory Accounting
Principles through-
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out the periods involved, except as expressly set
forth in the notes, exhibits or schedules thereto, and the Statutory
Financial Statements of National Re present fairly in all material
respects the financial position and the results of operations for
National Re and its Subsidiaries as of the dates and for the periods
therein in accordance with State Statutory Accounting Principles. The
Company has heretofore made available to Parent true and complete copies
of the Statutory Financial Statements.
Section 3.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed
in the Company SEC Documents or as set forth in Section 3.6 of the
Disclosure Schedule, since January 1, 1996, the Company and its
Subsidiaries have conducted their respective businesses and operations
in the ordinary course of business consistent with past practice. Since
March 31, 1996, there has not occurred (i) any events, changes, or
effects (including the incurrence of any liabilities of any nature,
whether or not accrued, contingent or otherwise) having or, which would
be reasonably likely to have, in the aggregate, a material adverse
effect on the Company and its Subsidiaries taken as a whole (other than
changes in insurance laws and regulations affecting the reinsurance
industry generally); (ii) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property)
with respect to the equity interests of the Company or of any of its
Subsidiaries, other than regular quarterly cash dividends or dividends
paid by wholly owned Subsidiaries; or (iii) any change by the Company or
any of its Subsidiaries in accounting principles or methods, except
insofar as may be required by a change in GAAP. Since January 1, 1996,
except as set forth on Section 3.6 of the Disclosure Schedule, the
Company and its Subsidiaries have conducted their respective businesses
in the ordinary course consistent with past practice.
Section 3.7 NO UNDISCLOSED LIABILITIES. Except (a) as
disclosed in Section 3.6 of the Disclosure Schedule, (b) to the extent
disclosed in the Company SEC Documents filed prior to the date of this
Agreement and (c) for liabilities and obligations incurred in the
ordinary course of business consistent with past practice, since March
31, 1996, neither the Company nor any of its Subsidiaries has incurred
any liabilities or obligations
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of any nature, whether or not accrued,
contingent or otherwise, that have, or would be reasonably likely to
have, a material adverse effect on the Company and its Subsidiaries.
Section 3.7 of the Disclosure Schedule sets forth each instrument
evidencing indebtedness of the Company and its Subsidiaries (other than
insurance treaties entered into in the ordinary course of the Company's
business) which will accelerate or become due or payable, or result in a
right of redemption or repurchase on the part of the holder of such
indebtedness, or with respect to which any other payment or amount will
become due or payable, in any such case with or without due notice or
lapse of time, as a result of this Agreement, the Merger or the other
transactions contemplated hereby.
Section 3.8 INFORMATION IN PROXY STATEMENT/PROSPECTUS. The
Proxy Statement/Prospectus (or any amendment thereof or supplement
thereto), at the date mailed to the Company's stockholders and at the
time of the Company Special Meeting, will not contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, PROVIDED, HOWEVER, that no representation is made by the
Company with respect to statements made therein based on information
supplied by Parent or Sub for inclusion in the Proxy
Statement/Prospectus. None of the information supplied by the Company
for inclusion or incorporation by reference in the Registration
Statement will, at the date it becomes effective and at the time of the
Company Special Meeting contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. Subject to the
proviso set forth in the second preceding sentence, the Proxy
Statement/Prospectus will comply in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
Section 3.9 EMPLOYEE BENEFIT PLANS; ERISA. As of the date of
this Agreement: (a) there are no material employee or director benefit
plans, arrangements, practices, contracts or agreements (including,
without limitation, employment agreements, change of control employment
agreements and severance agreements, incentive
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compensation, bonus,
stock option, stock appreciation rights and stock purchase plans) of any
type (including but not limited to plans described in section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), maintained by the Company, any of its Subsidiaries or any
trade or business, whether or not incorporated (an "ERISA Affiliate"),
that together with the Company would be deemed a "controlled group"
within the meaning of section 4001(a)(14) of ERISA, or with respect to
which the Company or any of its Subsidiaries has or may have a
liability, other than those listed on Section 3.9(a) of the Disclosure
Schedule (the "Benefit Plans"). Except as disclosed in Section 3.9(a)
or 5.5(c) of the Disclosure Schedule (or as otherwise permitted by this
Agreement) neither the Company nor any ERISA Affiliate has any formal
plan or commitment, whether legally binding or not, to create any
additional Benefit Plan or modify or change any existing Benefit Plan
that would affect any employee or terminated employee of the Company or
any ERISA Affiliate.
(b) Except as disclosed in Section 3.9(b) of the
Disclosure Schedule, with respect to any Benefit Plan, there are no
material amounts accrued but unpaid as of the most recent balance sheet
date that are not reflected on that balance sheet prepared in accordance
with GAAP.
(c) With respect to each Benefit Plan except as
disclosed on Schedule 3.9(c) of the Disclosure Schedule: (i) if intended
to qualify under section 401(a), 401(k) or 403(a) of the Code, such plan
has received, or an application is pending for, a determination letter
from the Service that the Plan so qualifies, and its trust is exempt
from taxation under section 501(a) of the Code and the Company knows of
no event that would prevent such qualification; (ii) such plan has been
administered in all material respects in accordance with its terms and
applicable law; (iii) no breaches of fiduciary duty have occurred; (iv)
no material disputes are pending, or, to the knowledge of the Company,
threatened; (v) no prohibited transaction (within the meaning of section
406 of ERISA) has occurred; (vi) all contributions and premiums due
(including any extensions for such contributions and premiums) have been
made in full; (vii) no such Plan has incurred or will incur any
"accumulated funding deficiency," as such term is defined in Section 412
of the Code, whether or not waived; (viii) no such
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Plan provides medical
or death benefits with respect to current or former employees of the
Company or any of its Subsidiaries beyond their termination of
employment, other than on an employee-pay-all basis; and (ix) no Plan is
a "multiemployer plan," as such term is defined in section 3(37) of
ERISA, or is covered by section 4063 or 4064 of ERISA.
(d) Except as disclosed on Schedule 3.9(d) of the
Disclosure Schedule: (i) neither the Company nor any ERISA Affiliate
has incurred any material liability under Title IV of ERISA since the
effective date of ERISA that has not been satisfied in full (including
sections 4063-4064 and 4069 of ERISA) and, to the knowledge of the
Company, no basis for any such liability exists; (ii) neither the
Company nor any ERISA Affiliate maintains (or contributes to), or has
maintained (or has contributed to) within the last six years, any
employee benefit plan that is subject to Title IV of ERISA (other than a
Benefit Plan).
(e) Except as set forth in Section 3.9(e) of the
Disclosure Schedule, Section 5.5(c) of the Disclosure Schedule or to the
extent disclosed in the Company SEC Documents, the consummation of the
transactions contemplated by this Agreement will not entitle any
individual to severance pay or accelerate the time of payment or
vesting, or increase the amount, of compensation or benefits due to any
individual with respect to any Benefit Plan. As a result of the
transactions described herein, either alone or together with another
event such as termination of employment, except as set forth in Section
3.9(e) of the Disclosure Schedule, no party will be required to make a
"parachute payment" to a "disqualified individual" within the meaning of
Section 280G of the Code.
(f) The Company has delivered or made available to
Parent accurate and complete copies of all plan texts, summary plan
descriptions, trust agreements and other related agreements including
all amendments to the foregoing; the two most recent annual reports; the
most recent annual and periodic accounting of plan assets; the most
recent determination letter received from the United States Internal
Revenue Service (the "Service"); and the two most recent actuarial
reports, to the extent any of the foregoing may be applicable to a
particular Benefit Plan.
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Section 3.10 LITIGATION; COMPLIANCE WITH LAW.
(a) Except to the extent disclosed in the Company SEC
Documents filed prior to the date of this Agreement, there is no suit,
claim, action, proceeding, review or investigation pending or, to the
knowledge of the Company, threatened against or affecting, the Company
or any of its Subsidiaries which, individually or in the aggregate, is
reasonably likely to have a material adverse effect on the Company and
its Subsidiaries taken as a whole, or would, or would be reasonably
likely to, materially impair the ability of the Company to consummate
the Merger or the other transactions contemplated hereby.
(b) The Company and its Subsidiaries have complied in
all material respects with all laws, statutes, regulations, rules,
ordinances, and judgments, decrees, orders, writs and injunctions, of
any court or Governmental Entity relating to any of the property owned,
leased or used by them, or applicable to their business, including, but
not limited to, equal employment opportunity, discrimination,
occupational safety and health, environmental, insurance regulatory,
antitrust laws, ERISA and laws relating to Taxes (as defined in Section
3.12).
Section 3.11 NO DEFAULT. Except as disclosed in the Company
SEC Documents, the business of the Company and each of its Subsidiaries
is not being conducted in default or violation of any term, condition or
provision of (a) its respective certificate of incorporation or by-laws
or similar organizational documents, or (b) any Company Agreement,
excluding from the foregoing clause (b), defaults or violations that
would not have a material adverse effect on the Company and its
Subsidiaries taken as a whole or would not, or would not be reasonably
likely to, materially impair the ability of the Company to consummate
the Merger or the other transactions contemplated hereby.
Section 3.12 TAXES. Except as set forth in Section 3.12 of
the Disclosure Schedule:
(a) the Company and its Subsidiaries have (I) duly filed
(or there have been filed on their behalf) with the appropriate
governmental authorities all materi-
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al Tax Returns (as hereinafter
defined) required to be filed by them and such Tax Returns are true,
correct and complete, and (II) duly paid in full or made provision in
accordance with GAAP (or there has been paid or provision has been made
on their behalf) for the payment of all Taxes (as hereinafter defined)
that are due and payable for all periods ending through the date hereof;
(b) no material federal, state, local or foreign audits
or other administrative proceedings or court proceedings are presently
pending with regard to any Taxes or Tax Returns of the Company or its
Subsidiaries;
(c) no governmental authority has asserted in writing
against the Company or any of its Subsidiaries any deficiency or claim
for a material amount of Taxes;
(d) there are no material liens for Taxes upon any
property or assets of the Company or any Subsidiary thereof, except for
liens for Taxes not yet due and payable and liens for Taxes that are
being contested in good faith;
(e) the United States federal income Tax Returns of the
Company and its Subsidiaries have been examined by the Service (or the
applicable statutes of limitation for the assessment of federal income
Taxes for such periods have expired) for all periods through and
including 1990; and
(f) the Company is not aware of any reason that would
preclude it from executing an opinion representation letter,
substantially similar to the form letter attached hereto as Exhibit A,
as of the Effective Time.
"Taxes" shall mean any and all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross
income, gross receipts, excise, stamp, real or personal property, ad
valorem, sales, withholding, estimated, social security, unemployment,
occupation, use, service, service use, license, net worth, payroll,
franchise, severance, transfer, recording or other taxes, assessments or
charges, imposed by any governmental authority and any interest,
penalties, or
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additions to tax attributable thereto. "Tax Return" shall
mean any report, return, document, declaration, information, return, or
filing (including any related or supporting information).
Section 3.13 CONTRACTS. Each material Company Agreement is
valid, binding and enforceable and in full force and effect, except
where failure to be valid, binding and enforceable and in full force and
effect would not have a material adverse effect on the Company and its
Subsidiaries taken as a whole, and there are no defaults thereunder,
except those defaults that would not have a material adverse effect on
the Company and its Subsidiaries taken as a whole. Neither the Company
nor any Subsidiary is a party to any agreement that expressly and
materially limits the ability of the Company or any Subsidiary to
compete in or conduct any line of business or compete with any person or
in any geographic area or during any period of time.
Section 3.14 TRANSACTIONS WITH AFFILIATES. Except to the
extent disclosed in the Company SEC Documents filed prior to the date of
this Agreement, since January 1, 1993 there have been no material
transactions, agreements, arrangements or understandings between the
Company or its Subsidiaries, on the one hand, and the Company's
affiliates (other than wholly-owned Subsidiaries of the Company) or
other Persons, on the other hand, that would be required to be disclosed
under Item 404 of Regulation S-K under the Securities Act.
Section 3.15 OPINION OF FINANCIAL ADVISOR. The Company has
received an opinion from Goldman, Sachs & Co. ("Goldman Sachs") to the
effect that the consideration to be received by the stockholders of the
Company pursuant to the Merger, is fair to such stockholders.
Section 3.16 LINCOLN NATIONAL CONTRACT. The Aggregate Excess
of Loss Reinsurance Contract between National Re and Lincoln National
Health and Casualty Insurance Company dated April 30, 1990, a true and
complete copy of which has been delivered to Parent, is in full force
and effect and will continue in effect following the Effective Time,
subject to the terms and conditions of such agreement.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
Section 4.1 ORGANIZATION. Each of Parent and its Subsidiaries
is a corporation duly organized, validly existing and in good standing
under the laws of Delaware, and has all requisite corporate or other
power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as now
being conducted, except where the failure to be so organized, existing
and in good standing or to have such power, authority and governmental
approvals would not have a material adverse effect on Parent and its
Subsidiaries. Parent and each of its Subsidiaries is duly qualified or
licensed to do business and in good standing in each jurisdiction in
which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary,
except where the failure to be so duly qualified or licensed and in good
standing would not have a material adverse effect on Parent and its
Subsidiaries taken as a whole. Sub has not heretofore conducted any
business other than in connection with this Agreement and the
transactions contemplated hereby.
Section 4.2 CAPITALIZATION. The authorized capital stock of
Parent consists of 270,000,000 shares of capital stock, consisting of
250,000,000 shares of Parent Common Stock and 20,000,000 shares of
preferred stock, without par value (the "Parent Preferred Stock"). As of
June 30, 1996, (i) 78,740,961 shares of Parent Common Stock are issued
and outstanding, (ii) approximately 1,724,386 shares of Parent ESOP
Convertible Preferred Stock are issued and outstanding, (iii) 24,086,383
shares of Parent Common Stock are issued and held in the treasury of
Parent, and (iv) not more than 8,000,000 shares of Parent Common Stock
are reserved for option and employee benefit plans of Parent. All of the
outstanding shares of Parent's capital stock are duly authorized, validly
issued, fully paid and non-assessable. There are no bonds, debentures,
notes or other indebtedness having voting rights (or convertible into
securities having such
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rights) ("Parent Voting Debt") of Parent or any of
its Subsidiaries issued and outstanding.
Section 4.3 CORPORATE AUTHORIZATION; VALIDITY OF AGREEMENT;
NECESSARY ACTION. Each of Parent and Sub has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and
performance by Parent and Sub of this Agreement and the consummation by
Parent and Sub of the transactions contemplated hereby have been duly and
validly authorized by their respective Boards of Directors and no other
corporate action or proceedings on the part of Parent and Sub are
necessary to authorize the execution and delivery by Parent and Sub of
this Agreement, and the consummation by Parent and Sub of the
transactions contemplated hereby. This Agreement has been duly executed
and delivered by Parent and Sub, and, assuming this Agreement constitutes
a valid and binding obligation of the Company, constitutes a valid and
binding obligation of each of Parent and Sub, enforceable against each of
them in accordance with their terms, except that (i) such enforcement may
be subject to applicable bankruptcy, insolvency or other similar laws,
now or hereafter in effect, affecting creditors' rights generally, and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought. The shares of Parent Common Stock to be issued pursuant to the
Merger will be duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. No vote of the
stockholders of Parent is necessary for Sub to consummate the Merger.
Section 4.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for
filings, permits, authorizations, consents and approvals as may be
required under, and other applicable requirements of, the Exchange Act,
the Securities Act, the DGCL, the HSR Act, state blue sky laws and any
applicable state takeover laws and insurance regulatory laws and
commissions, neither the execution, delivery or performance of this
Agreement by Parent and Sub nor the consummation by Parent and Sub of the
transactions contemplated hereby nor compliance by Parent and Sub with
any of the provisions hereof will (i) conflict with or result in any
breach of any provision of the
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Certificate of Incorporation or by-laws of
Parent and any of its Subsidiaries, (ii) require any filing with, or
permit, authorization, consent or approval of, any Governmental Entity
(except where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings would not have a material
adverse effect on Parent and its Subsidiaries taken as a whole or would
not, or would not be reasonably likely to, materially impair the ability
of Parent and Sub to consummate the Merger or the other transactions
contemplated hereby), (iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, guarantee, other
evidence of indebtedness, lease, license, contract, agreement or other
instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which any of them or any of their properties or assets may be
bound or (iv) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to Parent, any of its Subsidiaries or any of
their properties or assets, except in the case of clauses (iii) and (iv)
for violations, breaches or defaults which would not have a material
adverse effect on Parent and its Subsidiaries taken as a whole or would
not, or would not be reasonably likely to, materially impair the ability
of Parent or Sub to consummate the Merger or the other transactions
contemplated hereby.
Section 4.5 SEC REPORTS AND FINANCIAL STATEMENTS. Parent has
filed with the SEC, and has heretofore made available to the Company true
and complete copies of, all forms, reports, schedules, statements and
other documents required to be filed by it and its Subsidiaries since
January 1, 1994 under the Exchange Act or the Securities Act (as such
documents have been amended since the time of their filing, collectively,
the "Parent SEC Documents"). As of their respective dates or, if
amended, as of the date of the last such amendment, the Parent SEC
Documents, including, without limitation, any financial statements or
schedules included therein (a) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading and (b)
complied in all materi-
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al respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be, and the
applicable rules and regulations of the SEC thereunder. Each of the
consolidated financial statements included in the Parent SEC Documents
have been prepared from, and are in accordance with, the books and
records of Parent and/or its consolidated Subsidiaries, comply in all
material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with GAAP applied on a consistent basis
during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated
financial position and the consolidated results of operations and cash
flows (and changes in financial position, if any) of Parent and its
consolidated Subsidiaries as at the dates thereof or for the periods
presented therein (subject, in the case of unaudited interim financial
statements, to normal year end adjustments).
Section 4.6 ABSENCE OF CERTAIN CHANGES. Since January 1,
1996, Parent and its Subsidiaries have conducted their respective
businesses in the ordinary course of business consistent with past
practice. Since March 31, 1996, there has not occurred (i) any events,
changes, or effects (including the incurrence of any liabilities of any
nature, whether or not accrued, contingent or otherwise) having or, which
would be reasonably likely to have, individually or in the aggregate, a
material adverse effect on Parent and its Subsidiaries taken as a whole;
(ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to the
equity interests of Parent or of any of its Subsidiaries other than
regular quarterly cash dividends or dividends paid by wholly owned
Subsidiaries; or (iii) any change by Parent or any of its Subsidiaries in
accounting principles or methods, except insofar as may be required by a
change in GAAP.
Section 4.7 NO UNDISCLOSED LIABILITIES. Except (a) to the
extent disclosed in the Parent SEC Documents filed prior to the date of
this Agreement and (b) for liabilities and obligations incurred in the
ordinary course of business consistent with past practice, since March
31, 1996, neither Parent nor any of its Subsidiaries has incurred any
liabilities or obligations
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of any nature, whether or not accrued,
contingent or otherwise, that have, or would be reasonably likely to
have, a material adverse effect on Parent and its Subsidiaries.
Section 4.8 INFORMATION IN PROXY STATEMENT/PROSPECTUS. The
Registration Statement (or any amendment thereof or supplement thereto),
at the date it becomes effective and at the time of the Company Special
Meeting, will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they are made, not misleading, PROVIDED, HOWEVER, that no
representation is made by Parent or Sub with respect to statements made
therein based on information supplied by the Company for inclusion in the
Proxy Statement/Prospectus or the Registration Statement. None of the
information supplied by Parent or Sub for inclusion or incorporation by
reference in the Proxy Statement/Prospectus will, at the date mailed to
stockholders of the Company and at the time of the Company Special
Meeting, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they are made, not misleading. Subject to the proviso set forth in the
second preceding sentence, the Registration Statement will comply in all
material respects with the provisions of the Securities Act and the rules
and regulations thereunder.
Section 4.9 LITIGATION; COMPLIANCE WITH LAW.
(a) Except to the extent disclosed in the Parent SEC
Documents filed prior to the date of this Agreement, there is no suit,
claim, action, proceeding or investigation pending or, to the knowledge
of Parent, threatened against or affecting, Parent or any of its
Subsidiaries, which, individually or in the aggregate, is reasonably
likely to have a material adverse effect on Parent and its Subsidiaries
or would, or would be reasonably likely to, materially impair the ability
of Parent to consummate the Merger or the other transactions contemplated
hereby.
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(b) Parent and its Subsidiaries have complied in all
material respects with all laws, statutes, regulations, rules,
ordinances, and judgments, decrees, orders, writs and injunctions, of any
court or Governmental Entity relating to any of the property owned,
leased or used by them, or applicable to their business, including, but
not limited to, equal employment opportunity, discrimination,
occupational safety and health, environmental, insurance regulatory, and
antitrust laws.
Section 4.10 TAXES. (a) Parent and its Subsidiaries have (i)
duly filed (or there have been filed on their behalf) with the
appropriate governmental authorities all material Tax Returns required to
be filed by them and such Tax Returns are true, correct and complete, and
(ii) duly paid in full or made provision in accordance with GAAP (or
there has been paid or provision has been made on their behalf) for the
payment of all material Taxes due and payable for all periods ending
through the date hereof.
(b) Parent is not aware of any reason that would preclude it
from executing an opinion representation letter on behalf of Parent and
Sub, substantially similar to the form letter attached hereto as Exhibit
B, as of the Effective Time.
Section 4.11 FINANCING. Either Parent or Sub has, or will
have prior to the consummation of the Merger, sufficient funds available
to purchase the maximum amount of Shares which may be converted into the
right to receive the Cash Consideration in the Merger.
Section 4.12 OPINION OF FINANCIAL ADVISOR. Parent has
received an opinion from Morgan Stanley & Co. Incorporated ("Morgan
Stanley") dated the date of this Agreement to the effect that, as of such
date, the consideration to be paid by Parent in the Merger is fair to
Parent from a financial point of view, a copy of which opinion has been
delivered to the Company.
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ARTICLE 5
COVENANTS
Section 5.1 INTERIM OPERATIONS OF THE COMPANY. The Company
covenants and agrees that, except (i) as expressly provided in this
Agreement, (ii) with the prior written consent of Parent or (iii) as set
forth on Section 5.1 of the Disclosure Schedule, after the date hereof
and prior to the Effective Time:
(a) the business of the Company and its Subsidiaries,
including, without limitation, investment practices and policies, shall
be conducted only in the ordinary course of business consistent with past
practice and, each of the Company and its Subsidiaries shall use all
reasonable efforts to preserve its business organization intact and
maintain its existing relations with material customers,
retrocessionaires, employees, creditors and business partners;
(b) the Company will not, directly or indirectly, split,
combine or reclassify the outstanding Company Common Stock, or any
outstanding capital stock of any of the Subsidiaries of the Company;
(c) neither the Company nor any of its Subsidiaries
shall: (i) amend its certificate of incorporation or by-laws or similar
organizational documents; (ii) declare, set aside or pay any dividend or
other distribution payable in cash, stock or property with respect to its
capital stock other than dividends paid by the Company's wholly-owned
Subsidiaries to the Company or its wholly-owned Subsidiaries and other
than ordinary quarterly cash dividends by the Company not to exceed $.05
per quarter; (iii) issue, sell, transfer, pledge, dispose of or encumber
any additional shares of, or securities convertible into or exchangeable
for, or options, warrants, calls, commitments or rights of any kind to
acquire, any shares of capital stock of any class of the Company or its
Subsidiaries, other than issuances pursuant to exercise of stock-based
awards outstanding on the date hereof as disclosed in Section 3.2 hereof
or with respect to any shares issued under the Company's Employee Stock
Purchase Plan prior to its termination in accordance with Section 5.5(e);
(iv) transfer, lease, license, sell, mortgage, pledge, dispose of, or
encumber
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any assets that are material to the Company and its Subsidiaries
taken as a whole other than sales of investment assets in the ordinary
course of business consistent with past practice; or (v) redeem, purchase
or otherwise acquire directly or indirectly any of its capital stock;
(d) neither the Company nor any of its Subsidiaries
shall: (i) grant any increase in the compensation payable or to become
payable by the Company or any of its Subsidiaries to any officer or
employee other than scheduled annual increases in the ordinary course of
business consistent with past practice in an amount not to exceed 10% for
any individual; (ii) adopt any new, or amend or otherwise increase, or
accelerate the payment or vesting of the amounts payable or to become
payable under any existing, bonus, incentive compensation, deferred
compensation, severance, profit sharing, stock option, stock purchase,
insurance, pension, retirement or other employee benefit plan agreement
or arrangement; (iii) enter into any, or amend any existing, employment,
consulting or severance agreement with or, except in accordance with the
existing written policies of the Company, grant any severance or
termination pay to any officer, director or employee of the Company or
any of its Subsidiaries; (iv) make any additional contributions to any
grantor trust created by the Company to provide funding for non-tax-
qualified employee benefits or compensation; or (v) provide any severance
program to any Subsidiary which does not have a severance program as of
the date of this Agreement;
(e) neither the Company nor any of its Subsidiaries shall
modify, amend or terminate any of the material Company Agreements or
waive, release or assign any material rights or claims, except in the
ordinary course of business consistent with past practice ;
(f) neither the Company nor any of its Subsidiaries shall
permit any material insurance policy naming it as a beneficiary or a loss
payable payee to be cancelled or terminated, except in the ordinary
course of business consistent with past practice;
(g) neither the Company nor any of its Subsidiaries
shall: (i) incur or assume any debt except for (A) borrowings under
existing credit facilities in an amount not to exceed $10 million; (ii)
assume, guarantee,
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endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person, except in the ordinary course of business consistent with
past practice; (iii) make any loans, advances or capital contributions
to, or investments in, any other person (other than to wholly owned
Subsidiaries of the Company or customary loans or advances to employees
in accordance with past practice and other than as to such matters
related to the Company's or any of its Subsidiaries' investment
portfolios in the ordinary course of business consistent with past
practice); or (iv) enter into any material commitment (including, but not
limited to, any capital expenditure or purchase of assets) other than in
the ordinary course of business consistent with past practice;
(h) neither the Company nor any of its Subsidiaries shall
change any of the accounting principles used by it unless required by
Statutory Accounting Principles or GAAP;
(i) neither the Company nor any of its Subsidiaries shall
pay, discharge or satisfy any material claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction of any such claims,
liabilities or obligations, (x) reflected or reserved against in, or
contemplated by, the consolidated financial statements (or the notes
thereto) of the Company and its consolidated Subsidiaries, (y) incurred
in the ordinary course of business consistent with past practice or (z)
which are legally required to be paid, discharged or satisfied;
(j) neither the Company nor any of its Subsidiaries will
adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other material
reorganization of the Company or any of its Subsidiaries or any agreement
relating to a Takeover Proposal (as defined in Section 5.6) (other than
the Merger) other than confidentiality agreements as provided in Section
5.6(a);
(k) neither the Company nor any of its Subsidiaries will
engage in any transaction with, or enter into any agreement, arrangement,
or understanding with, directly or indirectly, any of the Company's
affil-
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iates, including, without limitation, any transactions, agreements,
arrangements or understandings with any affiliate or other Person covered
under Item 404 of Regulation S-K under the Securities Act that would be
required to be disclosed under such Item 404 other than such transactions
of the same general nature, scope and magnitude as are disclosed in the
Company SEC Documents;
(l) except upon the prior written consent of Parent, the
Company shall not make any Tax election that would have a material
adverse effect on the Company or any of its Subsidiaries, except in the
ordinary course of business consistent with past practice; and
(m) neither the Company nor any of its Subsidiaries will
enter into an agreement, contract, commitment or arrangement to do any of
the foregoing, or to authorize, recommend, propose or announce an
intention to do any of the foregoing.
Section 5.2 INTERIM OPERATIONS OF PARENT. Parent covenants
and agrees that, except (i) as expressly provided in this Agreement, or
(ii) with the prior written consent of the Company, after the date hereof
and prior to the Effective Time:
(a) the business of Parent and its Subsidiaries,
including, without limitation, investment practices and policies, shall
be conducted in the ordinary course of business consistent with past
practice;
(b) Parent will not, directly or indirectly, split,
combine or reclassify the outstanding Parent Common Stock;
(c) Parent will not: (i) amend its certificate of
incorporation or by-laws; or (ii) declare, set aside or pay any dividend
or other distribution payable in cash, stock or property with respect to
its capital stock except for quarterly cash dividends consistent in
amount and timing with past practice, provided that Parent may increase
its dividend rate consistent with prior practice;
(d) neither Parent nor any of its Subsidiaries shall
change any of the accounting principles used
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by it unless required by
GAAP or Statutory Accounting Principles; and
(e) neither Parent nor any of its Subsidiaries will enter
into an agreement, contract, commitment or arrangement to do any of the
foregoing, or to authorize, recommend, propose or announce an intention
to do any of the foregoing.
Section 5.3 ACCESS TO INFORMATION. (a) The Company shall
(and shall cause each of its Subsidiaries to) afford to the officers,
employees, accountants, counsel, financing sources and other
representatives of Parent, reasonable access, during normal business
hours, during the period prior to the Effective Time, to all of its and
its Subsidiaries' properties, books, contracts, commitments and records
(including any Tax Returns or other Tax related information pertaining to
the Company and its Subsidiaries) and, during such period, the Company
shall (and shall cause each of its Subsidiaries to) furnish promptly to
Parent (a) a copy of each report, schedule, registration statement and
other document filed or received by it during such period pursuant to the
requirements of the federal securities laws or any insurance regulatory
laws and (b) all other information concerning its business, properties
and personnel as Parent may reasonably request (including any Tax Returns
or other Tax related information pertaining to the Company and its
Subsidiaries). Parent will hold any such information which is nonpublic
in confidence in accordance with the provisions of the existing
confidentiality agreement between the Company and Parent, dated June 27,
1996 (the "Confidentiality Agreement").
Section 5.4 CONSENTS AND APPROVALS. (a) Each of the Company,
Parent and Sub will take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on it with
respect to this Agreement and the transactions contemplated hereby which
actions shall include, without limitation, furnishing all information in
connection with approvals of or filings with any Governmental Entity,
including, without limitation, any schedule, or reports required to be
filed with the SEC, and will promptly cooperate with and furnish
information to each other in connection with any such requirements
imposed upon any of them or any of their Subsidiaries in connection with
this Agreement and
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the transactions contemplated hereby. Each of the
Company, Parent and Sub will, and will cause its Subsidiaries to, take
all reasonable actions necessary to obtain any consent, authorization,
order or approval of, or any exemption by, any Governmental Entity or
other public or private third party, required to be obtained or made by
Parent, Sub, the Company or any of their Subsidiaries in connection with
the Merger or the taking of any action contemplated thereby or by this
Agreement.
Section 5.5 EMPLOYEE MATTERS.
(a) BENEFIT PLANS. After the Effective Time, Parent
shall either continue the existing Benefit Plans of the Company or shall
provide, or cause Sub to provide, benefits to employees of the Company
and its Subsidiaries that are no less favorable in the aggregate to such
employees than those provided under the "Parent Benefit Plans" (as
defined below) (as they may be amended from time to time) to similarly
situated employees of Parent and its Subsidiaries. "Parent Benefit Plan"
means any material employee or director benefit plan, arrangement,
practice, contract or agreement of any type (including but not limited to
a plan described in Section 3(3) of ERISA), maintained by Parent or
General Reinsurance Corporation, Parent's wholly owned Subsidiary.
(b) SERVICE CREDIT. With respect to any Parent Benefit
Plan which is an "employee benefit plan" as defined in Section 3(3) of
ERISA, for purposes of determining eligibility to participate, vesting,
and entitlement to benefits, including for severance benefits, vacation
entitlement and service awards (but not for accrual of pension benefits),
service with the Company or any Subsidiary shall be treated as service
with Parent or its Subsidiaries; PROVIDED, HOWEVER, that such service
shall not be recognized to the extent that such recognition would result
in a duplication of benefits. Such service also shall apply for purposes
of satisfying any waiting periods, evidence of insurability requirements,
or the application of any preexisting condition limitations. Company
employees shall be given credit for amounts paid under a corresponding
benefit plan during the same period for purposes of applying deductibles,
copayments and out-of-pocket maximums as though such amounts had been
paid in accordance with the terms and conditions of the Parent Plan.
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(c) SEVERANCE AND STAY PROTECTION PLAN. At or before the
Effective Time, the Company shall adopt a severance and stay protection
plan, the substantive terms of which are set forth on Section 5.5(c) in
the Disclosure Schedule. From and after the Effective Time, Parent shall
cause Sub to honor such plan in accordance the terms thereof.
(d) THIRD PARTY BENEFICIARY. For one year following the
Effective Time, the provisions of this Section 5.5 are intended for the
benefit of, and shall be enforceable by, the continuing employees of the
Company and its subsidiaries.
(e) Promptly following the date hereof but in no event
later than August 1, 1996, Parent and the Company shall cooperate to
cause the termination as soon as practicable, of the Company's Employee
Stock Purchase Plan.
Section 5.6 NO SOLICITATION. (a) The Company (and its
Subsidiaries and affiliates) will not, and the Company (and its
Subsidiaries and affiliates) will use their reasonable best efforts to
ensure that their respective officers, directors, employees, investment
bankers, attorneys, accountants and other agents do not, directly or
indirectly: (i) initiate, solicit or encourage, or (except to the extent
permitted by clause (ii) below) take any action to facilitate the making
of, any offer or proposal which constitutes or is reasonably likely to
lead to any Takeover Proposal (as defined below) of the Company or any
Subsidiary or an inquiry with respect thereto, or, (ii) in the event of
an unsolicited bona fide Takeover Proposal for the Company or any
Subsidiary of the Company, engage in negotiations or discussions with, or
provide any information or data to, any corporation, partnership, person
or other entity or group (other than Parent, Sub or any of their
affiliates or representatives) ("Person") relating to any Takeover
Proposal, except in the case of clause (ii) above, to the extent that the
Company's Board of Directors determines, after having received the advice
of outside legal counsel to the Company and the advice of the Company's
financial advisor, that the failure to engage in such negotiations or
discussions or provide such information is reasonably likely to result in
a breach of the Board of Directors' fiduciary duties under applicable
law; PROVIDED, HOWEVER,
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that notwithstanding the foregoing, the Company's
Board of Directors may take, and disclose to the Company's stockholders a
position contemplated by Rules for 14d-9 and 14e-2 promulgated under the
Exchange Act with respect to any tender offer for shares of capital stock
of the Company. Prior to furnishing any information to any such Person
making a Takeover Proposal, the Company shall have obtained a
confidentiality agreement from such Person substantially similar to the
Confidentiality Agreement. The Company shall notify Parent of any such
offers, proposals, inquiries or Takeover Proposals (including, without
limitation, the material terms and conditions thereof and the identity of
the Person making it), within 24 hours of the receipt thereof, and shall
provide Parent with a copy of any written Takeover Proposal or amendments
or supplements thereto, and shall thereafter inform Parent on a
reasonable basis of the status of any discussions or negotiations with
such a third party, and any material changes to the terms and conditions
of such Takeover Proposal, and shall promptly give Parent a copy of any
information delivered to such Person which has not previously been
reviewed by Parent. The Company shall, and shall cause its Subsidiaries
and affiliates, and their respective officers, directors, employees,
investment bankers, attorneys, accountants and other agents to,
immediately cease and cause to be terminated all discussions and
negotiations that have taken place prior to the date hereof, if any, with
any parties conducted heretofore with respect to any Takeover Proposal
relating to the Company and shall not renew any such discussions or
negotiations unless permitted by the first sentence of clause (a)(ii) of
this Section 5.6.
(b) As used in this Agreement, "Takeover Proposal" shall
mean any tender or exchange offer involving the capital stock of the
Company, any proposal for a merger, consolidation or other business
combination involving the Company, any proposal or offer to acquire in
any manner a substantial equity interest in, or a substantial portion of
the business or assets of, the Company or any Subsidiary of the Company,
any proposal or offer with respect to any recapitalization or
restructuring with respect to the Company or any Subsidiary of the
Company or any proposal or offer with respect to any other transaction
similar to any of the foregoing with respect to the Company or any
Subsidiary of the Company
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other than pursuant to the transactions to be
effected pursuant to this Agreement.
Section 5.7 ADDITIONAL AGREEMENTS. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use its
best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable, whether
under applicable laws and regulations or otherwise, or to remove any
injunctions or other impediments or delays, legal or otherwise, to
consummate and make effective the Merger and the other transactions
contemplated by this Agreement. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of the
Company, Parent and Sub shall use their best efforts to take, or cause to
be taken, all such necessary actions.
Section 5.8 PUBLICITY. So long as this Agreement is in
effect, neither the Company nor Parent nor their affiliates shall issue
or cause the publication of any press release or other public statement
or announcement with respect to this Agreement or the transactions
contemplated hereby without prior consultation with the other party,
except as may be required by law or by obligations pursuant to any
listing agreement with a national securities exchange, and in such case
shall use all reasonable efforts to consult with the other party prior to
such release or announcement being issued.
Section 5.9 NOTIFICATION OF CERTAIN MATTERS. The Company
shall give prompt notice to Parent, and Parent shall give prompt notice
to the Company, of (a) the occurrence, or non-occurrence of any event the
occurrence or non-occurrence of which would cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Effective Time and (b) any material
failure of the Company or Parent, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery of any
notice pursuant to this Section 5.9 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
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Section 5.10 DIRECTORS' AND OFFICERS' INSURANCE AND
INDEMNIFICATION. Parent agrees that at all times after the Effective
Time, it shall indemnify each person who is now, or has been at any time
prior to the date hereof, a director or officer of the Company or of any
of the Company's Subsidiaries or person entitled to indemnification
(individually an "Indemnified Party" and collectively the "Indemnified
Parties"), to the same extent and in the same manner as is now provided
in the respective charters or by-laws of the Company and such
Subsidiaries or otherwise in effect on the date hereof, with respect to
any claim, liability, loss, damage, cost or expense (whenever asserted or
claimed) ("Indemnified Liability") based in whole or in part on, or
arising in whole or in part out of, any matter existing or occurring at
or prior to the Effective Time. The Indemnified Parties shall be
entitled to advancement of expenses provided such Indemnified Party
provides Parent with an undertaking to reimburse Parent in a form
comparable to the undertaking provided for by the DGCL. Parent shall, or
shall cause the Surviving Corporation to, maintain in effect for not less
than six (6) years after consummation of the Merger the current policies
of directors' and officers' liability insurance maintained by the Company
and its Subsidiaries on the date hereof (provided that Parent may
substitute therefor policies having at least the same coverage and
containing terms and conditions which are no less advantageous to the
persons currently covered by such policies and with carriers comparable
to the Company's existing carriers in terms of creditworthiness) with
respect to matters existing or occurring at or prior to the Effective
Time. Promptly after receipt by an Indemnified Party of notice of the
assertion (an "Assertion") of any claim or the commencement of any action
against him or her in respect to which indemnity or reimbursement may be
sought against Parent, the Company, the Surviving Corporation or a
Subsidiary of the Company or the Surviving Corporation ("Indemnitors")
hereunder, such Indemnified Party shall notify any Indemnitor in writing
of the Assertion, but the failure to so notify any Indemnitor shall not
relieve any Indemnitor of any liability it may have to such Indemnified
Party hereunder except where such failure shall have materially
prejudiced Indemnitor in defending against such Assertion. No
Indemnified Party shall settle any Assertion without the prior written
consent of Parent provided, however, that if Parent withholds such
consent, then
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Parent shall provide the Indemnified Party reasonable
assurances that it shall honor the indemnification provisions of this
Section 5.10. The provisions of this Section 5.10 are intended for the
benefit of, and shall be enforceable by, the respective Indemnified
Parties.
Section 5.11 RULE 145 AFFILIATES. At least 30 days prior to
the Closing Date, the Company shall deliver to Parent a letter
identifying, to the best of the Company's knowledge, all persons who are,
at the time of the Company Special Meeting, deemed to be "affiliates" of
the Company for purposes of Rule 145 under the Securities Act ("Company
Affiliates"). The Company shall use all reasonable efforts to cause each
Person who is identified as a Company Affiliate to deliver to Parent
prior to the Closing Date an agreement substantially in the form of
Exhibit C to this Agreement.
Section 5.12 PROXY STATEMENT/PROSPECTUS. As soon as
practicable following the date of this Agreement, Parent and the Company
shall prepare and file with the SEC the Proxy Statement/Prospectus and
each shall use all reasonable efforts to have the Proxy
Statement/Prospectus cleared by the SEC as promptly as practicable. As
soon as practicable following such clearance, Parent shall prepare and
file with the SEC the Registration Statement, of which the Proxy
Statement/Prospectus will form a part, and shall use its best efforts to
have the Registration Statement declared effective by the SEC as promptly
as practicable thereafter. Parent and the Company shall cooperate with
each other in the preparation of the Proxy Statement/Prospectus, and each
will provide to the other promptly copies of all correspondence between
it or any of its representatives and the SEC. Each of the Company and
Parent shall furnish all information concerning it required to be
included in the Registration Statement and the Proxy
Statement/Prospectus, and as promptly as practicable after the
effectiveness of the Registration Statement, the Proxy
Statement/Prospectus will be mailed to the stockholders of the Company.
No amendment or supplement to the Registration Statement or the Proxy
Statement/Prospectus will be made without the approval of each of the
Company and Parent, which approval will not be unreasonably withheld or
delayed. Each of the Company and Parent will advise the other promptly
after it receives notice thereof, of the time when the Registration
Statement has become effective or any amendment thereto
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or any supplement
or amendment to the Proxy Statement/Prospectus has been filed, or the
issuance of any stop order, or the suspension of the qualification of the
Parent Common Stock to be issued in the Merger for offering or sale in
any jurisdiction, or of any request by the SEC or the NYSE for amendment
of the Registration Statement or the Proxy Statement/Prospectus.
Section 5.13 TAX-FREE REORGANIZATION. The parties intend the
transaction to qualify as a reorganization under Section 368(a) of the
Code; each party and its affiliates shall use all reasonable efforts to
cause the Merger so to qualify; and neither party nor any affiliate shall
take any action, including any transfer or other disposition of assets or
any interest in the Company after the Closing, that would cause the
Merger not to qualify as a reorganization under Section 368(a) of the
Code. Parent shall report the Merger for income tax purposes as a
reorganization within the meaning of section 368(a) of the Code and any
comparable state or local tax statute.
Section 5.14 EXISTING STOCKHOLDER AGREEMENTS AND REGISTRATION
RIGHTS AGREEMENT. The Company will cooperate to terminate or cause to be
terminated, prior to the Effective Time, the Amended and Restated
Management Stockholder Agreement, dated as of February 5, 1992, and the
Stockholders Agreement dated as of February 5, 1992, by and among Lincoln
National Corporation, Keystone, Inc., Acadia Partners, L.P. and the
persons listed on Schedule A thereto. The Company will cooperate to
cause the Amended and Restated Investor Stockholders Agreement, dated as
of February 5, 1992, to remain in full force and effect until the Company
Stockholder Meeting and to terminate such Agreement immediately following
such Meeting. The Company will suspend all sales under the shelf
Registration Statement filed pursuant to the Registration Rights
Agreement ("Registration Rights Agreement") by and among the Company
Keystone, Inc., Acadia Partners, L.P. and the other stockholders of the
Company named therein at least one business day prior to the Closing Date
and will cause the Registration Rights Agreement not to have any
application to any securities of Parent or its Subsidiaries following the
Effective Time.
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Section 5.15 STOCK EXCHANGE LISTING. Parent shall use all
reasonable efforts to cause the shares of Parent Common Stock issued in
the Merger and the shares of Parent Common Stock to be reserved for
issuance upon exercise of the Parent Stock Options to be approved for
listing on the NYSE prior to the Closing Date.
ARTICLE 6
CONDITIONS
Section 6.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The
obligations of the Company, on the one hand, and Parent, and Sub, on the
other hand, to consummate the Merger are subject to the satisfaction (or,
if permissible, waiver by the party for whose benefit such conditions
exist) of the following conditions:
(a) this Agreement shall have been adopted by the
stockholders of the Company in accordance with the DGCL;
(b) no court, arbitrator or governmental body, agency or
official shall have issued any order, decree or ruling and there shall
not be any statute, rule or regulation, restraining, enjoining or
prohibiting the consummation of the Merger;
(c) the Registration Statement shall have become
effective under the Securities Act and no stop order suspending
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by
the SEC;
(d) any waiting period applicable to the Merger under the
HSR Act shall have expired or been terminated; and
(e) all actions by or in respect of or filing or any
governmental body, agency, official, or authority required to permit the
consummation of the Merger (including insurance regulatory commission
approvals) shall have been obtained and such approval shall be in full
force and effect.
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Section 6.2 CONDITIONS TO THE OBLIGATIONS OF PARENT AND SUB.
The obligations of Parent and Sub to consummate the Merger are subject to
the satisfaction (or waiver by Parent) of the following further
conditions:
(a) the representations and warranties of the Company
shall have been true and accurate as of the Effective Time as if made at
and as of such time (except for those representations and warranties that
address matters only as of a particular date or only with respect to a
specific period of time which need only be true and accurate as of such
date or with respect to such period), except where the failure of such
representations and warranties to be so true and correct (without giving
effect to any limitation as to "materiality" or "material adverse effect"
set forth therein), would not have, and is not reasonably likely to have,
individually or in the aggregate, a material adverse effect on the
Company and its Subsidiaries taken as a whole;
(b) the Company shall have performed in all material
respects its obligations hereunder required to be performed by it at or
prior to the Effective Time;
(c) since March 31, 1996, except as set forth in Section
3.6 of the Disclosure Schedule, there shall not have occurred any event,
change or effect having, or which would be reasonably likely to have, in
the aggregate, a material adverse effect on the Company and its
Subsidiaries, taken as a whole (other than changes in insurance laws and
regulations affecting the reinsurance industry generally); and
(d) Parent shall have received an opinion of nationally
recognized tax counsel to Parent, to the effect that the Merger will
qualify as a reorganization within the meaning of Section 368 of the Code
and in rendering such opinion tax counsel may rely upon representations
provided by the parties hereto as well as certain stockholders of the
Company.
Section 6.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the Merger are subject to the
satisfaction (or waiver by the Company) of the following further
conditions:
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(a) the representations and warranties of Parent and Sub
shall be true and accurate as of the Effective Time as if made at and as
of such time (except for those representations and warranties that
address matters only as of a particular date or only with respect to a
specific period of time which need only be true and accurate as of such
date or with respect to such period), except where the failure of such
representations and warranties to be so true and correct (without giving
effect to any limitation as to "materiality" or "material adverse effect"
set forth therein), would not have, and is not reasonably likely to have,
individually or in the aggregate, a material adverse effect on Parent and
its Subsidiaries;
(b) each of Parent and Sub shall have performed in all
material respects all of the respective obligations hereunder required to
be performed by Parent or Sub, as the case may be, at or prior to the
Effective Time;
(c) the Parent Common Stock to be issued in the Merger
shall have been approved for listing on the New York Stock Exchange,
subject to official notice of issuance;
(d) since March 31, 1996, there shall not have occurred
any event, change or effect having, or which would be reasonably likely
to have, individually or in the aggregate, a material adverse effect on
Parent and its Subsidiaries, taken as a whole (other than changes in
insurance laws and regulations affecting the reinsurance industry
generally);
(e) the Company shall have received an opinion of
nationally recognized tax counsel to the Company, to the effect that the
Merger will qualify as a reorganization within the meaning of Section
368(a) of the Code and in rendering such opinion tax counsel may rely
upon representations provided by the parties hereto as well as certain
stockholders of the Company; and
(f) the Average Parent Share Price shall not be less than
$125 per share.
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ARTICLE 7
TERMINATION
Section 7.1 TERMINATION. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective
Time, whether before or after stockholder approval thereof:
(a) By the mutual consent of the Board of Directors of
Parent and the Board of Directors of the Company;
(b) By either of the Board of Directors of the Company or
the Board of Directors of Parent:
(i) if the Merger shall not have occurred on or
prior to December 31, 1996; PROVIDED, HOWEVER, that the right to
terminate this Agreement under this Section 7.1(b)(i) shall not be
available to any party whose failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of
the Merger to occur on or prior to such date; or
(ii) if any Governmental Entity shall have issued an
order, decree or ruling or taken any other action (which order,
decree, ruling or other action the parties hereto shall use their
best efforts to lift), in each case permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall
have become final and non-appealable;
(c) By the Board of Directors of the Company:
(i) if the Board of Directors of the Company shall have
(A) withdrawn, or modified or changed in a manner adverse to Parent or
Sub its approval or recommendation of this Agreement or the Merger in
order to approve and permit the Company to execute a definitive
agreement relating to a Takeover Proposal, and (B) determined, after
having received the advice of outside legal counsel to the Company and
the advice of the Company's financial advisor, that the failure to
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take such action as set forth in the preceding clause (A) is reasonably
likely to result in a breach of the Board of Directors' fiduciary
duties under applicable law; PROVIDED, HOWEVER, that the Company shall
have given Parent and Sub forty-eight (48) hours advance notice of any
termination pursuant to this Section 7.1(c)(i) and that the Company
shall have paid Parent the fees and expenses required by Section 8.1(b)
hereof;
(ii) if Parent or Sub (x) breaches or fails in any
material respect to perform or comply with any of its material
covenants and agreements contained herein or (y) breaches its
representations and warranties in any material respect and such
breach would have or would be reasonably likely to have a material
adverse effect on Parent and its Subsidiaries, in each case such
that the conditions set forth in Section 6.1 or Section 6.3 would
not be satisfied; PROVIDED, HOWEVER, that if any such breach is
curable by the breaching party through the exercise of the breaching
party's best efforts and for so long as the breaching party shall be
so using its best efforts to cure such breach, the Company may not
terminate this Agreement pursuant to this Section 7.1(c)(ii); or
(iii) if the Company fails to obtain the required
approval of its stockholders at the Company Special Meeting and the
Company shall have paid Parent any fees and expenses required by
Section 8.1(b) hereof.
(d) By the Board of Directors of Parent:
(i) if the Company (x) breaches or fails in any
material respect to perform or comply with any of its material
covenants and agreements contained herein or (y) breaches its
representations and warranties in any material respect and such
breach would have or would be reasonably likely to have a material
adverse effect on the Company and its Subsidiaries, in each case
such that the conditions set forth in Section 6.1 or Section 6.2
would not be satisfied; PROVIDED, HOWEVER, that if any such breach
is curable by the Company through the exercise of the Company's best
efforts and for so long as the Company shall be so using its best
efforts to cure such breach, Parent may not terminate this Agreement
pursuant to this Section 7.1(d)(i);
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(ii) if (A) the Board of Directors of the Company
shall have withdrawn, or modified or changed in a manner adverse to
Parent or Sub its approval or recommendation of this Agreement or
the Merger or shall have recommended a Takeover Proposal or other
business combination, or the Company shall have entered into an
agreement in principle (or similar agreement) or definitive
agreement providing for a Takeover Proposal or other business
combination with a person or entity other than Parent, Sub or their
Subsidiaries (or the Board of Directors of the Company resolves to
do any of the foregoing), or (B) prior to the certification of the
vote of the Company's stockholders to approve the Merger at the
Company Special Meeting, it shall have been publicly disclosed or
Parent or Sub shall have learned that any person, entity or "group"
(as that term is defined in Section 13(d)(3) of the Exchange Act)
(an "Acquiring Person"), other than Parent or its Subsidiaries or
the Stockholders, shall have acquired beneficial ownership
(determined pursuant to Rule 13d-3 promulgated under the Exchange
Act) of more than 40% of any class or series of capital stock of the
Company (including the Shares), through the acquisition of stock,
the formation of a group or otherwise, or shall have been granted
any option, right or warrant, conditional or otherwise, to acquire
beneficial ownership of more than 40% of any class or series of
capital stock of the Company (including the Shares) other than as
disclosed in a Schedule 13D on file with the SEC on the date hereof;
or
(iii) if the stockholders of the Company do not
approve the Merger at the Company Special Meeting.
Section 7.2 EFFECT OF TERMINATION. In the event of the
termination of this Agreement as provided in Section 7.1, written notice
thereof shall forthwith be given to the other party or parties specifying
the provision hereof pursuant to which such termination is made, and this
Agreement shall forthwith become null and void, and there shall be no
liability on the part of Parent, Sub or the Company except (A) for fraud
or for willful breach of this Agreement and (B) as set forth in Sections
8.1 and 8.2 hereof and in the last sentence of Section 5.3.
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ARTICLE 8
MISCELLANEOUS
Section 8.1 FEES AND EXPENSES. (a) Except as set forth in
Section 8.1(b) and except for expenses incurred in connection with
printing the Proxy Statement/Prospectus and the Registration Statement,
as well as the filing fees relating thereto, which costs shall be shared
equally by Parent and the Company, all costs and expenses incurred in
connection with this Agreement and the consummation of the transactions
contemplated hereby shall be paid by the party incurring such expenses.
(b) If (w) the Board of Directors of the Company shall
terminate this Agreement pursuant to Section 7.1(c)(i) hereof, (x) the
Board of Directors of Parent shall terminate this Agreement pursuant to
Section 7.1(d)(ii), (y) the Board of Directors of Parent shall terminate
this Agreement pursuant to Section 7.1(d)(iii) hereof or the Board of
Directors of the Company shall have terminated this Agreement pursuant to
Section 7.1(c)(iii) and in either case there shall have been made or
commenced a Takeover Proposal (other than the Merger) with respect to the
Company, or (z) the Board of Directors of Parent shall terminate this
Agreement pursuant to Section 7.1(d)(i) and within one year of such
termination, a Person shall acquire or beneficially own a majority of the
then outstanding Shares or shall have obtained majority representation on
the Company's Board of Directors or shall enter into a definitive
agreement with the Company with respect to a Takeover Proposal or similar
business combination (each such case of termination being referred to as
a "Trigger Event"), then the Company shall pay to Parent (not later than
the date of termination of this Agreement in the case of clauses (w), (x)
and (y) above) $25 million in cash.
Section 8.2 FINDERS' FEES. (a) Except for Morgan Stanley,
whose fees will be paid by Parent, there is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized
to act on behalf of Parent or any of its Subsidiaries who might be
entitled to any fee or commission from Parent or any of its Subsidiaries
upon consummation of the transactions contemplated by this Agreement.
(b) Except for Goldman Sachs, a copy of whose engagement
agreement has been provided to Parent
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and whose fees will be paid by the
Company, there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf
of the Company or any of its Subsidiaries who might be entitled to any
fee or commission from the Company or any of its Subsidiaries upon
consummation of the transactions contemplated by this Agreement.
Section 8.3 AMENDMENT AND MODIFICATION. Subject to applicable
law, this Agreement may be amended, modified and supplemented in any and
all respects, whether before or after any vote of the stockholders of the
Company contemplated hereby, by written agreement of the parties hereto,
pursuant to action taken by their respective Boards of Directors, at any
time prior to the Closing Date with respect to any of the terms contained
herein; PROVIDED, HOWEVER, that after the approval of this Agreement by
the stockholders of the Company, no such amendment, modification or
supplement shall reduce or change the consideration to be received by the
Company's stockholders in the Merger.
Section 8.4 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.
None of the representations and warranties in this Agreement or in any
schedule, instrument or other document delivered pursuant to this
Agreement shall survive the Effective Time.
Section 8.5 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, telecopied (which is confirmed) or sent by an overnight
courier service, such as FedEx, to the parties at the following addresses
(or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Sub, to:
General Re Corporation
695 East Main Street
Stamford, CT 06904
Attention: Charles F. Barr, Esq.
General Counsel
Telephone No.: (203) 328-5506
Telecopy No.: (203) 328-5877
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with a copy to:
James C. Freund, Esq.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone No.: (212) 735-3000
Telecopy No.: (212) 735-2001
and
(b) if to the Company, to:
National Re Corporation
777 Long Ridge Road
Stamford, CT 06904
Attention: Mary Ellen Burns, Esq.
General Counsel
Telephone No.: (203) 329-5391
Telecopy No.: (203) 329-5220
with a copy to:
Paul, Weiss, Rifkind, Wharton
& Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Matthew Nimetz, Esq.
Telephone No.: (212) 373-3000
Telecopy No.: (212) 757-3990
Section 8.6 INTERPRETATION. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. Whenever the words "include",
"includes" or "including" are used in this Agreement they shall be deemed
to be followed by the words "without limitation". The phrase "made
available" in this Agreement shall mean that the information referred to
has been made available if requested by the party to whom such
information is to be made available. The phrases "the date of this
Agreement", "the date hereof", and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to July 1, 1996. As
used in this Agreement, the term "affiliate(s)" shall have the meaning
set forth in Rule l2b-2 of the Exchange Act.
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Section 8.7 COUNTERPARTS. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the
same agreement and shall become effective when two or more counterparts
have been signed by each of the parties and delivered to the other
parties, it being understood that all parties need not sign the same
counterpart.
Section 8.8 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES;
RIGHTS OF OWNERSHIP. This Agreement and the Confidentiality Agreement
(including the exhibits hereto and the documents and the instruments
referred to herein and therein): (a) constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, and (b)
except as provided in Sections 5.5 (as provided therein) and 5.10 with
respect to the obligations of Parent thereunder, are not intended to
confer upon any person other than the parties hereto any rights or
remedies hereunder.
Section 8.9 SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void, unenforceable or
against its regulatory policy, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force
and effect and shall in no way be affected, impaired or invalidated.
Section 8.10 SPECIFIC PERFORMANCE. The parties hereto agree
that irreparable damage would occur in the event any provision of this
Agreement was not performed in accordance with the terms hereof and that
the parties shall be entitled to the remedy of specific performance of
the terms hereof, in addition to any other remedy at law or equity.
Section 8.11 GOVERNING LAW. This Agreement shall be governed
and construed in accordance with the laws of the State of Delaware
without giving effect to the principles of conflicts of law thereof.
Section 8.12 ASSIGNMENT. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other parties, except that Sub may
assign, in its sole discretion, any or all of its
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rights, interests and
obligations hereunder to Parent or to any direct or indirect wholly owned
Subsidiary of Parent; PROVIDED, HOWEVER, that no such assignment shall
relieve Parent from any of its obligations hereunder. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective
successors and assigns.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
GENERAL RE CORPORATION
By: /s/ JAMES E. GUSTAFSON
-------------------------
Name: James E. Gustafson
Title: President and Chief Operating Officer
N ACQUISITION CORPORATION
By: /s/ JOSEPH P. BRANDON
--------------------------
Name: Joseph P. Brandon
Title: Vice President
NATIONAL RE CORPORATION
By: /s/ WILLIAM D. WARREN
---------------------------
Name: William D. Warren
Title: President, Chief
Executive Officer and Chairman of the
Board
<PAGE>
EXHIBIT A
FORM OF COMPANY TAX OPINION REPRESENTATION LETTER
_______________, 1996
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Dear Sirs:
On behalf of the Company, the undersigned, in connection with
the opinions to be delivered by you pursuant to Sections 6.2(e) and
6.3(e) of the Agreement and Plan of Merger dated as of July ___, 1996,
among Parent, Sub and the Company,{*/} hereby certifies that, to the
extent the facts relate to the Company, to his knowledge and after due
diligence, and to the extent otherwise (including with respect to matters
involving Sub) without knowledge to the contrary, the descriptions of the
facts contained in the Proxy Statement/Prospectus and Registration
Statement, dated ___________________, 1996, relating to the proposed
Merger of the Company into Sub completely and accurately describe the
Merger and the transactions leading up thereto and further that:
1. The Merger will be consummated in compliance with the
terms of the Agreement and Plan of Merger, and none of the material terms
and conditions therein have been or, except as scheduled, will have been
waived or modified.
2. The fair market value of the Parent Common Stock and Cash
Consideration received by each Company shareholder will be approximately
equal to the fair market value of the Company Common Stock surrendered in
the exchange and was arrived at through arm's length negotiation.
**FOOTNOTES**
{*/}For purposes of this certificate, capitalized terms used and not
otherwise defined herein shall have the meaning ascribed thereto in the
Agreement and Plan of Merger.
<PAGE>
2
3. There is no intercorporate indebtedness existing between
Parent and the Company or between Sub and the Company that was issued,
acquired, or will be settled at a discount.
4. The Company is not an investment company as defined in
section 368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.
5. At the Effective Time, Sub will acquire at least 90
percent of the fair market value of the net assets and at least 70
percent of the fair market value of the gross assets held by the Company
immediately prior to the Merger. For purposes of this representation,
amounts used by the Company to pay its reorganization expenses and
dissenters and to make all redemptions and distributions (except for
regular, normal dividends) made by the Company immediately preceding the
transfer will be included as assets of the Company held immediately prior
to the Merger.
6. Following the Merger, Sub will continue the historic
business of the Company or use a significant portion of the Company's
business assets in a business.
7. The payment of cash in lieu of fractional shares of Parent
Common Stock does not represent separately bargained-for consideration.
8. None of the compensation received (or to be received) by
any shareholder-employee of the Company will be separate consideration
for, or allocable to, any of his shares of Company Common Stock. None of
the Parent Common Stock received by any shareholder-employee of the
Company pursuant to the Merger will be separate consideration for, or
allocable to, any employment agreement or arrangement. The compensation
paid to any shareholder-employee of the Company will be commensurate with
amounts that would be paid to a third party bargaining at arm's length
for similar services.
9. The Company, the Parent, Sub and the shareholders of the
Company will each pay their respective expenses, if any, incurred in
connection with the Merger and the transactions related thereto.
10. On the date hereof, there is no plan or intention on the
part of the shareholders of the Company who own 5 percent or more of the
Common Stock of the Company and, to the best knowledge of the management
of the Company, there is no plan or intention on the part of the
remaining shareholders of the Company, to sell, exchange or dispose
otherwise of a number of shares of Parent Common Stock received in the
Merger that would reduce such Company shareholders' ownership of Parent
Common Stock to a number of shares having a value, as of the date of the
Merger, of less than 50 percent of the value of all of the formerly
outstanding Company Common Stock as of the same date. For purposes of
this representation,
<PAGE>
3
shares of Company Common Stock exchanged for cash or
other property in the Merger, surrendered by dissenters or exchanged for
cash in lieu of fractional shares of Parent Common Stock will be treated
as outstanding Company Common Stock on the date of the Merger. In
addition, and not in limitation of the foregoing, the Company has
considered, in making this representation, any shares of Company Common
Stock that have been sold, redeemed or otherwise disposed of by
shareholders who own 5 percent or more of the Company Common Stock, or by
shareholders who are officers or directors of the Company, after the
announcement of the Merger and prior to the Effective Time, to the extent
the management of the Company has knowledge on the date hereof of any
such sales, redemptions or dispositions. Except as set forth on Annex I
to this letter, to the knowledge of the management of the Company, there
are no shareholders who own 5 percent or more of the Company Common Stock
on the date hereof.
11. The liabilities of the Company assumed by Sub and the
liabilities to which the transferred assets of the Company are subject
were incurred by the Company in the ordinary course of its business.
12. The fair market value of the assets of the Company
transferred to Sub will equal or exceed the sum of the liabilities
assumed by Sub, plus the amount of liabilities, if any, to which the
transferred assets are subject.
13. The Company is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of section 368(a)(3)(A) of
the Internal Revenue Code.
I understand that Paul, Weiss, Rifkind, Wharton & Garrison, as
counsel for the Company, and Skadden, Arps, Slate, Meagher & Flom, as
counsel for Parent and Sub, will rely on this certificate in rendering
their respective opinions concerning certain of the federal income tax
consequences of the Merger and hereby commit to inform them if, for any
reason, any of the foregoing representations ceases to be true prior to
the Effective Time.
NATIONAL RE CORPORATION
By:
----------------------------
Name:
Title:
<PAGE>
EXHIBIT B
FORM OF PARENT TAX OPINION REPRESENTATION LETTER
_______________, 1996
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Dear Sirs:
On behalf of Parent and Sub, the undersigned, in connection
with the opinions to be delivered by your firms pursuant to Sections
6.2(e) and 6.3(e) of the Agreement and Plan of Merger dated as of July
___, 1996, among Parent, Sub and the Company,{*/} hereby certifies that,
to the extent the facts relate to Parent and Sub, to his knowledge and
after due diligence, and to the extent otherwise without knowledge to the
contrary, the descriptions of the facts contained in the Registration
Statement and the Proxy Statement completely and accurately describe the
Merger and the transactions leading up thereto and further that:
1. The Merger will be consummated in compliance with the
terms of the Agreement and Plan of Merger, and none of the material terms
and conditions therein have been or, except as scheduled, will have been,
waived or modified.
2. Prior to the Merger, Parent will be in control of Sub
within the meaning of section 368(c) of the Internal Revenue Code.
3. The fair market value of the Parent Common Stock and other
consideration received by each Company shareholder will be approximately
equal to the fair market value of the Company Common Stock surrendered in
the exchange and was arrived at through arm's length negotiation.
**FOOTNOTES**
{*/}For purposes of this certificate, capitalized terms used and not
otherwise defined herein shall have the meaning ascribed thereto in the
Agreement and Plan of Merger.
<PAGE>
2
4. There is no intercorporate indebtedness existing between
Parent and the Company or between Sub and the Company that was issued,
acquired, or will be settled at a discount.
5. Neither Parent nor Sub is an investment company as defined
in section 368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.
6. At the Effective Time, Sub will acquire at least 90
percent of the fair market value of the net assets and at least 70
percent of the fair market value of the gross assets held by the Company
immediately prior to the Merger. For purposes of this representation,
amounts used by the Company to pay its reorganization expenses and
dissenters and to make all redemptions and distributions (except for
regular, normal dividends) made by the Company immediately preceding the
transfer will be included as assets of the Company held immediately prior
to the Merger.
7. Parent has no plan or intention to redeem or acquire after
the date of the Merger any of the Parent Common Stock to be issued in the
Merger. Parent publicly announced on ____________ that its Board of
Directors authorized the repurchase of up to $500,000,000 of its Common
Stock through open market purchases (the "Buy Back"). Pursuant to the
Buy Back, (a) any redemptions will be undertaken for a corporate business
purpose, (b) the Parent Common Stock to be purchased will be widely held,
(c) the purchases of Parent Common Stock will be made in the open market,
and to the best of Parent's knowledge, will not be made from (i)
directors or officers of Parent or Sub, or (ii) any shareholder owning
one percent or more of the outstanding parent Common Stock, and (d) there
is no plan or intention that the aggregate amount of Parent Common Stock
purchased in the Buy Back will equal or exceed 20 percent of the
outstanding Parent Common Stock.
8. Parent has no plan or intention to liquidate Sub, merge
Sub with and into another corporation, sell or dispose otherwise of any
of the stock of Sub, or cause Sub to sell or otherwise dispose of any of
the assets of the Company acquired in the Merger, except for dispositions
made in the ordinary course of business, or transfers described in
section 368(a)(2)(C) of the Internal Revenue Code.
9. Following the Merger, Sub will continue the historic
business of the Company or use a significant portion of the Company's
business assets in a business.
10. Following the Merger, Sub will not issue additional shares
of its stock that would result in Parent losing control of Sub within the
meaning of section 368(c) of the Internal Revenue Code.
11. No stock of Sub will be issued in the Merger.
<PAGE>
3
12. The payment of cash in lieu of fractional shares of Parent
Common Stock is solely for the purpose of avoiding the expense and
inconvenience to Parent of issuing fractional shares of Parent Common
Stock and does not represent separately bargained-for consideration.
13. None of the compensation received (or to be received) by
any shareholder-employee of the Company will be separate consideration
for, or allocable to, any of his shares of Company Common Stock. None of
the Parent Common Stock received by any shareholder-employee of the
Company pursuant to the Merger will be separate consideration for, or
allocable to, any employment agreement or arrangement. The compensation
paid to any shareholder-employee of the Company will be commensurate with
amounts that would be paid to a third party bargaining at arm's length
for similar services.
14. The Company, the Parent, Sub and the shareholders of the
Company will each pay their respective expenses, if any, incurred in
connection with the Merger and the transactions related thereto.
I understand that Paul, Weiss, Rifkind, Wharton & Garrison, as
counsel for the Company, and Skadden, Arps, Slate, Meagher & Flom, as
counsel for Parent, will rely on this certificate in rendering their
opinion concerning certain of the federal income tax consequences of the
Merger and hereby commit to inform them if, for any reason, any of the
foregoing representations ceases to be true prior to the Effective Time.
GENERAL RE CORPORATION
By:
-----------------------
Name:
Title:
<PAGE>
EXHIBIT C
FORM OF AFFILIATE AGREEMENT
1996
General Re Corporation
695 East Main Street
Stamford, CT 06904
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be
deemed to be an "affiliate" of National Re Corporation, a Delaware
corporation (the "Company"), as the term "affiliate" is defined for
purposes of paragraphs (c) and (d) of Rule 145 of the rules and regulations
(the "Rules and Regulations") of the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the
"Act"). Pursuant to the terms of the Agreement and Plan of Merger, dated
as of July 1, 1996 (the "Agreement"), by and among the Company, General Re
Corporation, a Delaware corporation ("Parent"), and N Acquisition
Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent
("Sub"), the Company will be merged with and into Sub (the "Merger").
As a result of the Merger, I will receive shares of common stock,
par value $.50 per share, of Parent (the "Parent Stock") in exchange for
shares owned by me of common stock, no par value, of the Company.
I represent, warrant, and covenant to Parent that in the event I
receive any Parent Stock as a result of the Merger:
A. I shall not make any sale, transfer, or other disposition of
the Parent Stock in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer, or otherwise dispose of the
Parent Stock to the extent I felt necessary, with my counsel or counsel for
the Company.
C. I have been advised that the issuance of the Parent Stock to
me pursuant to the Merger has been registered with the Commission under the
Act on a Registration Statement on Form S-4. However, I have also been
advised that, since at the time the Merger was submitted for a vote of the
stockholders of the Company, I may be deemed to have been an affiliate of
the Company and the distribution by me of the Parent Stock has not been
registered under the Act, I may not sell, transfer or otherwise dispose of
the Parent Stock issued to me in the Merger unless (i) such sale, transfer,
or other disposition has been registered under the Act, (ii) such sale,
transfer, or other disposition is made in conformity
<PAGE>
2
with Rule 145
promulgated by the Commission under the Act, or (iii) in the opinion of
counsel reasonably acceptable to Parent, or a "no action" letter obtained
by the undersigned from the staff of the Commission, such sale, transfer,
or other disposition is otherwise exempt from registration under the Act.
D. I understand that Parent is under no obligation to register
the sale, transfer, or other disposition of the Parent Stock by me or on my
behalf under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.
E. I also understand that stop transfer instructions will be
given to Parent's transfer agent with respect to the Parent Stock and that
there will be placed on the certificates for the Parent Stock issued to me,
or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED _____________________________ BETWEEN THE
REGISTERED HOLDER HEREOF AND _________________________, A COPY
OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF GENERAL
RE CORPORATION."
F. I also understand that unless the transfer by me of my
Parent Stock has been registered under the Act or is a sale made in
conformity with the provisions of Rule 145, Parent reserves the right to
put the following legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO,
OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933."
It is understood and agreed that the legends set forth in
paragraphs E and F above shall be removed by delivery of substitute
certificates without such legend if such legend is not required for
purposes of the Act or the Agreement, including sales under Rule 145(d).
It is also understood and agreed that such legends and the stop orders
referred to above will be removed if (i) two years shall have elapsed from
the date the undersigned
<PAGE>
3
acquired the Parent Stock received in the Merger
and the provisions of Rule 145(d) (2) are then available to the
undersigned, (ii) three years shall have elapsed from the date the
undersigned acquired the Parent Stock received in the Merger and the
provisions of Rule 145(d) (3) are then applicable to the undersigned, or
(iii) Parent has received either an opinion of counsel, which opinion and
counsel shall be reasonably satisfactory to Parent, or a "no action" letter
obtained by the undersigned from the staff of the Commission, to the effect
that the restrictions imposed by Rule 145 under the Act no longer apply to
the undersigned.
Execution of this letter should not be considered an admission on
my part that I am an "affiliate" of the Company as described in the first
paragraph of this letter or as a waiver of any rights I may have to object
to any claim that I am such an affiliate on or after the date of this
letter.
Very truly yours,
-----------------------------
Accepted this ______ day of
, 1996 by
- --------------
- -----------------------------
By:
--------------------------
Name:
Title:
EXHIBIT 99
National Re Corporation
PRESS RELEASE
NATIONAL RE CORPORATION ANNOUNCES
MERGER AGREEMENT WITH GENERAL RE
7/1/96
BUSINESS EDITORS
Stamford, CT, July 1, 1996...... NATIONAL RE CORPORATION and GENERAL RE
CORPORATION have entered into a definitive merger agreement between the two
companies.
Under the National Re shareholders will have the option at the closing of
accepting either
$53 in cash or $53 value in General Re stock. For shareholders stock, the
transaction will be tax free. The total consideration from the acquisition
is approximately $940 million.
The transaction provides for a minimum stock component of 50%. There is no
minimum cash component. National Re shareholders electing to receive stock
will receive no less than 0.3212 or more than 0.3926 of a General Re share.
Under the terms of the agreement, the parties have agreed to a breakup fee
of $25 million or approximately $1.40 per National Re share.
General Re plans to finance the cash component of the transaction from
internal sources. It is anticipated that the transaction which is
subject, among other things, to regulatory approval and the approval of
National Re shareholders, will be completed in the fourth quarter.
General Re expects that the transaction will not be dilutive to 1997
operating earnings.
National Re also announced that certain significant stockholders of
National Re have entered into agreements to support the transactions.
These shareholders collectively own 22% of National Re's outstanding common
shares.
William D. Warren, National Re's Chairman, Chief Executive Officer and
President commented: "We are very pleased to become part of the General Re
organization. General Re is a world leader in the reinsurance industry and
will provide us with the opportunity to expand our scope and better utilize
both companies' expertise and resources. Our shareholders and clients will
benefit from joining with a company that is the global leader in a dynamic
and growing field."
"The acquisition of National Re complements and solidifies General Re's
position as the leading U.S. reinsurer and augments our position as the
premier global reinsurer," stated Ronald E. Ferguson, General Re's Chairman
and Chief Executive Officer. "National Re's business philosophy and
culture are very similar to that of General Re, and the added account
portfolio will be an excellent fit with our own. National Re and General
Re are committed to the same principles, namely, having the best people,
underwriting for profit, providing superior client service, working
directly with our clients and writing predominantly excess reinsurance. I
am tremendously pleased that we have been able to reach an agreement
<PAGE>
2
which is beneficial to the shareholders, clients and staffs of both companies
and we look forward to working together."
James E. Gustafson, General Re's President and Chief Operating Officer
added, "We are truly excited about the opportunities that can be created
from combining the National Re team with our own team. Both companies'
underwriters, marketers and other staff will benefit greatly from working
together. Although we have a similar culture and philosophy toward
business, there is little overlap of clients or accounts in our portfolios.
By bringing our two organizations together, we broaden our market reach."
National Re Corporation, through its wholly owned subsidiary, National
Reinsurance Corporation is one of six major writers of property and
casualty reinsurance in the United States. National Re focuses its treaty
marketing efforts on small to medium-sized, regional and specialty property
and casualty insurers. Facultative marketing efforts are directed toward
the full range of property and casualty insurers. The majority of the
company's premiums are from casualty reinsurance business. National Re
Corporation also provides risk management, underwriting and other
consulting services through its subsidiary National Risk Services, Inc. and
provides reinsurance brokerage services through National Intermediaries,
Inc. The Corporation's remaining subsidiaries are Fairfield Insurance
Company, which operates as a primary insurance company and Global
Resolution, Inc.,
which provides consulting for running-off reinsurance claims and
liabilities.
General Re Corporation is a holding company for global reinsurance and
related risk assessment, risk transfer and risk management operations.
General Re owns General Reinsurance Corporation, the largest professional
property/casualty reinsurer domiciled in the United States, and also holds
a controlling interest in Kolnische Ruckversicherungs-Gesellschaft AG
(Cologne Re), a major international reinsurer. In addition, General Re
writes excess and surplus lines insurance through General Star Management,
provides alternative risk solutions through the Genesis Underwriting
Management and provides reinsurance brokerage services through
Herbert Clough Inc. In addition, General Re operates as a dealer in the
swap and derivatives markets through General Re Financial Products
Corporation. General Re also provides investment management services
through General Re-New England Asset Management, Inc.
National Re through its wholly-owned subsidiary, National Reinsurance
Corporation provides property and casualty reinsurance to insurers on a
direct basis. National Re, is rated A+ (Superior) by A.M. Best Company and
assigned a claims-paying ability of AA+ (Excellent) by Standard & Poor's.
Headquartered in Stamford, Connecticut, National Re has eight domestic
branch offices serving clients nationwide and international offices in
Canada and the United Kingdom.
CONTACT:NATIONAL RE CORPORATION, Stamford 203/329-7700
Anne M. Quinn, Vice-President
