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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
August 13, 1996
Date of report (Date of earliest event reported)
AMERICAN RE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-11688 13-3672116
(State or Other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation or organization) Identification No.)
555 COLLEGE ROAD EAST
PRINCETON, NEW JERSEY 08543
(609) 243-4200
(Address including zip code, and telephone number, including area code, of
registrant's principal executive office)
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<PAGE>
ITEM 5. OTHER EVENTS.
On August 13, 1996, American Re Corporation, a Delaware corporation (the
"Company"), entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Munchener Ruckversicherungs - Gesellschaft Aktiengesellschaft
in Munchen, a company organized under the laws of Germany ("Munich Re"), and
Puma Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Munich Re ("Sub"), pursuant to which Sub will merge with and into the Company
(the "Merger"). As a result of the Merger, the outstanding shares of the
Company's common stock, $.01 par value (the "Common Stock") will be converted
into the right to receive $65.00 per share in cash. The Merger is conditioned
upon, among other things, approval by holders of a majority of the Common Stock
and receipt of certain regulatory and governmental approvals. The Merger
Agreement is filed as an exhibit hereto and is incorporated herein by reference.
Pursuant to a Stockholders Agreement dated as of August 13, 1996 among American
Re Associates, L.P. and KKR Partners II, L.P., who collectively own 64.1% of the
Common Stock (the "Majority Stockholders"), and Munich Re and Sub, the Majority
Stockholders have agreed, among other things, to vote their shares of Common
Stock in favor of the Merger and have granted an option to Munich Re to purchase
their shares in certain circumstances. The Stockholders Agreement is filed as an
exhibit hereto and is incorporated herein by reference.
A copy of the press release dated August 14, 1996 issued by the Company
relating to the Merger is filed as Exhibit 99 and is incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
2 Agreement and Plan of Merger dated as of August 13, 1996
among Munchener Ruckversicherungs - Gesellschaft
Aktiengesellschaft in Munchen, Puma Acquisition Corp. and
American Re Corporation.
4 Stockholders Agreement dated as of August 13, 1996 among
American Re Associates, L.P., KKR Partners II, L.P.,
Munchener Ruckversicherungs - Gesellschaft
Aktiengesellschaft in Munchen and Puma Acquisition Corp.
99 Press Release dated August 14, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN RE CORPORATION
(Registrant)
/s/ James R. Fisher
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James R. Fisher
Duly Authorized Officer and Senior Vice President,
Chief Financial and Accounting Officer
Dated: August 14, 1996
<PAGE>
INDEX TO EXHIBITS
<TABLE><CAPTION>
PAGE NUMBER IN
SEQUENTIAL
NUMBERING
EXHIBIT NO. DESCRIPTION SYSTEM
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<S> <C> <C>
2 Agreement and Plan of Merger dated as of August 13, 1996 among
Munchener Ruckversicherungs - Gesellschaft Aktiengesellschaft in
Munchen, Puma Acquisition Corp. and American Re Corporation.
4 Stockholders Agreement dated as of August 13, 1996 among American
Re Associates, L.P., KKR Partners II, L.P., Munchener
Ruckversicherungs - Gesellschaft Aktiengesellschaft in Munchen
and Puma Acquisition Corp.
99 Press Release dated August 14, 1996.
</TABLE>
EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
among
MUNCHENER RUCKVERSICHERUNGS-GESELLSCHAFT
AKTIENGESELLSCHAFT IN MUNCHEN,
PUMA ACQUISITION CORP.
and
AMERICAN RE CORPORATION
Dated as of August 13, 1996
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TABLE OF CONTENTS
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Page
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ARTICLE I
THE MERGER . . . . . . . . . . . . . . . . 2
Section 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Effects of the Merger . . . . . . . . . . . . . . . . . . 2
Section 1.4 Certificate of Incorporation; By-laws . . . . . . . . . . 2
Section 1.5 Directors and Officers . . . . . . . . . . . . . . . . . . 3
ARTICLE II
CONVERSION OF SHARES; STOCKHOLDERS MEETING . . . . . . . . 3
Section 2.1 Conversion of Securities . . . . . . . . . . . . . . . . . 3
Section 2.2 Treatment of Company Stock Options . . . . . . . . . . . . 3
Section 2.3 Dissenting Shares and Section 262 Shares . . . . . . . . . 4
Section 2.4 Surrender of Shares; Stock Transfer Books . . . . . . . . 5
Section 2.5 Stockholders Meeting . . . . . . . . . . . . . . . . . . . 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . 7
Section 3.1 Organization . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.3 Corporate Authorization; Validity of Agreement; Company
Action . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.4 Consents and Approvals; No Violations . . . . . . . . . . 9
Section 3.5 SEC Reports and Financial Statements . . . . . . . . . . 10
Section 3.6 Absence of Certain Changes . . . . . . . . . . . . . . . 11
Section 3.7 Information in Proxy Statement . . . . . . . . . . . . . 12
Section 3.8 Employee Benefit Plans . . . . . . . . . . . . . . . . . 12
Section 3.9 Compliance . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.10 Absence of Litigation . . . . . . . . . . . . . . . . . 14
Section 3.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.12 Opinion of Financial Advisors . . . . . . . . . . . . . 15
Section 3.13 Aetna Adverse Loss Agreement . . . . . . . . . . . . . . 15
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB . . . . . 15
Section 4.1 Organization . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.2 Corporate Authorization; Validity of Agreement;
Necessary Action . . . . . . . . . . . . . . . . . . . 16
Section 4.3 Consents and Approvals; No Violations . . . . . . . . . 16
Section 4.4 Information in Proxy Statement . . . . . . . . . . . . . 17
Section 4.5 Financing . . . . . . . . . . . . . . . . . . . . . . . 17
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<PAGE>
Page
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ARTICLE V
COVENANTS . . . . . . . . . . . . . . . 17
Section 5.1 Interim Operations of the Company . . . . . . . . . . . 17
Section 5.2 Access to Information . . . . . . . . . . . . . . . . . 20
Section 5.3 Consents and Approvals . . . . . . . . . . . . . . . . . 20
Section 5.4 Employee Matters . . . . . . . . . . . . . . . . . . . . 21
Section 5.5 No Solicitation . . . . . . . . . . . . . . . . . . . . 22
Section 5.6 Fiduciary Duties . . . . . . . . . . . . . . . . . . . . 23
Section 5.7 Additional Agreements . . . . . . . . . . . . . . . . . 23
Section 5.8 Publicity . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.9 Notification of Certain Matters . . . . . . . . . . . . 24
Section 5.10 Directors' and Officers' Insurance and Indemnification . 24
Section 5.11 Proxy Statement . . . . . . . . . . . . . . . . . . . . 25
Section 5.12 Certain Fees . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VI
CONDITIONS . . . . . . . . . . . . . . . 26
Section 6.1 Conditions to the Obligations of Each Party . . . . . . 26
Section 6.2 Conditions to the Obligations of Parent and Sub . . . . 26
Section 6.3 Conditions to the Obligations of the Company . . . . . . 27
ARTICLE VII
TERMINATION . . . . . . . . . . . . . . 27
Section 7.1 Termination . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.2 Effect of Termination . . . . . . . . . . . . . . . . . 29
ARTICLE VIII
MISCELLANEOUS . . . . . . . . . . . . . . 29
Section 8.1 Costs and Expenses . . . . . . . . . . . . . . . . . . . 29
Section 8.2 Financial Advisory Fees . . . . . . . . . . . . . . . . 29
Section 8.3 Amendment and Modification . . . . . . . . . . . . . . . 29
Section 8.4 Nonsurvival of Representations and Warranties . . . . . 30
Section 8.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.6 Interpretation . . . . . . . . . . . . . . . . . . . . . 31
Section 8.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . 31
Section 8.8 Entire Agreement; No Third Party Beneficiaries . . . . . 31
Section 8.9 Severability . . . . . . . . . . . . . . . . . . . . . . 31
Section 8.10 Specific Performance . . . . . . . . . . . . . . . . . . 31
Section 8.11 Governing Law . . . . . . . . . . . . . . . . . . . . . 32
Section 8.12 Assignment . . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.13 Consent to Jurisdiction . . . . . . . . . . . . . . . . 32
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<PAGE>
AGREEMENT AND PLAN OF MERGER
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AGREEMENT AND PLAN OF MERGER, dated as of August 13 1996, among
MUNCHENER RUCKVERSICHERUNGS-GESELLSCHAFT AKTIENGESELLSCHAFT IN MUNCHEN, a German
company ("Parent"), PUMA ACQUISITION CORP., a Delaware corporation and a wholly
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owned subsidiary of Parent ("Sub"), and AMERICAN RE CORPORATION, a Delaware
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corporation (the "Company").
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WHEREAS, the Board of Directors of the Company has (i) determined that
the consideration to be paid for each outstanding share (collectively, the
"Shares") of Common Stock, par value $.01 per share (the "Company Common
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Stock"), in the Merger (as defined in Section 1.1) is fair to and in the best
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interests of the stockholders of the Company, (ii) approved this Agreement and
the transactions contemplated hereby and (iii) resolved to recommend approval of
the Merger and this Agreement by such stockholders;
WHEREAS, the Boards of Directors of Parent and Sub have approved, and
deem it advisable and in the best interests of their respective stockholders to
consummate, the Merger, 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 a Stockholders Agreement (the "Stockholders Agreement") with each of
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American Re Associates, L.P. and KKR Partners II, L.P. (collectively, the
"Stockholders"), pursuant to which, among other things, the Stockholders,
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severally and not jointly, have agreed to vote the shares of Company Common
Stock then owned by them in favor of the Merger provided for herein and have
granted to Parent an option to purchase such shares of Company Common Stock, all
on the terms and subject to the conditions set forth in the Stockholders
Agreement, including the condition that all necessary regulatory approvals from
the Delaware Department of Insurance and the New York State Department of
Insurance shall have been obtained and shall be in full force and effect; and
WHEREAS, the Board of Directors of the Company has approved the
transactions contemplated by this Agreement and the Stockholders Agreement in
accordance with the provisions of Section 203 of the Delaware General
Corporation Law (the "DGCL");
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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 Stockholders Agreement, the parties hereto agree as follows:
<PAGE>
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
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of this Agreement, and in accordance with the DGCL, at the Effective Time (as
defined in Section 1.2), Sub shall be merged with and into the Company (the
"Merger"). As a result of the Merger, the separate corporate existence of Sub
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shall cease and the Company shall continue as the surviving corporation of the
Merger (the "Surviving Corporation").
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Section 1.2 Effective Time. As soon as practicable after the
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satisfaction or waiver of the conditions set forth in Article VI, the parties
hereto shall cause the Merger to be consummated by filing this Agreement or a
certificate of merger (the "Certificate of Merger") with the Secretary of State
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of the State of Delaware, in such form as required by, and executed in
accordance with the relevant provisions of, the DGCL. The date and time of the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware (or such later time as shall be agreed to in writing by the parties
hereto and is specified in the Certificate of Merger) will be the "Effective
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Time". On the second business day following the later to occur of the
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satisfaction of the condition specified in Section 6.1(a) and the satisfaction
of the condition specified in Section 6.1(e) (or such other date as the parties
shall mutually agree), a closing shall be held at the offices of Shearman &
Sterling, 599 Lexington Avenue, New York, New York 10022, or such other place as
the parties shall agree, for the purpose of confirming the satisfaction or
waiver, as the case may be, of the conditions set forth in Article VI.
Section 1.3 Effects of the Merger. The Merger shall have the effects
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set forth in the applicable provisions of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, immunities, powers and franchises of the Company
and Sub shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Sub shall become the debts, liabilities and duties of
the Surviving Corporation.
Section 1.4 Certificate of Incorporation; By-laws. (a) At the
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Effective Time and without any further action on the part of the Company or Sub,
the Certificate of Incorporation of the Company (as amended, the "Certificate of
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Incorporation") as in effect immediately prior to the Effective Time shall be
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the certificate of incorporation of the Surviving Corporation until thereafter
amended as provided therein and under the DGCL.
(b) At the Effective Time and without any further action on the part
of the Company or Sub, the By-laws of Sub shall be the By-laws of the Surviving
Corporation and thereafter may be amended or repealed in accordance with their
terms or the
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<PAGE>
Certificate of Incorporation of the Surviving Corporation and as provided by
law.
Section 1.5 Directors and Officers. The directors of Sub immediately
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prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed (as the case may be) and qualified.
ARTICLE II
CONVERSION OF SHARES; STOCKHOLDERS MEETING
Section 2.1 Conversion of Securities. At the Effective Time, by
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virtue of the Merger and without any action on the part of Sub, the Company or
the holders of any of the following securities:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be cancelled pursuant to Section
2.1(b)) and any Dissenting Shares (as defined in Section 2.3(a))) shall be
cancelled, extinguished and converted automatically into the right to
receive an amount equal to $65.00 per share in cash (the "Merger
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Consideration") payable to the holder thereof, without interest, upon
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surrender of the certificate that prior to the Merger represented such
Share in the manner provided in Section 2.4, less any required withholding
taxes.
(b) Each Share held in the treasury of the Company and each Share
owned by Parent, Sub or any other direct or indirect Subsidiary (as defined
in Section 3.1) of Parent or of the Company, in each case immediately prior
to the Effective Time, shall be cancelled and retired without any
conversion thereof and no payment or distribution shall be made with
respect thereto.
(c) Each share of common, preferred or other capital stock of Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one validly issued, fully paid and nonassessable
share of identical common, preferred or other capital stock of the
Surviving Corporation.
Section 2.2 Treatment of Company Stock Options. (a) Immediately
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prior to the Effective Time, each then outstanding employee stock option and any
related stock appreciation right and each then outstanding director stock option
and any related stock appreciation right (collectively, a "Company Stock
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<PAGE>
Option"), whether or not then vested or exercisable, shall be (or, if not
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previously vested and exercisable, shall become), consistent with the plans and
agreements applicable to such Company Stock Options, vested and exercisable and
such Company Stock Options immediately thereafter shall be cancelled by the
Company, and (except to the extent such Company Stock Option is subject to an
Option Deferral Agreement (as defined below)) each holder of a cancelled Company
Stock Option shall be entitled to receive at the Effective Time or as soon as
practicable thereafter (or, if later, with respect to any Company Stock Option,
the date six months and one day following the grant of such Company Stock
Option) from the Company (and, if necessary, Parent shall provide funds to the
Company sufficient for such payments) in consideration for the cancellation of
such Company Stock Option an amount in cash equal to the product of (i) the
number of shares of Company Common Stock previously subject to such Company
Stock Option and (ii) the excess, if any, of the Merger Consideration over the
exercise price per share of Company Common Stock previously subject to such
Company Stock Option.
(b) Parent shall be permitted, on or prior to the date 30 days
following the date of this Agreement, to enter into agreements ("Option Deferral
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Agreements") with one or more holders of Company Stock Options, whereby such
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holders may agree to the cancellation of a portion of their Company Stock
Options immediately prior to the Effective Time in consideration for the right
to receive, in lieu of the payments provided for in Section 2.2(a) above,
certain amounts of compensation at a date or dates in the future as specified in
the Option Deferral Agreements.
Section 2.3 Dissenting Shares and Section 262 Shares. (a)
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Notwithstanding anything in this Agreement to the contrary, shares of Company
Common Stock that are issued and outstanding immediately prior to the Effective
Time and which are held by stockholders who have not voted in favor of or
consented to the Merger and who shall have delivered a written demand for
appraisal of such shares of Company Common Stock in the time and manner provided
in Section 262 of the DGCL and shall not have failed to perfect or shall not
have effectively withdrawn or lost their rights to appraisal and payment under
the DGCL (the "Dissenting Shares") shall not be converted into the right to
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receive the Merger Consideration, but shall be entitled to receive the
consideration as shall be determined pursuant to Section 262 of the DGCL;
provided, however, that if such holder shall have failed to perfect or shall
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have effectively withdrawn or lost his, her or its right to appraisal and
payment under the DGCL, such holder's shares of Company Common Stock shall
thereupon be deemed to have been converted, at the Effective Time, into the
right to receive the Merger Consideration set forth in Section 2.1(a) of this
Agreement, without any interest thereon, less any required withholding taxes.
(b) The Company shall give Parent (i) prompt notice of any demands
for appraisal pursuant to Section 262 received by the
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<PAGE>
Company, withdrawals of such demands, and any other instruments served pursuant
to the DGCL and received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company shall not, except with the prior written consent of Parent,
make any payment with respect to any such demands for appraisal or offer to
settle or settle any such demands.
Section 2.4 Surrender of Shares; Stock Transfer Books. (a) Prior to
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the Effective Time, Sub shall designate a bank or trust company (which shall be
reasonably satisfactory to the Company) to act as agent for the holders of
Shares in connection with the Merger (the "Paying Agent") to receive the Merger
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Consideration to which holders of Shares shall become entitled pursuant to
Section 2.1(a). When and as needed, Parent or Sub will make available to the
Paying Agent sufficient funds to make all payments pursuant to Section 2.4(b).
Such funds shall be invested by the Paying Agent as directed by Sub or, after
the Effective Time, the Surviving Corporation, provided that such investments
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shall be in obligations of or guaranteed by the United States of America, in
commercial paper obligations rated A-1 or P-1 or better by Moody's Investors
Service, Inc. or Standard & Poor's Rating Services, respectively, or in deposit
accounts, certificates of deposit, bank repurchase or reverse repurchase
agreements or banker's acceptances of, or Eurodollar time deposits purchased
from, commercial banks with capital exceeding $250 million (based on the most
recent financial statements of such bank which are then publicly available at
the SEC or otherwise). Any net profit resulting from, or interest or income
produced by, such investments will be payable to the Surviving Corporation or
Parent, as Parent directs.
(b) As soon as practicable after the Effective Time (but in no event
more than five business days after the Effective Time), the Surviving
Corporation shall cause to be mailed to each record holder, as of the Effective
Time, of an outstanding certificate or certificates which immediately prior to
the Effective Time represented Shares (the "Certificates"), a form of letter of
------------
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent) and instructions for use in effecting the
surrender of the Certificates for payment of the Merger Consideration therefor.
Upon surrender to the Paying Agent of a Certificate, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger Consideration for each Share formerly
represented by such Certificate, and such Certificate shall then be cancelled.
No interest shall be paid or accrued for the benefit of holders of the
Certificates on the Merger Consideration payable upon the surrender of the
Certificates. If payment of the Merger Consideration is to be made to a person
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<PAGE>
other than the person in whose name the surrendered Certificate is registered,
it shall be a condition of payment that the Certificate so surrendered shall be
properly endorsed or shall be otherwise in proper form for transfer and that the
person requesting such payment shall have paid any transfer and other taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation that such tax
either has been paid or is not applicable.
(c) At any time following six months after the Effective Time, the
Surviving Corporation shall be entitled to require the Paying Agent to deliver
to it any funds (including any interest and other income received with respect
thereto) which had been made available to the Paying Agent and which have not
been disbursed to holders of Certificates, and thereafter such holders shall be
entitled to look to the Surviving Corporation (subject to abandoned property,
escheat or other similar laws) only as general creditors thereof with respect to
the Merger Consideration payable upon due surrender of their Certificates.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a Certificate for Merger Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(d) At the close of business on the day of the Effective Time, the
stock transfer books of the Company shall be closed and thereafter there shall
be no further registration of transfers of shares of Company Common Stock on the
records of the Company. From and after the Effective Time, the holders of
Certificates evidencing ownership of Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Shares except
as otherwise provided for herein or by applicable law.
Section 2.5 Stockholders Meeting. Subject to Section 5.6, in order
--------------------
to consummate the Merger, the Company, acting through its Board of Directors,
shall, in accordance with applicable law and the Company's Certificate of
Incorporation and By-laws, (a) duly call, give notice of, convene and hold a
special meeting of its stockholders as soon as practicable after the date of
this Agreement for the purpose of considering and taking action on this
Agreement and the transactions contemplated hereby (the "Stockholders Meeting")
--------------------
and (b) subject to Section 5.6, include in the proxy statement to be sent to the
stockholders of the Company (such proxy statement, as amended or supplemented,
is herein referred to as the "Proxy Statement") the recommendation of the Board
---------------
of Directors that the stockholders of the Company vote in favor of the approval
of this Agreement and the transactions contemplated hereby.
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<PAGE>
ARTICLE III
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
------------
(as defined below) 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, individually or in the
aggregate, 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, individually or in the aggregate, have a Material Adverse
Effect on the Company and its Subsidiaries, taken as a whole.
As used in this Agreement, the term "Subsidiary" means, with respect
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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. 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,
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together with the jurisdiction of incorporation of each Subsidiary and the
percentage of the outstanding capital stock of each Subsidiary owned by the
Company and each other Subsidiary.
As used in this Agreement, "Material Adverse Effect" means any adverse
-----------------------
change or effect that has had or will have a material adverse effect on the
financial condition, results of operations or business of a person and its
Subsidiaries, taken as a whole, but shall exclude any change or effect resulting
from general economic conditions (including without limitation changes
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<PAGE>
in interest rates), any occurrence or condition affecting the property and
casualty insurance or reinsurance industry generally (including without
limitation any change or proposed change in insurance laws or regulations in any
jurisdiction), any reinsurance or insurance exposure relating to any catastrophe
and, for purposes of Section 3.6 only, any occurrence or condition arising out
of the transactions contemplated by this Agreement or the public announcement
thereof.
Section 3.2 Capitalization. (a) The authorized capital stock of the
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Company consists of 250,000,000 shares of Company Common Stock and 20,000,000
shares of preferred stock. As of the date hereof, (i) 47,292,325 shares of
Company Common Stock were issued and outstanding, (ii) no shares of Company
Common Stock were held in the treasury of the Company, (iii) options to acquire
an aggregate of 4,583,625 shares of Company Common Stock were outstanding
pursuant to Company Stock Options and (iv) no shares of preferred stock were
issued and outstanding. 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(a) 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, preemptive 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.
(b) Except as set forth in Section 3.2(b) of the Disclosure Schedule,
all of the outstanding shares of capital stock of each of the Company's
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
-8-
<PAGE>
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.
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 the necessary approval of its
stockholders as contemplated by Section 2.5 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 of its stockholders as
contemplated by Section 2.5 with respect to the Merger, no other corporate
action or proceedings on the part of the Company are 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 Stockholders Agreement, including, but not limited to, all
actions necessary to render the provisions of Section 203 of the DGCL
inapplicable to this Agreement and the Stockholders Agreement. 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"), all necessary approvals of the German Cartel Office, the Investment
- ---
Advisers Act of 1940, as amended, state securities or "blue sky" laws, state
takeover laws, state and foreign insurance regulatory laws and commissions, and
for the approval of this
-9-
<PAGE>
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 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 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, defaults, or rights of
termination, amendment, cancellation or acceleration, 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, 1995
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 (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
-10-
<PAGE>
financial statements included in the Company SEC Documents has 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 American Re-
Insurance Company, a Delaware domiciled insurer and a wholly owned Subsidiary of
the Company (the "Insurer"), as filed with the Department of Insurance for the
-------
State of Delaware (the "Delaware Insurance Department") for the years ended
-----------------------------
December 31, 1994 and December 31, 1995 (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, are referred to as the "Statutory Financial
-------------------
Statements"), have been prepared in accordance with the accounting practices
- ----------
prescribed or permitted by the Delaware Insurance Department 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 throughout the
periods involved, except as expressly set forth in the notes, exhibits or
schedules thereto, and the Statutory Financial Statements of the Insurer present
fairly in all material respects the financial position and the results of
operations for the Insurer 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. Since June 30, 1996, there
--------------------------
have 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, in the aggregate, a Material Adverse Effect on the Company
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 the Company or any of its
Subsidiaries, other than regular quarterly cash dividends and dividends paid by
wholly owned Subsidiaries; or (iii) any change by the Company or any of its
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<PAGE>
Subsidiaries in accounting principles or methods, except insofar as may be
required by a change in GAAP or State Statutory Accounting Principles. Since
January 1, 1996, the Company and its Subsidiaries have conducted their
respective businesses in the ordinary course consistent with past practice.
Section 3.7 Information in Proxy Statement. The Proxy Statement (or
------------------------------
any amendment thereof or supplement thereto), at the date mailed to the
Company's stockholders and at the time of the Stockholders 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. The Proxy Statement will comply in
all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
Section 3.8 Employee Benefit Plans. 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 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 3.8(a) of the Disclosure Schedule (the "Benefit Plans"). Except as
-------------
disclosed in Section 3.8(a) of the Disclosure Schedule (or as otherwise
permitted by this Agreement) neither the Company nor any ERISA Affiliate has
adopted or announced 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 materially increase the liability of the Company or any
ERISA Affiliate to any employee or terminated employee of the Company or any
ERISA Affiliate.
(b) With respect to each Benefit Plan except as disclosed on Schedule
3.8(b) of the Disclosure Schedule: (i) if intended to qualify under section
401(a), 401(k) or 403(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), such plan has received, or an application is pending for, a
----
determination letter from the Internal Revenue Service (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 have a material adverse
effect on such qualification; (ii)
-12-
<PAGE>
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 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; provided, however, that
all of the foregoing representations shall be deemed to be true so long as the
liability which could reasonably be expected to arise thereunder, without regard
to this proviso (when aggregated with all such other liabilities thereunder,
disregarding this proviso) could not result in liability that would have a
Material Adverse Effect. Except as set forth in the Company SEC Documents
(including the footnotes to any audited financial statements included therein),
the aggregate accumulated benefit obligations of each Benefit Plan subject to
Title IV of ERISA (as of the date of the most recent actuarial valuation
prepared for such Benefit Plan) do not exceed the fair market value of the
assets of such Benefit Plan (as of such Valuation Date).
(c) Except as disclosed on Schedule 3.8(c) of the Disclosure
Schedule, neither the Company nor any ERISA Affiliate has incurred any 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) that would
have a Material Adverse Effect and, to the knowledge of the Company, no
reasonable basis for any such liability exists.
(d) Except as set forth in Section 3.8(d) 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 in an amount which would have a Material Adverse Effect. 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
3.8(d) of the Disclosure Schedule, no party will be required to make an "excess
parachute payment" to a "disqualified individual" within the meaning of section
280G of the Code in an amount which would have a Material Adverse Effect.
(e) Other than documents related to plans maintained under the laws
of countries outside the United States and which are required to be maintained
under such foreign laws, the Company has delivered or made available to Parent
accurate and complete copies of all plan texts, summary plan descriptions,
-13-
<PAGE>
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 Service; and the two most recent actuarial reports, to the
extent any of the foregoing may be applicable to a particular Benefit Plan.
Section 3.9 Compliance. Neither the Company nor any Subsidiary is in
----------
default or violation of (i) any law, rule, regulation, order, judgment or decree
applicable to the Company or any Subsidiary or by which any property or asset of
the Company or any Subsidiary is bound or affected, or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any Subsidiary is a party
or by which the Company or any Subsidiary or any property or asset of the
Company or any Subsidiary is bound or affected, except for any such defaults or
violations that would not, individually or in the aggregate, have a Material
Adverse Effect.
Section 3.10 Absence of Litigation. Except as disclosed in the
---------------------
Company SEC Documents filed prior to the date of this Agreement, as of the date
hereof, there is no claim, action, proceeding or investigation (excluding those
relating to policies of insurance or reinsurance written by the Company and its
Subsidiaries) pending or, to the knowledge of the Company, threatened in writing
against the Company or any Subsidiary, or any property or asset of the Company
or any Subsidiary, before any court, arbitrator or administrative, governmental
or regulatory authority or body, domestic or foreign, which individually or in
the aggregate, is reasonably likely to have a Material Adverse Effect. As of
the date hereof, neither the Company nor any Subsidiary nor any property or
asset of the Company or any Subsidiary is subject to any order, writ, judgment,
injunction, decree, determination or award having, individually or in the
aggregate, a Material Adverse Effect.
Section 3.11 Taxes. The Company and each of its Subsidiaries, and
-----
any consolidated, combined, unitary or aggregate group for Tax purposes of which
the Company or any of its Subsidiaries is or has been a member has timely filed
all Tax Returns required to be filed by it, has paid all Taxes shown thereon to
be due and has provided adequate reserves in its financial statements for any
Taxes that have not been paid, whether or not shown as being due on any returns,
except where the failure to make such filings, pay such taxes or provide for
such reserves would not have a Material Adverse Effect. Except as disclosed on
Schedule 3.9, none of the Company or the Subsidiaries has granted any extension
or waiver of the statute of limitations period applicable to any Tax return,
which period (after giving effect to such extension or waiver) has not expired.
Except as disclosed on Schedule 3.9, the Company and the Subsidiaries have not
received any notice of deficiency or assessment from any taxing authority with
respect to liabilities
-14-
<PAGE>
for income and other material Taxes which have not been fully paid or finally
settled. There are no liens with respect to Taxes upon any of the properties or
assets of the Company or the Subsidiaries other than liens for Taxes not yet due
and payable. As used herein, "Taxes" shall mean any taxes of any kind,
-----
including but not limited to those on or measured by or referred to as income,
gross receipts, sales, use, ad valorem, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
value added, property or windfall profits taxes, customs, duties or similar
fees, assessments or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any
governmental authority, domestic or foreign. As used herein, "Tax Return" shall
----------
mean any return, report or statement required to be filed with any governmental
authority with respect to Taxes.
Section 3.12 Opinion of Financial Advisors. The Company has received
-----------------------------
opinions from Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated 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 3.13 Aetna Adverse Loss Agreement. The Aggregate Excess of
----------------------------
Loss Agreement dated September 30, 1992, between the Company and The Aetna
Casualty and Surety Company, a true and complete copy of which has been
delivered to Parent, as of the date hereof is in full force and effect and the
Company has received no notice that it is in default or violation of such
agreement.
ARTICLE IV
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 or other business organization 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 materially impair the ability of Parent and
Sub to consummate the Merger or the other transactions contemplated hereby.
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
-15-
<PAGE>
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 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 of this
Agreement and the consummation by Parent of the transactions contemplated hereby
have been duly and validly authorized by its Management Board and its
Supervisory Board and the execution, delivery and performance by Sub of this
Agreement and the consummation by Sub of the transactions contemplated hereby
have been duly and validly authorized by its Board 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 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.
Section 4.3 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, all necessary approvals of the German Cartel Office,
state securities or "blue sky" laws, state takeover laws and state and foreign
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 certificate of incorporation or by-laws of Parent or 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 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,
-16-
<PAGE>
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, defaults, or rights
of termination, amendment, cancellation or acceleration, which would not
materially impair the ability of Parent or Sub to consummate the Merger or the
other transactions contemplated hereby.
Section 4.4 Information in Proxy Statement. None of the information
------------------------------
supplied by Parent or Sub for inclusion or incorporation by reference in the
Proxy Statement will, at the date mailed to stockholders of the Company and at
the time of the Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
Section 4.5 Financing. Either Parent or Sub has, or will have prior
---------
to the consummation of the Merger, sufficient funds available to purchase the
Shares which will be converted into the right to receive the Merger
Consideration in the Merger.
ARTICLE V
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
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 shall 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;
-17-
<PAGE>
(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 $.11 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 exercises of Company Stock Options; (iv)
transfer, lease, license, sell, mortgage, pledge, dispose of, or encumber
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; provided
--------
that, notwithstanding anything to the contrary in the foregoing, to the
extent the Effective Time occurs after December 31, 1996, the Company shall
be permitted to declare and pay immediately prior to the Effective Time a
quarterly dividend (not to exceed $.11 per share pro rated for the period
from January 1, 1997 to the Effective Time, inclusive);
(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 executive officer 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)
except to the extent currently required under applicable law or the terms
of the applicable agreement or arrangement, 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) except in accordance with past
practice and in an aggregate amount not to exceed $5 million, and other
than by reason of the transactions contemplated hereby, enter into any, or
amend any existing, employment, consulting or severance agreement with, or
grant any severance or termination pay to, any officer, director or
employee of the Company or any of its Subsidiaries; (iv) except with
respect to the Company's foreign operations, as required by law or existing
arrangements, make any additional contributions to any grantor trust
created by the Company to provide funding for non-tax-qualified employee
-18-
<PAGE>
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; provided that notwithstanding anything to the contrary in the
--------
foregoing, bonuses accrued in 1996, but which would in the ordinary course
be payable in 1997, may be paid in 1996;
(e) 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;
(f) neither the Company nor any of its Subsidiaries shall: (i) incur
or assume any debt except for borrowings under existing credit facilities
in an amount not to exceed $150 million; (ii) assume, guarantee, 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 (including private placements) in the ordinary course
of business consistent with past practice); or (iv) make any material
capital expenditure other than in the ordinary course of business
consistent with past practice;
(g) 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;
(h) 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 an
Acquisition Proposal (as defined in Section 5.5) other than the Merger and
other than as permitted by Section 5.6;
(i) 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
affiliates, 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;
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(j) 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 and its Subsidiaries, taken as a whole, except in the
ordinary course of business consistent with past practice;
(k) neither the Company nor any of its Subsidiaries shall pay,
discharge or satisfy any claim, liability or obligation (including
contingent claims, liabilities and obligations), other than in the ordinary
course of business consistent with past practice; and
(l) 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 Access to Information. 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 (i) 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 (ii) 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 July 23, 1996, as amended (the "Confidentiality
---------------
Agreement").
- ---------
Section 5.3 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 the transactions contemplated hereby. Each of the
Company, Parent
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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.
(b) In furtherance and not in limitation of Section 5.3(a), (i) as
soon as practicable following the date of this Agreement, Parent and Sub shall
use their reasonable best efforts to prepare and file with relevant insurance
regulators requests for approval of the transactions contemplated by this
Agreement and shall use all reasonable efforts to have such insurance regulators
approve the transactions contemplated by this Agreement, (ii) each of Parent and
Sub shall give to the Company prompt written notice if it receives any notice or
other communication from any insurance regulator in connection with the
transactions contemplated by this Agreement, and, in the case of any such
written notice or communication, shall promptly furnish the Company with a copy
thereof; (iii) each of Parent and Sub shall give to the Company reasonable prior
written notice of the time and place when any meetings may be held by it with
insurance regulators in connection with the transactions contemplated by this
Agreement, and the Company shall have the right to have a representative or
representatives present at any such meeting; and (iv) a reasonable time prior to
furnishing any written materials or presentations to any insurance regulator in
connection with the transactions contemplated by this Agreement, Parent and Sub
shall furnish the Company with a copy thereof, and the Company shall have a
reasonable opportunity to provide comments thereon.
Section 5.4 Employee Matters. (a) For a period of two years
----------------
following the Effective Time, Parent shall either continue the existing Benefit
Plans of the Company or shall provide, or cause the Surviving Corporation to
provide, benefits to employees of the Company and its Subsidiaries under
substitute plans or arrangements ("Parent Benefit Plans") that are no less
--------------------
favorable in the aggregate to such employees than those provided under such
existing Benefit Plans.
(b) 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, service awards or any service-related
benefits, and 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
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<PAGE>
condition limitations. Employees of the Company or any Subsidiary 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 Benefit Plan.
Section 5.5 No Solicitation. The Company shall not, nor shall it
---------------
permit any of its Subsidiaries to, nor shall it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of its Subsidiaries to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any Acquisition
Proposal (as hereinafter defined) or (ii) participate in any discussions,
conversations, negotiations or other communications regarding, or furnish to any
person any information with respect to, or otherwise cooperate in any way,
assist or participate in, facilitate or encourage any effort or attempt by any
other person or entity, to seek to do any of the foregoing or take any other
action to facilitate any inquiries or the making of any proposal that
constitutes, or is likely to lead to, any Acquisition Proposal. From and after
the date hereof, the Company, its Subsidiaries and all officers, directors,
employees of, and all investment bankers, attorneys and other advisors and
representatives of, the Company and its Subsidiaries shall cease doing any of
the foregoing; provided, however, that, notwithstanding the provisions of the
-------- -------
first sentence of this Section 5.5, the Company, any of its Subsidiaries or any
officer, director or employee of, or any investment banker, attorney or other
advisor or representative of, the Company or any of its Subsidiaries may, (i)
following receipt of a request for information made within 30 days of the date
hereof (A) which was not solicited, initiated or encouraged by the Company, any
of its Subsidiaries or any officer, director or employee of, or any investment
banker, attorney or other advisor or representative of, the Company or any of
its Subsidiaries after the date of this Agreement and (B) which the Company in
good faith believes could lead to an Acquisition Proposal, furnish information,
in the case of any person who has executed a confidentiality agreement with the
Company prior to the date hereof, pursuant to such confidentiality agreement or,
in the case of any other person, pursuant to a confidentiality agreement
substantially similar to the Confidentiality Agreement, and (ii) following
receipt of an Acquisition Proposal by the Company with respect to which the
Board of Directors of the Company determines in good faith that in order to
comply with its fiduciary duties to stockholders under applicable law it is
necessary for the Board of Directors to withdraw or modify its approval or
recommendation of this Agreement or the Merger, approve or recommend such
Acquisition Proposal or enter into an agreement with respect to such Acquisition
Proposal, participate in discussions or negotiations regarding, or furnish
information with respect to, or take other actions to facilitate, such
Acquisition Proposal. Notwithstanding anything in this Agreement to the
contrary, from
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<PAGE>
and after the date hereof, the Company shall promptly and within not more than
12 hours advise Parent orally and in writing of the receipt by it (or any of the
other entities or person referred to above) of any Acquisition Proposal, or any
inquiry which is likely to lead to any Acquisition Proposal, the material terms
and conditions of such Acquisition Proposal or inquiry, and the identity of the
person making any such Acquisition Proposal or inquiry. The Company will keep
Parent fully informed of the status and details of any such Acquisition Proposal
or inquiry. For purposes of this Agreement, "Acquisition Proposal" means any
--------------------
proposal with respect to a merger, consolidation, share exchange or similar
transaction involving the Company or any significant portion of the assets of
the Company and its Subsidiaries, other than the transactions contemplated
hereby.
Section 5.6 Fiduciary Duties. (a) The Board of Directors of the
----------------
Company shall not (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Parent or Sub, the approval or recommendation by such Board of
Directors of this Agreement or the Merger, (ii) approve or recommend, or propose
to approve or recommend, any Acquisition Proposal which was not solicited after
the date hereof or (iii) enter into any agreement with respect to any
Acquisition Proposal which was not solicited after the date hereof, unless the
------
Company receives an Acquisition Proposal which was not solicited after the date
hereof and the Company's Board of Directors determines in good faith that in
order to comply with its fiduciary duties to stockholders under applicable law
it is necessary for the Board of Directors to withdraw or modify its approval or
recommendation of this Agreement or the Merger, approve or recommend such
Acquisition Proposal or enter into an agreement with respect to such Acquisition
Proposal.
(b) The Company's Board of Directors may take, and disclose to the
Company's stockholders, a position contemplated by Rules 14d-9 and 14e-2
promulgated under the Exchange Act with respect to any tender offer for shares
of capital stock of the Company.
(c) Notwithstanding anything contained in this Agreement to the
contrary, any action by the Board of Directors permitted by this Section 5.6
shall not constitute a breach of this Agreement by the Company.
Section 5.7 Additional Agreements. Subject to the terms and
---------------------
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable, 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
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<PAGE>
purposes of this Agreement, the proper officers and directors of the Company,
Parent and Sub shall use all reasonable 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 of the
Company or Parent and Sub, as the case may be, 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.
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
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<PAGE>
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 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 Proxy Statement. As soon as practicable following the
---------------
date of this Agreement, the Company shall prepare and file with the SEC the
Proxy Statement and shall use all reasonable efforts to have the Proxy Statement
cleared by the SEC as promptly as practicable. Parent shall cooperate with the
Company in the preparation of the Proxy Statement. The Company shall give
Parent and its counsel the opportunity to review the Proxy Statement prior to
its being filed with the SEC and shall give Parent and its counsel the
opportunity to review all amendments and supplements to the Proxy Statement and
all responses to requests for additional information and replies to comments
prior to their being filed with, or sent to, the SEC. The Company will provide
to Parent promptly copies of all correspondence between it or any of its
representatives and the SEC. Parent shall furnish all information concerning it
required to be included in the Proxy Statement, and as promptly as practicable,
the Proxy Statement will be mailed to the stockholders of the Company. No
amendment or supplement to the Proxy Statement will be made without the approval
of Parent, which approval will not be unreasonably withheld or delayed. The
Company will advise Parent promptly after it receives notice thereof, of the
time when any supplement or amendment to the Proxy Statement has been filed, or
the issuance of any stop order, or of any request by the SEC or the New York
Stock Exchange for amendment of the Proxy Statement.
Section 5.12 Certain Fees. The Company shall pay promptly to or on
------------
behalf of Parent $32.5 million, payable in cash, if all of the following shall
have occurred:
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<PAGE>
(a) a bona fide Acquisition Proposal is commenced, publicly proposed,
publicly disclosed or communicated to the Company at any time after the
date of this Agreement;
(b) the Board of Directors of the Company, in accordance with Section
5.6, withdraws or modifies its approval or recommendation of this Agreement
or the Merger, approves or recommends such Acquisition Proposal or enters
into an agreement with respect to such Acquisition Proposal; and
(c) this Agreement is terminated in accordance with Section
7.1(c)(ii), 7.1(c)(iii), 7.1(d)(ii) or 7.1(d)(iii).
ARTICLE VI
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) any waiting period applicable to the Merger under the HSR Act
shall have expired or been terminated;
(d) any necessary approval of the German Cartel Office shall have
been obtained; and
(e) all actions by or in respect of any filing or any governmental
body, agency, official, or authority required to permit the consummation of
the Merger (including insurance regulatory approvals from the Delaware
Insurance Department and from the New York Department of Insurance and all
other material insurance regulatory approvals) shall have been obtained and
such approval shall be in full force and effect.
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:
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<PAGE>
(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 war-
ranties 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, individually or in the aggregate, a Material Adverse Effect on
the Company and its Subsidiaries, taken as a whole; and
(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.
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:
(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 war-
ranties to be so true and correct (without giving effect to any limitation
as to "materiality" or "Material Adverse Effect" set forth therein), would
not, individually or in the aggregate, materially impair the ability of
Parent and Sub to consummate the Merger and the other transactions
contemplated hereby; and
(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.
ARTICLE VII
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:
-27-
<PAGE>
(a) by the mutual written consent of Parent and the Company;
(b) by either of the Company or Parent:
(i) if the Merger shall not have occurred on or prior to
February 28, 1997; 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 Company:
(i) if Parent or Sub (x) breaches or fails in any material
respect to perform or comply with any of its covenants and agreements
contained herein or (y) breaches its representations and warranties,
in each case such that the conditions set forth in Section 6.1 or
Section 6.3 would not be satisfied;
(ii) if the Board of Directors of the Company shall have
exercised its rights set forth in Section 5.6(a) hereof; or
(iii) if the stockholders of the Company do not approve the Merger
at the Stockholders Meeting; or
(d) by Parent:
(i) if the Company (x) breaches or fails in any material respect
to perform or comply with any of its covenants and agreements
contained herein or (y) breaches its representations and warranties,
in each case such that the conditions set forth in Section 6.1 or
Section 6.2 would not be satisfied;
(ii) if the Board of Directors of the Company shall have
exercised its rights set forth in Section 5.6(a) hereof; or
(iii) if the stockholders of the Company do not approve the Merger
at the Stockholders Meeting.
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<PAGE>
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 5.12 and 8.2 hereof and in the last sentence of
Section 5.2.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Costs and Expenses. Except for expenses incurred in
------------------
connection with printing the Proxy 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.
Section 8.2 Financial Advisory Fees. (a) Except for Morgan Stanley
-----------------------
& Co. Incorporated, 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 & Co. and Merrill Lynch, Pierce, Fenner
& Smith Incorporated, whose fees and expenses will be paid by the Company at or
prior to the Effective Time and in accordance with the Company's agreements with
such firms, the terms of which have been previously disclosed to Parent by the
Company, and except for the payments to third parties for services rendered to
the Company disclosed in Section 8.2(b) of the Disclosure Schedule, there are no
investment bankers, brokers, finders or other intermediaries which have been
retained by or are 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
Effective Time with respect to any of the terms contained herein; provided,
--------
however, that after the approval of this Agreement by
- -------
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<PAGE>
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 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:
Munich Reinsurance Company
Koniginstrasse 107
D-80791 Munich
Germany
Attention: Dr. Heiner Hasford
Telephone No.: 011-49-89-3891-3542
Telecopy No.: 011-49-89-3891-9030
with a copy to:
Shearman & Sterling
199 Bishopsgate
London EC2M 3TY
England
Attention: W. Jeffrey Lawrence
Telephone No.: 011-44-171-920-9080
Telecopy No.: 011-44-171-920-9020
(b) if to the Company, to:
American Re Corporation
555 College Road East
Princeton, New Jersey 08543
Attention: General Counsel
Telephone No.: (609) 243-4200
Telecopy No.: (609) 243-4992
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Attention: Gary I. Horowitz, Esq.
Telephone No.: (212) 455-2000
Telecopy No.: (212) 455-2502
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<PAGE>
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 August 13, 1996. As
used in this Agreement, the term "affiliate(s)" shall have the meaning set forth
in Rule 12b-2 of the Exchange Act.
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. 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 Section 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 or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated hereby may be consummated as
originally contemplated to the fullest extent possible.
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.
-31-
<PAGE>
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 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.
Section 8.13 Consent to Jurisdiction; Waiver of Jury Trial. (a)
---------------------------------------------
Each of the parties hereto:
(i) consents to submit itself to the personal jurisdiction of (A) the
United States District Court for the Southern District of New York in the
event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement to the extent such court would have subject
matter jurisdiction with respect to such dispute and (B) the Chancery or
other Courts of the State of Delaware otherwise;
(ii) agrees that it will not attempt to deny or defeat such personal
jurisdiction or venue by motion or other request for leave from any such
court;
(iii) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any
court other than such courts; and
(iv) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to a party at
its address set forth in subsection 8.5 or at such other address of which a
party shall have been notified pursuant thereto;
(v) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(vi) agrees to appoint an agent for service of process in Delaware.
-32-
<PAGE>
(b) EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING IN RELATION TO THIS AGREEMENT
AND FOR ANY COUNTERCLAIM THEREIN.
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.
MUNCHENER RUCKVERSICHERUNGS-
GESELLSCHAFT AKTIENGESELLSCHAFT
IN MUNCHEN
By: /s/ Hans Rathnow
-----------------------------
Name: Hans Rathnow
Title: Member of the Board of
Management
By: /s/ Dr. jur. Heiner Hasford
----------------------------
Name: Dr. jur. Heiner Hasford
Title: Member of the Board of
Management
PUMA ACQUISITION CORP.
By: /s/ Hans Rathnow
-----------------------------
Name: Hans Rathnow
Title: Chairman of the Board,
President and Chief
Executive Officer
By: /s/ Dr. jur. Heiner Hasford
-----------------------------
Name: Dr. jur. Heiner Hasford
Title: Vice President and
Assistant Secretary
AMERICAN RE CORPORATION
By: /s/ Paul H. Inderbitzin
-----------------------------
Name: Paul H. Inderbitzin
Title: Chairman of the Board,
President and Chief
Executive Officer
-33-
EXHIBIT 4
STOCKHOLDERS AGREEMENT
----------------------
STOCKHOLDERS AGREEMENT, dated as of August 13, 1996 (this
"Agreement"), among MUNCHENER RUCKVERSICHERUNGS-GESELLSCHAFT AKTIENGESELLSCHAFT
---------
IN MUNCHEN, a German company ("Parent"), PUMA ACQUISITION CORP., a Delaware
------
corporation and a wholly owned subsidiary of Parent ("Sub"), and the several
---
stockholders of American Re Corporation, a Delaware corporation (the "Company"),
-------
that are parties hereto (each, a "Stockholder" and, collectively, the
-----------
"Stockholders").
------------
RECITALS
--------
Parent and the Company propose to enter into an Agreement and Plan of
Merger dated as of the date hereof (as the same may be amended or supplemented,
the "Merger Agreement"; capitalized terms used but not defined herein shall have
----------------
the meanings set forth in the Merger Agreement as entered into on the date
hereof) providing for the merger of Sub with and into the Company (the
"Merger"), upon the terms and subject to the conditions set forth in the Merger
------
Agreement.
As of the date hereof, each Stockholder is the record and beneficial
owner of the number of shares of Company Common Stock set forth on the signature
page hereof beneath such Stockholder's name (with respect to each Stockholder,
such Stockholder's "Existing Shares" and, together with any shares of Company
---------------
Common Stock acquired after the date hereof, whether upon the exercise of
warrants, options, conversion of convertible securities or otherwise, such
Stockholder's "Shares").
------
As an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Stockholders agree, and the Stockholders
have agreed, to enter into this Agreement.
The Stockholders and Parent desire to set forth their agreement with
respect to the voting of the Shares in connection with the Merger and the
Stockholders desire to grant to Sub an option to acquire the Shares, in each
case upon the terms and subject to the conditions set forth herein.
AGREEMENT
---------
To implement the foregoing and in consideration of the mutual
agreements contained herein, the parties agree as follows:
1. Agreement to Vote. Each Stockholder, severally and not jointly,
-----------------
hereby agrees that, from and after the date hereof and until this Agreement
shall have been terminated in accordance with Section 8, at any meeting of the
holders of Company Common Stock, however called, or in connection with any
written consent of the holders of Company Common Stock, such Stockholder shall
<PAGE>
vote (or cause to be voted) such Stockholder's Shares (i) in favor of adoption
and approval of the Merger Agreement and the Merger and the approval of the
terms thereof and each of the other actions contemplated by the Merger Agreement
and this Agreement and (ii) except as otherwise agreed to in writing in advance
by Parent, against the following actions (other than the Merger and the
transactions contemplated by the Merger Agreement): (A) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company or its subsidiaries; (B) a sale, lease or
transfer of a material amount of assets of the Company or its subsidiaries, or a
reorganization, recapitalization, dissolution or liquidation of the Company or
its subsidiaries; (C) (1) any change in a majority of the persons who constitute
the Board of Directors of the Company; (2) any material amendment of the
Company's Certificate of Incorporation or By-laws; or (3) any other action
involving the Company or its subsidiaries which has the effect of impeding,
interfering with, delaying, postponing, or impairing (A) the ability of the
Company to consummate the Merger or (B) the transactions contemplated by this
Agreement and the Merger Agreement. Such Stockholder shall not enter into any
agreement or understanding with any person or entity prior to the termination of
this Agreement to vote in any manner inconsistent herewith.
2. Option. (a) Each Stockholder, severally and not jointly, hereby
------
grants to Sub an irrevocable option to purchase such Stockholder's Shares, on
the terms and subject to the conditions set forth herein (collectively, with
respect to all the Stockholders' Shares, the "Option").
------
(b) The Option may be exercised by Sub, as a whole and not in part,
during the period commencing upon the occurrence of any of the following events
and ending on the date which is the 30th calendar day following the first to
occur of such events:
(i) the Merger Agreement shall have been terminated by the Company
pursuant to Section 7.1(c)(ii) thereof;
(ii) the Merger Agreement shall have been terminated by the Company
pursuant to Section 7.1(c)(iii) thereof; or
(iii) the Merger Agreement shall have been terminated by Parent
pursuant to Section 7.1(d) thereof.
(c) If Sub wishes to exercise the Option, Sub shall send a written
notice to each Stockholder of its intention to exercise the Option, specifying
the place, and, if then known, the time and the date (the "Closing Date") of the
------------
closing (the "Closing") of the purchase. The Closing Date shall occur on the
-------
fifth business day (or such longer period as may be required by applicable law
or regulation) after the later of (i) the date on which such notice is delivered
and (ii) the satisfaction of the conditions set forth in Section 2(f).
-2-
<PAGE>
(d) At the Closing, each Stockholder shall deliver to Sub (or its
designee) all of such Stockholder's Shares by delivery of a certificate or
certificates evidencing such Shares in the denominations designated by Sub in
its exercise notice delivered pursuant to Section 2(c), duly endorsed to Sub or
accompanied by stock powers duly executed in favor of Sub, with all necessary
stock transfer stamps affixed.
(e) At the Closing, Sub shall pay, and Parent shall cause Sub to pay,
to the Stockholders, by wire transfer in immediately available funds to the
account of KKR Associates specified in writing no more than two days prior to
the Closing, an amount equal to the product of the Merger Consideration and the
number of Shares purchased pursuant to the exercise of the Option (the "Purchase
--------
Price").
- -----
(f) The Closing shall be subject to the satisfaction of each of the
following conditions:
(i) 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 purchase and sale of the Shares pursuant to the
exercise of the Option;
(ii) any waiting period applicable to the consummation of the purchase
and sale of the Shares pursuant to the exercise of the Option under the HSR
Act shall have expired or been terminated; and
(iii) all actions by or in respect of, and any filing with, any
governmental body, agency, official, or authority required to permit the
consummation of the purchase and sale of the Shares pursuant to the
exercise of the Option (including insurance regulatory approvals from the
Delaware Department of Insurance and from the New York Department of
Insurance) shall have been obtained or made and shall be in full force and
effect.
3. Representations and Warranties of Each Stockholder. Each
--------------------------------------------------
Stockholder hereby, severally and not jointly, represents and warrants to Parent
and Sub as of the date hereof in respect of itself as follows:
(a) Organization. Such Stockholder is a partnership duly organized,
------------
validly existing and in good standing under the laws of the jurisdiction of
its organization.
(b) Authorization; Validity of Agreement; Necessary Action. Such
------------------------------------------------------
Stockholder has full partnership power and authority to execute and deliver
this Agreement, to perform such Stockholder's obligations hereunder and to
consummate the transactions contemplated hereby. The execution,
-3-
<PAGE>
delivery and performance by such Stockholder of this Agreement and the con-
summation by it of the transactions contemplated hereby have been duly and
validly authorized by such Stockholder and no other partnership action or
proceedings on the part of such Stockholder are necessary to authorize the
execution and delivery by it of this Agreement and the consummation by it
of the transactions contemplated hereby. This Agreement has been duly
executed and delivered by such Stockholder, and, assuming this Agreement
constitutes a valid and binding obligation of Parent, constitutes a valid
and binding obligation of such Stockholder, enforceable against it 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.
(c) Consents and Approvals; No Violations. Except for filings,
-------------------------------------
permits, authorizations, consents and approvals as may be required under,
and other applicable requirements of, the HSR Act, the Investment Advisers
Act of 1940, as amended, any applicable state takeover laws and applicable
state insurance laws and regulations, neither the execution, delivery or
performance of this Agreement by such Stockholder nor the consummation by
it of the transactions contemplated hereby nor compliance by it with any of
the provisions hereof will (i) conflict with or result in any breach of any
provision of its partnership agreement or certificate of limited
partnership, (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 materially impair the ability of such Stockholder to
consummate the 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 such Stockholder is a party or by
which it or any of its properties or assets may be bound or (iv) violate
any order, writ, injunction, decree, statute, rule or regulation applicable
to it or any of its properties or assets, except in the case of clauses
(iii) and (iv) for violations, breaches or defaults, or rights of
termination, amendment, cancellation or acceleration, which would not
materially impair the ability of such Stockholder to consummate the
transactions contemplated hereby.
-4-
<PAGE>
(d) Shares. Such Stockholder's Existing Shares are, and its Shares
------
on the Closing Date will be, owned beneficially and of record by such
Stockholder. Such Stockholder's Existing Shares constitute all of the
shares of Company Common Stock owned of record or beneficially by such
Stockholder. All of such Stockholder's Existing Shares are issued and
outstanding and such Stockholder does not own, of record or beneficially,
any warrants, options or other rights to acquire any shares of Company
Common Stock. Such Stockholder has sole voting power, sole power of
disposition, sole power to issue instructions with respect to the matters
set forth in Sections 1 and 2 hereof, sole power of conversion, sole power
to demand appraisal rights and sole power to agree to all of the matters
set forth in this Agreement, in each case with respect to all of such
Stockholder's Existing Shares and will have sole voting power, sole power
of disposition, sole power to issue instructions with respect to the
matters set forth in Sections 1 and 2 hereof, sole power of conversion,
sole power to demand appraisal rights and sole power to agree to all of the
matters set forth in this Agreement, with respect to all of such
Stockholder's Shares on the Closing Date, with no limitations,
qualifications or restrictions on such rights, subject to applicable
federal securities laws and the terms of this Agreement. Such Stockholder
has good and valid title to its Existing Shares and at all times during the
term hereof and on the Closing Date will have good and valid title to its
Shares, free and clear of all liens, claims, security interests or other
charges or encumbrances, and, upon delivery thereof to Sub against delivery
of the consideration therefor pursuant to this Agreement, good and valid
title thereto, free and clear of all liens, claims, security interests or
other charges or encumbrances (other than any arising as a result of
actions taken or omitted by Sub), will pass to Sub.
(e) No Finder's Fees. Except as disclosed in the Merger Agreement,
----------------
no broker, investment banker, financial advisor or other person is entitled
to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated hereby based
upon arrangements made by or on behalf of such Stockholder.
4. Representations and Warranties of Parent. Parent and Sub hereby
----------------------------------------
represent and warrant to each Stockholder as of the date hereof as follows:
(a) Organization. Each of Parent and Sub is a corporation duly
------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
-5-
<PAGE>
(b) 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 of this
Agreement and the consummation by Parent of the transactions contemplated
hereby have been duly and validly authorized by its Management Board and
its Supervisory Board and the execution, delivery and performance by Sub of
this Agreement and the consummation by Sub of the transactions contemplated
hereby have been duly and validly authorized by its Board of Directors, and
no other corporate action or proceedings on the part of Parent or Sub are
necessary to authorize the execution and delivery by Parent or Sub of this
Agreement, and the consummation by Parent or 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 Stockholders, constitutes valid and binding
obligations of Parent and Sub, enforceable against them 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.
(c) Consents and Approvals; No Violations. Except for filings,
-------------------------------------
permits, authorizations, consents and approvals as may be required under,
and other applicable requirements of, the HSR Act, any applicable state
takeover laws and applicable state insurance laws and regulations, neither
the execution, delivery or performance of this Agreement by Parent or Sub
nor the consummation by Parent or Sub of the transactions contemplated
hereby nor compliance by Parent or Sub 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 of Parent or any of its
Subsidiaries, (ii) require any filing with, or permit, authorization,
consent or approval of, any Governmental Entity, (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 Sub is a party or by
which it or any of its 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.
-6-
<PAGE>
(d) Financing. Either Parent or Sub has, or will have prior to the
---------
Closing, sufficient funds available to purchase the Shares upon exercise of
the Option.
5. Further Agreements of Stockholders. (a) Each Stockholder,
----------------------------------
severally and not jointly, hereby agrees, while this Agreement is in effect, and
except as contemplated hereby, not to (i) sell, transfer, pledge, encumber,
assign or otherwise dispose of, enforce or permit the execution of the
provisions of any redemption agreement with the Company or enter into any
contract, option or other arrangement or understanding with respect to or
consent to the offer for sale, sale, transfer, pledge, encumbrance, assignment
or other disposition of, any of its Existing Shares, or any Shares acquired
after the date hereof, or any interest in any of the foregoing, except to
Parent; (ii) grant any proxies or powers of attorney, deposit any Shares into a
voting trust or enter into a voting agreement with respect to any Shares, or any
interest in any of the foregoing, except to Parent or Sub; or (iii) take any
action that would make any representation or warranty of such Stockholder
contained herein untrue or incorrect or have the effect of preventing or
disabling the Stockholder from performing such Stockholder's obligations under
this Agreement.
(b) Each Stockholder hereby irrevocably waives any rights of
appraisal or rights to dissent from the Merger that the Stockholder may have.
(c) Each Stockholder agrees with, and covenants to, Parent that the
Stockholder shall not request that the Company register the transfer (book-entry
or otherwise) of any certificate or uncertificated interest representing any of
such Stockholder's Shares, unless such transfer is made in compliance with this
Agreement. In the event of a stock dividend or distribution, or any change in
the Company Common Stock by reason of any stock dividend or distribution, or any
change in the Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term "Shares"
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all of
the Shares may be changed or exchanged and the Purchase Price shall be
accordingly adjusted. Each Stockholder shall be entitled to receive any cash
dividend paid by the Company during the term of this Agreement until the Shares
are cancelled in the Merger or purchased hereunder.
(d) Each Stockholder, severally and not jointly, shall not, nor shall
it authorize or permit any partner, officer, director or employee of, or any
investment banker, attorney or other advisor or representative of, such
Stockholder to, directly or indirectly, (i) solicit, initiate or encourage the
submission of any Acquisition Proposal (as hereinafter defined) or (ii)
participate in any discussions, conversations, negotiations or
-7-
<PAGE>
other communications regarding, or furnish to any person any information with
respect to, or otherwise cooperate in any way, assist or participate in,
facilitate or encourage any effort or attempt by any other person or entity, to
seek to do any of the foregoing or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or is likely to lead
to, any Acquisition Proposal. From and after the date hereof, each Stockholder
and all partners, officers, directors, employees of, and all investment bankers,
attorneys and other advisors and representatives of, such Stockholder shall
cease doing any of the foregoing. Notwithstanding anything in this Agreement to
the contrary, from and after the date hereof, each Stockholder, severally and
jointly, shall promptly and within not more than 12 hours advise Parent orally
and in writing of the receipt by it (or any of the other entities or person
referred to above) of any Acquisition Proposal, or any inquiry which is likely
to lead to any Acquisition Proposal, the material terms and conditions of such
Acquisition Proposal or inquiry, and the identity of the person making any such
Acquisition Proposal or inquiry. Each Stockholder will keep Parent fully
informed of the status and details of any such Acquisition Proposal or inquiry.
For purposes of this Agreement, "Acquisition Proposal" means any proposal with
--------------------
respect to a merger, consolidation, share exchange or similar transaction
involving the Company or any significant portion of the assets of the Company
and its Subsidiaries, other than the transactions contemplated by the Merger
Agreement and this Agreement.
6. Further Agreements of Parent. (a) Parent hereby agrees that, in
----------------------------
the event that Sub purchases the Stockholders' Shares pursuant to the Option, as
promptly as practicable thereafter, Parent will propose to the Company a merger,
on terms and subject to conditions substantially the same as those provided for
in the Merger Agreement, between itself or one of its wholly owned Subsidiaries
and the Company pursuant to which the stockholders of the Company (other the
Company, any direct or indirect Subsidiary of the Company or Parent) will
receive an amount of cash consideration per share of Company Common Stock equal
to the Merger Consideration, and will take such actions as may be necessary or
appropriate in order effectuate such merger at the earliest practicable time
(such merger, the "Back-end Merger").
---------------
(b) If, after purchasing the Shares pursuant to the Option, Parent or
any of its affiliates receives any cash or non-cash consideration in respect of
the Shares in connection with a Third Party Business Combination (as defined
below) during the period commencing on the date of the Closing and ending on the
first anniversary thereof, Parent shall promptly pay over to the Stockholders
(pro rata in accordance with the number of Shares acquired from each Stockholder
pursuant to the Option), as an addition to the Purchase Price, (x) the excess,
if any, of such consideration over the aggregate Purchase Price paid for the
Shares by Parent or Sub hereunder less (y) the sum of (I) the
-8-
<PAGE>
amount of taxes payable by Parent or Sub in connection with such Third Party
Business Combination and (II) the amount of out-of-pocket expenses paid by
Parent or Sub in connection with such Third Party Business Combination; provided
--------
that, (i) if the consideration received by Parent or such affiliates shall be
securities listed on a national securities exchange or traded on the NASDAQ
National Market ("NASDAQ"), the per share value of such consideration shall be
------
equal to the closing price per share listed on such national securities exchange
or NASDAQ on the date such transaction is consummated and (ii) if the
consideration received by Parent or such affiliates shall be in a form other
than securities, the per share value shall be determined in good faith as of the
date such transaction is consummated by Parent and the Stockholders, or, if
Parent and the Stockholders cannot reach agreement, by a nationally recognized
investment banking firm reasonably acceptable to the parties. The term "Third
-----
Party Business Combination" of the Company means the occurrence of any of the
- --------------------------
following events: (A) the Company or any Subsidiary of the Company is acquired
by merger or otherwise by any person or group, other than Parent or any
affiliate thereof (a "Third Party"); (B) the Company or any Subsidiary of the
-----------
Company enters into an agreement with a Third Party which contemplates the
acquisition of 20% or more of the total assets of the Company and its
Subsidiaries, taken as a whole; (C) the Company or Parent enters into a merger
or other agreement with a Third Party which contemplates the acquisition of more
than 20% of the outstanding shares of the Company's capital stock; or (D) a
Third Party acquires more than 20% of the total assets of the Company and its
Subsidiaries, taken as a whole. Notwithstanding the foregoing, in no event
shall any Stockholder be entitled to receive any payment pursuant to this
Section 6(b) if at any time prior to the consummation of such Third Party
Business Combination, Parent shall, directly or indirectly, beneficially own
100% of the Company Common Stock.
(c) Parent and Sub agree that, in connection with any exercise of the
Option, Sub will purchase, pursuant to "tag along" rights of management
stockholders of the Company who are parties to agreements with any Stockholder
(or any affiliate of such Stockholder), all shares of Company Common Stock
required to be purchased as a result of the sale by the Stockholders of all
shares of Company Common Stock owned by them pursuant to such exercise of the
Option. Any such purchase of shares of Company Common Stock from such
management stockholders shall be for the same purchase price as the shares of
Company Common Stock purchased pursuant to such exercise of the Option and shall
be made notwithstanding any waiver or nonfulfillment by any such management
stockholder or any Stockholder (or its affiliate) of any requirements for notice
of sale or proper exercise of such "tag along" rights.
7. Further Assurances. From time to time prior to the Closing, at
------------------
any other party's request and without further consideration, each party hereto
shall execute and deliver such
-9-
<PAGE>
additional documents and take all such further lawful action as may be necessary
or desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement.
8. Termination. Except as set forth in Section 2 and except for
-----------
Parent's obligations pursuant to Section 6, this Agreement shall terminate, and
no party shall have any rights or obligations hereunder and this Agreement shall
become null and void and have no further effect upon the earliest of (a) the
Effective Time, (b) termination of the Merger Agreement pursuant to Section 7.1
and (c) the election by any Stockholder at any time after February 28, 1997 to
terminate this Agreement. Notwithstanding the foregoing, in the event the
Option shall have been exercised in accordance with Section 2, but the Closing
shall not have occurred, the provisions of Sections 1 and 3 shall survive until
the Closing. Nothing in this Section 8 shall relieve any party of liability for
breach of this Agreement.
9. Costs and Expenses. 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.
10. Amendment and Modification. This Agreement may be amended,
--------------------------
modified and supplemented in any and all respects only by written agreement of
the parties hereto.
11. Several Obligations. The representations, warranties, covenants,
-------------------
agreements and conditions of this Agreement applicable to the Stockholders are
several and not joint.
12. 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 to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
-10-
<PAGE>
(i) if to Parent, to:
Munich Reinsurance Company
Koniginstrasse 107
D-80791 Munich
Germany
Attention: Dr. Heiner Hasford
Telephone No.: 011-49-89-3891-3542
Telecopy No.: 011-49-89-3891-9030
with a copy to:
Shearman & Sterling
199 Bishopsgate
London EC2M 3TY
England
Attention: W. Jeffrey Lawrence
Telephone No.: 011-44-171-920-9080
Telecopy No.: 011-44-171-920-9020
(ii) if to the Stockholders, to:
c/o KKR Associates
2800 Sand Hill Road
Menlo Park, California 94025
Attention: Saul A. Fox
Telephone No.: (415) 233-6590
Telecopy No.: (415) 233-6594
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Attention: Gary I. Horowitz, Esq.
Telephone No.: (212) 455-2000
Telecopy No.: (212) 455-2502
13. 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 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 August 13, 1996.
14. 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.
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<PAGE>
15. Entire Agreement; No Third Party Beneficiaries. This
----------------------------------------------
Agreement constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof, and is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
16. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated hereby may be consummated as
originally contemplated to the fullest extent possible.
17. Specific Performance; Remedies Cumulative. (a) 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.
(b) Remedies Cumulative. All rights, powers and remedies
-------------------
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
18. 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.
19. 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 Parent may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder 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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<PAGE>
20. Limited Liability of Partners. Notwithstanding any other
-----------------------------
provision of this Agreement, neither the general partner nor the limited
partners, nor any future general or limited partner of any Stockholder, shall
have any personal liability for performance of any obligation of such
Stockholder under this Agreement.
21. Consent to Jurisdiction; Waiver of Jury Trial. (a) Each of
---------------------------------------------
the parties hereto:
(i) consents
to submit itself to the personal jurisdiction of (A) the United States
District Court for the Southern District of New York in the event any
dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement to the extent such court would have
subject matter jurisdiction with respect to such dispute and (B) the
Chancery or other Courts of the State of Delaware otherwise;
(ii) agrees
that it will not attempt to deny or defeat such personal jurisdiction
or venue by motion or other request for leave from any such court;
(iii) agrees
that it will not bring any action relating to this Agreement or any of
the transactions contemplated by this Agreement in any court other than
such courts; and
(iv) agrees
that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to a party at
its address set forth in Section 12 or at such other address of which a
party shall have been notified pursuant thereto;
(v) agrees
that nothing herein shall affect the right to effect service of process
in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction; and
(vi) agrees to
appoint an agent for service of process in Delaware.
(b) EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING IN RELATION TO THIS
AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
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<PAGE>
IN WITNESS WHEREOF, Parent and each of the Stockholders have
caused this Agreement to be signed by their respective officers or other
authorized person thereunto duly authorized as of the date first written above.
MUNCHENER RUCKVERSICHERUNGS-
GESELLSCHAFT AKTIENGESELLSCHAFT
IN MUNCHEN
By: /s/ Hans Rathnow
-----------------------------
Name: Hans Rathnow
Title: Member of the Board
of Management
By: /s/ Dr. jur. Heiner Hasford
-----------------------------
Name: Dr. jur. Heiner Hasford
Title: Member of the Board
of Management
PUMA ACQUISITION CORP.
By: /s/ Hans Rathnow
-----------------------------
Name: Hans Rathnow
Title: Chairman of the Board,
President and Chief
Executive Officer
By: /s/ Dr. jur. Heiner Hasford
-----------------------------
Name: Dr. jur. Heiner Hasford
Title: Vice President and
Assistant Secretary
AMERICAN RE ASSOCIATES, L.P.
By: KKR ASSOCIATES, its general
partner
By: /s/ Saul Fox
-------------------------
Name: Saul Fox
Title: General Partner
Number of Existing Shares:
30,000,000
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<PAGE>
KKR PARTNERS II, L.P.
By: KKR ASSOCIATES, its general
partner
By: /s/ Perry Golkin
-------------------------
Name: Perry Golkin
Title: General Partner
Number of Existing Shares: 236,000
-15-
EXHIBIT 99
[GRAPHIC OMITTED]
For Immediate Release Contacts, American Re: James R. Fisher
August 14, 1996 (609) 243-4602
Thomas H. Walker, Jr.
(609) 243-4679
Munich Re: Christian Jacobi
011-49-89-3891-2376
Peter Wagner
011-49-89-3891-2703
AMERICAN RE AGREES TO BE ACQUIRED BY MUNICH RE
FOR $65 PER SHARE
PRINCETON, NJ -- American Re Corporation (NYSE-ARN) announced today that it has
signed definitive documents providing for it to be acquired by Munich
Reinsurance Company, the world's largest reinsurer, for $65 in cash for each
share of common stock (on a fully-diluted basis), or approximately $3.3 billion
in total consideration excluding the Company's outstanding long-term debt and
preferred securities.
In the transaction, the Company, which is the holding company for
American Re-Insurance Company, will merge with a subsidiary of Munich Re.
American Re-Insurance Company will retain its name, and its home office will
continue to be located in Princeton, NJ. The Company expects that the
transaction, which is subject to the approval by the stockholders of the
Company, to regulatory approvals, and to certain other customary conditions and
approvals, will close later this year. The Company also announced that certain
partnerships controlled by Kohlberg Kravis Roberts & Co. ("KKR"), which
collectively own approximately 64.1% of the Company's voting stock, have agreed
to vote in favor of the transaction and have granted an option on their shares
to Munich Re.
Paul H. Inderbitzin, Chairman, President and Chief Executive Officer of
the Company, who will retain those positions after the transaction closes, said,
"I am delighted to have American Re become part of the Munich Re organization.
This transaction recognizes the substantial value that American Re already
provides to its clients through its Whole Account approach, which will be
enhanced by American Re's new affiliation with the world's largest reinsurer.
Munich Re's global stature and integrity are well known and I believe the
strengths of the two companies will complement each other very well."
-more-
<PAGE>
Mr. Inderbitzin also noted, "While this transaction will end American
Re's ownership by KKR, I believe that it will not end our relationship with that
firm, which has been, and I believe will continue to be, a stalwart,
knowledgeable supporter of the insurance and reinsurance industry."
Saul Fox, general partner of KKR said, "Given the rapid consolidation
of the international insurance community, this transaction will allow American
Re to continue as an industry leader, enhancing its ability to provide clients
with both service and capacity. It is the right move at the right time for both
companies, creating a larger, more formidable global competitor. We would like
to congratulate Munich Re on joining forces with such a fine management team.
"In fact, the relationship between KKR and American Re's management
team has been an exceptional four-year partnership," Mr. Fox continued.
"Although we had anticipated a much longer formal association, we know that the
company under the leadership of Paul and his colleagues will continue to
flourish. KKR remains very enthusiastic about the prospects for the insurance
industry generally and will continue to pursue promising management-led
acquisition opportunities."
Dr. Hans-Jurgen Schinzler, the Chairman of Munich Re's Board of
Management, noted, "The purchase means a great step forward for our core
business, reinsurance. We have the greatest respect for the qualities of
American Re -- its high quality business approach, its people and its clients.
We are convinced that the addition of American Re to the Munich Re family of
companies, including Munich American Reinsurance Company, will allow us to offer
the best service to our clients and outstanding opportunities for our employees.
The transaction is also expected to have a positive effect on Munich Re's future
earnings per share."
The Company, through its wholly owned subsidiaries, is a direct writer
of treaty and facultative reinsurance and related services, with approximately
1,200 employees in 13 domestic and 16 international offices.
###
