<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 21, 1998
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Life Re Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(a)(3).
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $.001 per share; 6% Adjustable Conversion-rate
Equity Security Units ("Units")
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
17,286,279 shares of Common Stock and 2,070,000 Units
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
$96.872
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$1,866,211,928.79*
------------------------------------------------------------------------
(5) Total fee paid:
$373,242.39 ( 1/50 of 1% of $1,866,211,928.79)
------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
*Includes $163,910,794.75 to be received by holders of options to acquire Common
Stock and $27,744,714.75 to be received by holders of Units.
<PAGE> 2
LIFE RE CORPORATION
969 HIGH RIDGE ROAD
STAMFORD, CONNECTICUT 06905
October 21, 1998
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Special Meeting") of Life Re Corporation (the "Company") to be held at 2:00
p.m., eastern time, on November 23, 1998, at the offices of Life Re Corporation,
969 High Ridge Road, Stamford, Connecticut 06905.
As described in the accompanying Proxy Statement, at the Special Meeting
you will be asked to consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger, dated as of July 27, 1998 (the "Merger
Agreement"), by and among Swiss Reinsurance Company ("Swiss Re"), SRC
Acquisition Corp. ("Sub"), Swiss Re America Holding Corporation ("Holding") and
the Company pursuant to which Sub will be merged with and into the Company (the
"Merger"), with the Company continuing as the surviving corporation and becoming
a wholly owned subsidiary of Swiss Re and Holding. Pursuant to the Merger
Agreement, stockholders of the Company will be entitled to receive $95.00 in
cash for each share of the Company's Common Stock owned by them, provided, that
if the closing is delayed by Swiss Re after all conditions are otherwise
satisfied, stockholders shall also be entitled to receive an additional payment
per share equal to $.0208 per day from, but not including, the date on which the
closing would have occurred absent the exercise by Swiss Re of its right to
delay the closing, to, and including, the closing date. Consummation of the
Merger is subject to certain conditions, including approval and adoption of the
Merger Agreement by the affirmative vote of the holders of a majority of the
outstanding shares of the Company's Common Stock.
Your Board of Directors has carefully reviewed and considered the terms and
conditions of the Merger Agreement and has determined that the Merger Agreement
and the Merger are fair to and in the best interests of the Company and its
stockholders, and has approved and adopted the Merger Agreement.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT.
Detailed information concerning the proposed Merger is set forth in the
accompanying Proxy Statement. I urge you to read the enclosed material carefully
and request that you promptly complete and return the enclosed proxy in the
enclosed return envelope, which requires no postage if mailed in the United
States. If you attend the Special Meeting, you may vote in person even if you
have previously returned your proxy. Your vote is important regardless of the
number of shares you own.
Sincerely,
/s/ RODNEY A. HAWES, JR.
--------------------------------------
Rodney A. Hawes, Jr.
Chairman of the Board
and Chief Executive Officer
<PAGE> 3
LIFE RE CORPORATION
969 HIGH RIDGE ROAD
STAMFORD, CONNECTICUT 06905
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 23, 1998
To Our Stockholders:
Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of Life Re Corporation, a Delaware corporation (the "Company"), will
be held on November 23, 1998, at 2:00 p.m., eastern time, at the office of Life
Re Corporation, 969 High Ridge Road, Stamford, Connecticut 06905, for the
following purpose:
To consider and vote upon a proposal to approve and adopt an Agreement and
Plan of Merger, dated as of July 27, 1998 (the "Merger Agreement"), by and among
Swiss Reinsurance Company, a Swiss corporation ("Swiss Re"), SRC Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of Swiss Re ("Sub"),
Swiss Re America Holding Corporation, a Delaware corporation and a wholly owned
subsidiary of Swiss Re ("Holding"), and the Company, pursuant to which (i) Sub
will be merged with and into the Company (the "Merger"), with the Company
continuing as the surviving corporation and becoming a wholly owned subsidiary
of Swiss Re and Holding and (ii) each outstanding share of common stock, par
value $.001 per share, of the Company (the "Common Stock"), other than shares
held by the Company in its treasury, Swiss Re, Holding, the Sub or any other
wholly owned subsidiary of Swiss Re and shares held by the stockholders, if any,
who properly exercise their appraisal rights under Delaware law, will be
converted into the right to receive $95.00 in cash, provided, that if the
closing is delayed by Swiss Re after all conditions are otherwise satisfied,
stockholders shall also be entitled to receive an additional payment per share
equal to $.0208 per day from, but not including, the date on which the closing
would have occurred absent the exercise by Swiss Re of its right to delay the
closing to, and including, the closing date.
October 23, 1998 has been fixed as the record date for the determination of
stockholders entitled to notice of and to vote at the Special Meeting or any
adjournments or postponements thereof. Only holders of record of Common Stock at
the close of business on that date will be entitled to notice of and to vote at
the Special Meeting or any adjournments or postponements thereof.
Holders of Common Stock who do not vote in favor of approving and adopting
the Merger Agreement and who otherwise comply with the applicable statutory
procedures of Section 262 of the Delaware General Corporation Law (the "DGCL")
will be entitled to appraisal rights under Section 262 of the DGCL. A summary of
the provisions of Section 262 of the DGCL, including a summary of the
requirements that must be complied with by holders of Common Stock desiring to
assert appraisal rights, is set forth in the accompanying Proxy Statement under
the heading "The Merger -- Appraisal Rights." The entire text of Section 262 of
the DGCL is attached as Annex C to the Proxy Statement.
The accompanying Proxy Statement describes the Merger Agreement, the
proposed Merger and certain actions to be taken in connection with the Merger.
To ensure that your vote will be counted, please complete, date and sign the
enclosed proxy card and return it promptly in the enclosed postage-paid
envelope, whether or not you plan to attend the Special Meeting. You may revoke
your proxy in the manner described in the accompanying Proxy Statement at any
time before it is voted at the Special Meeting. Executed proxies with no
instructions indicated thereon will be voted "FOR" approval and adoption of the
Merger Agreement.
By Order Of The Board Of Directors,
/s/ W. WELDON WILSON
--------------------------------------
W. Weldon Wilson
Executive Vice President, General
Counsel and Secretary
Stamford, Connecticut
October 21, 1998
<PAGE> 4
YOUR VOTE IS IMPORTANT. TO VOTE YOUR SHARES, PLEASE MARK, DATE, SIGN AND
RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING.
PLEASE DO NOT SEND YOUR COMMON STOCK CERTIFICATES AT THIS TIME. IF THE
MERGER IS CONSUMMATED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF
YOUR CERTIFICATES.
2
<PAGE> 5
LIFE RE CORPORATION
969 HIGH RIDGE ROAD
STAMFORD, CONNECTICUT 06905
------------------------
PROXY STATEMENT
------------------------
FOR A SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 23, 1998
This Proxy Statement is being furnished to holders of common stock, par
value $.001 per share ("Common Stock"), of Life Re Corporation, a Delaware
corporation (the "Company"), in connection with the solicitation of proxies by
and on behalf of the Company's Board of Directors (the "Board") for use at a
special meeting of stockholders to be held at 2:00 p.m., eastern time, on
November 23, 1998, at the offices of Life Re Corporation, 969 High Ridge Road,
Stamford, Connecticut 06905, and at any adjournments or postponements thereof
(the "Special Meeting"). This Proxy Statement and the accompanying Notice and
Proxy Card are first being mailed to holders of Common Stock entitled to notice
of, and to vote at, the Special Meeting on or about October 26, 1998.
At the Special Meeting, holders of Common Stock will be asked to consider
and vote upon a proposal to approve and adopt an Agreement and Plan of Merger,
dated as of July 27, 1998 (the "Merger Agreement"), by and among Swiss
Reinsurance Company, a Swiss corporation ("Swiss Re"), SRC Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of Swiss Re ("Sub"), Swiss Re
America Holding Corporation, a Delaware corporation and a wholly owned
subsidiary of Swiss Re ("Holding"), and the Company. A copy of the Merger
Agreement is attached to this Proxy Statement as Annex A. Pursuant to the Merger
Agreement, (i) Sub will be merged with and into the Company (the "Merger"), with
the Company continuing as the surviving corporation and becoming a wholly owned
subsidiary of Swiss Re and Holding and (ii) each outstanding share of Common
Stock, other than shares held by the Company in its treasury, Swiss Re, Holding,
Sub, or any other wholly owned subsidiary of Swiss Re and shares held by the
stockholders, if any, who properly exercise their appraisal rights under
Delaware law, will be converted into the right to receive $95.00 in cash,
provided, that if the closing of the Merger (the "Closing") is delayed by Swiss
Re after all conditions are otherwise satisfied, stockholders shall also be
entitled to receive an additional payment per share equal to $.0208 per day
from, but not including, the date on which the Closing would have occurred
absent the exercise by Swiss Re of its right to delay the Closing to, and
including, the date of the Closing (the "Closing Date") (as used herein, $95.00
per share plus any "per diem" consideration paid per share is referred to as the
"Merger Consideration"). Holders of Common Stock who do not vote in favor of
approving and adopting the Merger Agreement and who otherwise comply with the
applicable statutory procedures of Section 262 of the Delaware General
Corporation Law (the "DGCL") will be entitled to appraisal rights under Section
262 of the DGCL. See "The Merger -- Appraisal Rights."
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT.
All information contained in this Proxy Statement concerning Swiss Re and
its subsidiaries, including Holding and Sub, has been supplied by Swiss Re and
has not been independently verified by the Company. Except as otherwise
indicated, all other information contained in this Proxy Statement (or, as
permitted by applicable rules and regulations of the Securities and Exchange
Commission, incorporated by reference herein) has been supplied or prepared by
the Company.
The date of this Proxy Statement is October 21, 1998.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION....................................... 1
FORWARD-LOOKING STATEMENTS.................................. 1
SUMMARY..................................................... 3
The Companies............................................. 3
The Special Meeting....................................... 4
The Merger................................................ 5
Selected Consolidated Financial Data...................... 8
THE SPECIAL MEETING......................................... 10
General................................................... 10
Matters to Be Considered at the Special Meeting........... 10
Record Date; Voting at the Special Meeting................ 10
Proxies; Revocation of Proxies............................ 11
Solicitation of Proxies................................... 11
THE MERGER.................................................. 12
Background of the Merger.................................. 12
The Company's Reasons for the Merger; Recommendation of
the Board of Directors................................. 13
Opinion of the Company's Financial Advisor................ 14
Interest of Certain Persons in the Merger................. 17
Financing the Merger...................................... 21
Accounting Treatment...................................... 21
Certain Federal Income Tax Consequences................... 21
Regulatory Filings and Approvals.......................... 22
Effect of Merger on Corporation Obligated, Mandatorily
Redeemable Capital Securities of Subsidiary Trusts
Holding Solely Parent Debentures....................... 22
Certain Consequences of the Merger........................ 23
Appraisal Rights.......................................... 23
CERTAIN LEGAL MATTERS....................................... 25
THE MERGER AGREEMENT........................................ 25
The Merger................................................ 25
Representations and Warranties............................ 27
Certain Covenants......................................... 27
Conditions to the Merger.................................. 33
Termination............................................... 33
THE COMPANIES............................................... 34
The Company............................................... 34
Swiss Re.................................................. 34
Holding................................................... 34
SELECTED CONSOLIDATED FINANCIAL DATA........................ 35
MARKET PRICES OF COMMON STOCK............................... 37
CERTAIN PROJECTIONS OF FUTURE OPERATING RESULTS............. 38
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT..................................... 40
Security Ownership of Certain Beneficial Owners........... 40
Security Ownership of Management.......................... 40
STOCKHOLDER PROPOSALS....................................... 41
INDEPENDENT AUDITORS........................................ 41
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 42
Annex A: Agreement and Plan of Merger....................... A-1
Annex B: Opinion of Goldman, Sachs & Co..................... B-1
Annex C: Section 262 of the Delaware General Corporation
Law....................................................... C-1
</TABLE>
i
<PAGE> 7
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports, proxy statements and other information with
the Securities and Exchange Commission (the "SEC"). The reports, proxy
statements and other information filed by the Company with the SEC may be
inspected and copied at the public reference facilities maintained by the SEC at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and also are
available for inspection at the SEC's Regional Offices at Seven World Trade
Center, Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material also may be obtained, at
prescribed rates, from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549. In addition, the Company is required to
file electronic versions of certain material with the SEC through the SEC's
Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. The SEC
maintains a site on the Internet's World Wide Web at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. The Common Stock
and the Company's 6% Units, as more fully described under "The Merger -- Effect
of Merger on Corporation Obligated, Mandatorily Redeemable Capital Securities of
Subsidiary Trusts Holding Solely Parent Debentures" are listed and traded on the
New York Stock Exchange, Inc. (the "NYSE") and such reports, proxy statements
and other information concerning the Company may also be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.
NO PERSON IS AUTHORIZED TO PROVIDE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROXY STATEMENT
OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS INCORPORATED BY REFERENCE
HEREIN. ANY INFORMATION OR REPRESENTATIONS WITH RESPECT TO SUCH MATTERS NOT
CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
THE COMPANY. THE DELIVERY OF THIS PROXY STATEMENT SHALL NOT, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
IN THIS PROXY STATEMENT OR IN THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THEREOF, AS THE CASE MAY
BE.
FORWARD-LOOKING STATEMENTS
Certain information contained or incorporated by reference in this Proxy
Statement, including the information set forth under "Certain Projections of
Future Operating Results" and other statements as to the future financial or
operating performance of the Company, may constitute "forward-looking
statements." The Private Securities Litigation Reform Act of 1995 provides
certain "safe harbor" protections for forward-looking statements in order to
encourage companies to provide prospective information about their businesses.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance, and underlying assumptions and
other statements which are other than statements of historical facts.
Forward-looking statements contained or incorporated by reference in this Proxy
Statement were not prepared in compliance with the published guidelines of the
American Institute of Certified Public Accountants regarding projections or
financial forecasts.
The forward-looking statements set forth or incorporated by reference in
this Proxy Statement are based upon various assumptions, many of which are
based, in turn, upon further assumptions, including without limitation,
management's examination of historical operating trends, data contained in the
Company's records and other data available from third parties. Although the
Company believes that such assumptions were reasonable when made, because such
assumptions are inherently subject to significant uncertainties and
contingencies which are difficult or impossible to predict and are beyond the
Company's control, there can be no assurance, and no representation or warranty
is made, that management's expectations, beliefs or projections will result or
be achieved or accomplished. In addition to the other factors and matters
addressed elsewhere herein and in the documents incorporated by reference
herein, factors that in the view of the
<PAGE> 8
Company, could cause actual results to differ materially from those discussed in
the forward-looking statements include: (i) uncertainties relating to general
economic and business conditions which may impact the reinsurance marketplace;
(ii) changes in laws and government regulations applicable to the Company; (iii)
the ability of the Company to implement its operating strategies successfully;
(iv) the ability of the Company to execute Administrative Reinsurance(SM)
transactions and the amount, timing and returns thereof and therefrom; (v)
material fluctuations in interest rate levels; (vi) material changes in
mortality and morbidity experience; (vii) material changes in persistency;
(viii) material changes in the level of operating expenses; (ix) success or
failure of certain of the Company's clients in premium writing; (x) significant
changes in competitive factors affecting the Company; (xi) occurrences affecting
the Company's ability to obtain funds from operations, debt or equity to finance
growth in its businesses; and (xii) other risks and uncertainties.
Pursuant to Section 21E(d) of the Exchange Act and Section 27A(d) of the
Securities Act of 1933, as amended (the "Securities Act"), none of the Company,
Swiss Re or any of their respective agents, employees or advisors intends or has
any duty or obligation to supplement, amend, update or revise any of the
forward-looking statements contained or incorporated by reference in this Proxy
Statement. The Company and Swiss Re are aware, however, of their responsibility,
pursuant to Item 10(b)(3)(iii) of Regulation S-K (Standard Instructions for
Filing Forms under Securities Act of 1933, Securities Exchange Act of 1934 and
Energy Policy and Conservation Act of 1975), to make full and prompt disclosure
of material facts, both favorable and unfavorable, regarding their financial
condition. Neither the Company's nor Swiss Re's independent auditors have
reviewed, examined or compiled such statements or applied any procedures with
respect to such statements. Accordingly, such auditors have not expressed any
opinion or other form of assurance with respect to such statements.
2
<PAGE> 9
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement. This summary is not intended to be complete and is
qualified in its entirety by reference to the more detailed information
contained elsewhere, or incorporated by reference, in this Proxy Statement and
the Annexes hereto. Stockholders are urged to read this Proxy Statement and the
Annexes hereto carefully and in their entirety. Unless otherwise defined herein,
all capitalized terms used in this Summary have the respective meanings assigned
to them elsewhere in this Proxy Statement.
THE COMPANIES
The Company................... The Company through its principal wholly owned
subsidiary, Life Reassurance Corporation of
America ("Life Reassurance"), provides ordinary
and group life reinsurance in the United
States.
The Company's two core lines of business are
traditional life reinsurance, which involves
the transfer of mortality risks on new sales
from primary (or ceding) insurers of ordinary
and group life insurance to the Company, and
Administrative Reinsurance, which involves the
acquisition of blocks of life insurance in
force and, frequently, the assumption of
administrative responsibility by the Company.
Swiss Re...................... Swiss Reinsurance Company ("Swiss Re") is one
of the world's leading reinsurers, with more
than seventy offices in over thirty countries.
Swiss Re and its subsidiaries operate in both
the property and casualty and life and health
reinsurance business. In fiscal year 1997,
Swiss Re reported gross premium revenues of
approximately $11.9 billion, an increase of
approximately 22% from fiscal year 1996, of
which approximately 20% can be attributed to
the first time inclusion of Mercantile &
General Re in its results of operations. Swiss
Re reported profits of approximately $1.5
billion last year, an increase of approximately
45% from fiscal year 1996.
Sub........................... Sub is a newly incorporated Delaware
corporation organized in connection with the
Merger, and has not carried on any activities
other than in connection with the Merger. Sub
is wholly owned by Swiss Re and Holding (as
defined below). Upon the consummation of the
Merger, Sub will be merged with and into the
Company, with the Company continuing as the
surviving corporation (the "Surviving
Corporation") and becoming a wholly owned
subsidiary of Swiss Re and Holding.
Holding....................... The Merger Agreement provides that Swiss Re
America Holding Corporation ("Holding"), a
Delaware corporation wholly owned by Swiss Re,
may opt to become a party to the Merger
Agreement and to be bound by its terms. Holding
became a party to the Merger Agreement on July
27, 1998. Upon becoming a party to the Merger
Agreement, Holding made each representation and
warranty of Swiss Re and Sub contained in the
Merger Agreement (unless such warranty or
representation spoke of matters unique to Swiss
Re or Sub) and agreed to be bound by each
covenant of Swiss Re, Sub and the Surviving
Corporation. Holding is the U.S. holding
company for Swiss Re's U.S. operations.
Holding's subsidiaries are engaged primarily in
the property and casualty and life
3
<PAGE> 10
reinsurance business. Its two principal
subsidiaries are Swiss Reinsurance America
Corporation and Swiss Re Life & Health America
Inc.
THE SPECIAL MEETING
Time, Date and Place.......... The Special Meeting will be held at 2:00 p.m.,
eastern time, on November 23, 1998, at the
offices of Life Re Corporation, 969 High Ridge
Road, Stamford, Connecticut 06905.
Matters to Be Considered at
the Special Meeting........... At the Special Meeting, stockholders will
consider and vote upon a proposal to approve
and adopt the Merger Agreement. See "The
Special Meeting -- Matters to Be Considered at
the Special Meeting."
Record Date; Voting at the
Special Meeting............... October 23, 1998 has been fixed as the record
date (the "Record Date") for the determination
of stockholders entitled to notice of, and to
vote at, the Special Meeting. Accordingly, only
stockholders of record at the close of business
on the Record Date will be entitled to vote at
the Special Meeting. At the close of business
on October 19, 1998, the most recent
practicable date prior to the date of this
Proxy Statement, there were 17,286,529 shares
of Common Stock outstanding and entitled to
vote. Stockholders of record on the Record Date
are entitled to one vote per share, exercisable
in person or by properly executed proxy, upon
each matter properly submitted for the vote of
stockholders at the Special Meeting. The
presence, in person or by properly executed
proxy, of the holders of a majority of the
outstanding shares of Common Stock is necessary
to constitute a quorum at the Special Meeting.
The affirmative vote of the holders of a
majority of the outstanding shares of Common
Stock is required to approve and adopt the
Merger Agreement. Abstentions and broker
non-votes will be counted as votes against the
proposal to approve and adopt the Merger
Agreement. See "The Special Meeting -- Record
Date; Voting at the Special Meeting."
Proxies; Revocation of
Proxies....................... This Proxy Statement is being furnished to
stockholders of record at the close of business
on the Record Date in connection with the
solicitation of proxies by and on behalf of the
Board for use at the Special Meeting. All
shares of Common Stock which are represented at
the Special Meeting by properly executed
proxies received and not duly and timely
revoked will be voted at the Special Meeting in
accordance with the instructions contained
therein. In the absence of contrary
instructions, such shares will be voted "FOR"
the approval and adoption of the Merger
Agreement.
Any proxy signed and returned by a stockholder
may be revoked by such stockholder at any time
before it is voted, by giving due notice of
such revocation to the Secretary of the Company
(969 High Ridge Road, Stamford, Connecticut
06905), by signing and delivering a proxy
bearing a later date or by attending the
Special Meeting and voting in person.
Attendance at the Special Meeting without
taking other affirmative action as
aforementioned will not
4
<PAGE> 11
constitute a revocation of a proxy. See "The
Special Meeting -- Proxies; Revocation of
Proxies."
THE MERGER
Effects of the Merger; Merger
Consideration............... Upon consummation of the Merger, (i) Sub will
be merged with and into the Company, with the
Company continuing as the Surviving Corporation
and becoming a wholly owned subsidiary of Swiss
Re and Holding and (ii) each outstanding share
of Common Stock, other than shares held by the
Company in its treasury, Swiss Re, Holding,
Sub, or any other wholly owned subsidiary of
Swiss Re and shares held by stockholders, if
any, who properly exercise their appraisal
rights under Delaware law, will be converted
into the right to receive the Merger
Consideration.
Treatment of 6% Adjustable
Conversion-rate Equity
Securities of the Company... As more fully described under "The
Merger -- Effect of Merger on Corporation
Obligated, Mandatorily Redeemable Capital
Securities of Subsidiary Trusts Holding Solely
Parent Debentures -- 6% Adjustable
Conversion-rate Equity Securities," holders of
6% Adjustable Conversion-rate Equity Security
Units of the Company ("Units") will be entitled
to receive upon settlement of the forward
contracts (the "Contracts") associated with
such Units on March 15, 2001, the Merger
Consideration, in lieu of the Common Stock
otherwise issuable upon settlement of the
Contracts.
Treatment of Stock Options.... All outstanding Options (as more fully
described under "The Merger Agreement -- The
Merger -- Option Plans") obligating the Company
to issue, transfer or sell any shares of Common
Stock which are not currently vested will
become vested at the effective time of the
Merger (the "Effective Time"). Each holder of
an Option who has consented to its cancellation
shall be entitled to receive as soon as
practicable after the Effective Time, in
exchange for such Option, an amount equal to
the product of (i) the excess of the amount of
the Merger Consideration per share over the per
share exercise price of such Option, multiplied
by (ii) the number of shares of Common Stock
covered by such Option.
Recommendation of the
Company's Board of
Directors................... The Board has determined that the Merger
Agreement and the Merger are fair to and in the
best interests of the Company and its
stockholders and has approved and adopted the
Merger Agreement.
ACCORDINGLY, THE BOARD RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT.
In reaching its determination that the Merger
Agreement and the Merger are fair to and in the
best interests of the Company and its
stockholders, the Board considered a number of
factors, as more fully described under "The
Merger -- The Company's Reasons for the Merger;
Recommendation of the Board of Directors."
5
<PAGE> 12
Opinion of the Company's
Financial Advisor............. Goldman, Sachs & Co. ("Goldman Sachs") has
delivered its written opinion to the Board
that, as of July 27, 1998, the Merger
Consideration to be received by the holders of
Common Stock pursuant to the Merger Agreement
is fair from a financial point of view to such
holders. The full text of the written opinion
of Goldman Sachs, which sets forth assumptions
made, matters considered and limitations on the
review undertaken in connection with the
opinion, is attached hereto as Annex B and is
incorporated herein by reference. The opinion
of Goldman Sachs referred to herein does not
constitute a recommendation as to how any
stockholder should vote with respect to such
transaction. STOCKHOLDERS ARE URGED TO, AND
SHOULD, READ SUCH OPINION IN ITS ENTIRETY. Upon
consummation of the Merger, the Company will
pay Goldman Sachs a transaction fee for acting
as the Company's financial advisor in
connection with the transaction. See "The
Merger -- Opinion of the Company's Financial
Advisor -- Opinion of Goldman Sachs."
Interests of Certain Persons
in the Merger................. Certain members of the Company's executive
management and of the Board will receive
economic benefits as a result of the Merger.
For information concerning such benefits, see
"The Merger -- Interests of Certain Persons in
the Merger."
Financing the Merger.......... Swiss Re and its subsidiaries will contribute
internally generated funds to Sub in amounts
sufficient to pay the total amount required to
pay the Merger Consideration to the Company's
stockholders and Option holders, and pay
estimated fees, expenses and other transaction
costs of Swiss Re and Sub in connection with
the Merger. See "The Merger -- Financing the
Merger."
Conditions to the Merger...... The Merger is subject to certain customary
closing conditions, including, without
limitation, the approval of the Merger
Agreement by the requisite vote of the
stockholders of the Company in accordance with
applicable law, the representations and
warranties of each of Swiss Re, Sub, Holding
and the Company being true and correct in all
material respects on and as of the Effective
Time, each of Swiss Re, Sub, Holding and the
Company having performed in all material
respects its obligations to be performed prior
to the Effective Time under the Merger
Agreement, and the receipt of all material
consents, authorizations, orders and approvals
of (or filings with) any governmental entity
required in connection with the Merger shall
have been obtained or made.
Termination; Certain Fees..... The Merger Agreement will be subject to
termination at any time prior to the Effective
Time by (i) the mutual consent of Swiss Re,
Sub, Holding and the Company, (ii) either Swiss
Re, Sub, Holding or the Company if the
Company's stockholders fail to approve and
adopt the Merger Agreement at the Special
Meeting, any court or governmental entity has
taken action to permanently restrain, enjoin or
otherwise prohibit the Merger and such action
has become final and non-appealable, or if the
Effective Time shall not have occurred before
January 31, 1999, or (iii) the Company if the
Company receives a Superior Proposal (as
defined herein) from a bona fide third party
under certain circumstances. If the
6
<PAGE> 13
Merger Agreement is terminated by the Company
under certain circumstances described herein,
the Company will be obligated to pay to Swiss
Re a termination fee of $60 million in cash.
See "The Merger Agreement -- Termination."
Appraisal Rights.............. Holders of Common Stock on the Record Date who
do not vote in favor of approving and adopting
the Merger Agreement and who otherwise comply
with the applicable statutory procedures of
Section 262 of the DGCL will be entitled to
appraisal rights under Section 262 of the DGCL.
A summary of the provisions of Section 262 of
the DGCL, including a summary of the
requirements with which holders of Common Stock
desiring to assert appraisal rights must
comply, is contained herein under the heading
"The Merger -- Appraisal Rights." The entire
text of Section 262 of the DGCL is attached
hereto as Annex C.
Certain Federal Income Tax
Consequences................ The receipt of cash by a stockholder of the
Company pursuant to the Merger will be a
taxable transaction for federal income tax
purposes and may also be taxable under
applicable state, local and foreign income and
other tax laws. A stockholder will recognize
gain or loss in an amount equal to the
difference between the adjusted tax basis of
his or her Common Stock and the amount of cash
received in exchange therefor in the Merger.
Such gain or loss will be capital gain or loss
if the Common Stock is a capital asset in the
hands of the stockholder and will be long-term
capital gain or loss if the holding period
exceeds one year. See "The Merger -- Certain
Federal Income Tax Consequences."
Certain Information In
Connection With the Common
Stock....................... The Common Stock is listed on the NYSE. On June
18, 1998, the trading date preceding the date
on which the merger of Berkshire Hathaway Inc.
and General Re Corporation was announced, which
had an industry-wide impact on the pricing of
reinsurance companies, the high and low sales
prices of the Common Stock, as reported on the
NYSE Composite Tape, were $73 5/8 and $73 per
share, respectively. On July 24, 1998, the last
trading date prior to the public announcement
of the execution of the Merger Agreement, the
high and low sales prices of the Common Stock,
as reported on the NYSE Composite Tape, were
$89 and $85 1/8 per share, respectively. On
October 19, 1998, the last practicable date
prior to the date of this Proxy Statement, the
high and low sales prices of the Common Stock,
as reported on the NYSE Composite Tape, were
$92 1/8 and $91 7/8 per share, respectively.
Stockholders are urged to obtain current market
quotations for the Common Stock prior to making
any decision with respect to the Merger. See
"Selected Financial Data -- Market Prices of
Common Stock."
7
<PAGE> 14
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data for the
Company for the periods indicated. The data set forth below should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, and the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, incorporated by reference herein. See
"Incorporation of Certain Documents by Reference." The selected consolidated
financial data at and for the years ended December 31, 1997, 1996, 1995, 1994
and 1993 are derived from the consolidated financial statements of the Company.
The selected consolidated financial data at June 30, 1998 and for the six months
ended June 30, 1998 and 1997 are derived from the unaudited condensed
consolidated financial statements of the Company, which have been prepared on
the same basis as the Company's audited consolidated financial statements and,
in the opinion of management, contain all adjustments consisting of only normal
recurring adjustments necessary for a fair presentation of the financial
position and results of operations for these periods. The results of operations
for the six months ended June 30, 1998 may not be indicative of results for the
full year.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
----------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- -------- --------- --------- -------- -------- --------
(UNAUDITED) (IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues
Policy revenues.......................... $ 302.4 $ 237.3 $ 490.3 $ 451.0 $ 383.2 $ 350.9 $ 289.0
Investment income........................ 105.3 71.2 151.0 124.3 98.6 82.4 73.5
Realized investment gains................ .7 1.8 4.5 17.2 3.7 .1 21.0
-------- -------- --------- --------- -------- -------- --------
Total revenues......................... 408.4 310.3 645.8 592.5 485.5 433.4 383.5
-------- -------- --------- --------- -------- -------- --------
Benefits and Expenses
Policy benefits.......................... 206.0 168.6 341.0 332.5 281.5 245.8 208.7
Acquisition costs........................ 85.6 68.2 142.2 111.9 95.7 88.7 71.1
Interest credited to policyholder
accounts............................... 33.2 18.1 40.7 34.6 21.2 15.0 15.0
Interest expense......................... 3.9 4.0 8.0 8.4 10.7 9.1 9.9
Distributions on corporation obligated,
mandatorily redeemable capital
securities of subsidiary trusts holding
solely parent debentures............... 6.7 .6 5.0 -- -- -- --
Other operating expenses................. 23.9 16.8 32.7 29.0 21.6 22.0 18.1
-------- -------- --------- --------- -------- -------- --------
Total benefits and expenses............ 359.4 276.4 569.6 516.5 430.8 380.6 322.8
-------- -------- --------- --------- -------- -------- --------
Income before federal income taxes and
extraordinary charge..................... 49.1 34.0 76.2 76.1 54.8 52.8 60.6
Provision for federal income taxes........ 17.2 11.9 26.7 21.9 19.2 18.5 21.4
-------- -------- --------- --------- -------- -------- --------
Income before extraordinary charge........ 31.9 22.1 49.5 54.2 35.6 34.3 39.2
Extraordinary charge, net of federal
income tax benefit....................... -- -- -- -- 1.0 -- --
-------- -------- --------- --------- -------- -------- --------
Net income................................ $ 31.9 $ 22.1 $ 49.5 $ 54.2 $ 34.6 $ 34.3 $ 39.2
======== ======== ========= ========= ======== ======== ========
Diluted Earnings Per Share:
Income before extraordinary charge....... $ 1.92 $ 1.57 $ 3.48 $ 3.89 $ 2.39 $ 2.21 $ 2.50
Extraordinary charge, net of federal
income tax benefit..................... -- -- -- -- (.07) -- --
-------- -------- --------- --------- -------- -------- --------
Net income............................... $ 1.92 $ 1.57 $ 3.48 $ 3.89 $ 2.32 $ 2.21 $ 2.50
Common dividends per share............... $ 0.30 $ 0.26 $ 0.52 $ 0.40 $ 0.28 $ 0.24 $ 0.20
Weighted average common and common
equivalent shares........................ 16.6 14.1 14.2 13.9 14.9 15.5 15.7
</TABLE>
8
<PAGE> 15
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
----------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- -------- --------- --------- -------- -------- --------
(UNAUDITED) (IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END):
Invested assets........................... $3,840.3 $1,914.3 $ 2,784.6 $ 1,833.2 $1,504.2 $ 998.5 $ 944.6
Total assets.............................. $4,909.7 $2,618.0 $ 3,700.2 $ 2,519.3 $2,024.1 $1,442.3 $1,339.7
Loans payable............................. $ 125.0 $ 125.0 $ 125.0 $ 125.0 $ 140.0 $ 140.0 $ 150.0
Corporation obligated, mandatorily
redeemable capital securities of
subsidiary trusts holding solely parent
debentures............................... $ 236.6 $ 100.0 $ 100.0 -- -- -- --
Common shareholders' equity............... $ 631.8 $ 307.4 $ 373.8 $ 290.1 $ 279.3 $ 194.9 $ 230.7
OTHER FINANCIAL DATA (AS OF OR FOR THE
PERIOD ENDED):
Return on average shareholders' equity.... 13% 15% 15% 19% 15% 16% 20%
Return on average shareholders' equity, as
adjusted(2).............................. 14% 15% 16% 15% 14% 16% 14%
Book value per common share............... $ 36.55 $ 22.61 $ 27.42 $ 21.44 $ 19.99 $ 12.56 $ 14.87
Book value per common share, as
adjusted(3).............................. $ 32.49 $ 20.95 $ 22.92 $ 19.61 $ 16.45 $ 14.75 $ 12.77
Ratio of earnings to fixed charges:
Excluding interest on annuities and
financial products(4).................. 5.5x 8.2x 6.7x 9.8x 6.0x 6.6x 6.9x
Including interest on annuities and
financial products(5).................. 2.1x 2.5x 2.4x 2.8x 2.7x 3.2x 3.4x
First year reinsurance premiums assumed... $ 35.5 $ 28.6 $ 61.3 $ 38.2 $ 22.6 $ 19.3 $ 13.6
Capital invested in Administrative
Reinsurance(SM) transactions(6).......... $ 152.8 $ 16.2 $ 85.1 $ 32.0 $ 35.9 -- --
Life insurance in force (7)............... N.A. N.A. $ 148,986 $ 116,012 $ 91,283 $ 81,213 $ 79,652
Statutory capital and surplus (7)......... $ 327.3 $ 277.3 $ 210.5 $ 209.3 $ 208.2 $ 193.8 $ 187.4
</TABLE>
- ---------------
N.A. -- Not Available.
(1) Diluted earnings per share have been calculated in accordance with Financial
Accounting Standards Board Statement No. 128, Earnings Per Share ("SFAS
128"). Basic earnings per share in accordance with SFAS 128 for the six
months ended June 30, 1998 and 1997 were $2.02 and $1.63, respectively, and
for the years ended 1997, 1996, 1995, 1994 and 1993 were $3.64, $3.97,
$2.32, $2.21 and $2.53, respectively. The adoption of SFAS 128 did not
result in the restatement of previously reported earnings per share, as
diluted earnings per share calculated in accordance with SFAS 128 results in
the same per share amounts as previously reported by the Company.
(2) Return on shareholders' equity, as adjusted, is calculated by dividing net
income (excluding realized investment gains and extraordinary charge) by
average shareholders' equity for the period (which is the simple average of
beginning and end of period shareholders' equity excluding unrealized
investment gains or losses).
(3) Book value per share is calculated by dividing end of period shareholders'
equity (excluding unrealized investment gains and losses) by end of period
common shares outstanding.
(4) For purposes of determining this ratio, earnings consist of income before
federal income taxes and extraordinary charge (1995), plus fixed charges.
Fixed charges consist of interest expense on debt, distributions on capital
securities and the portion of operating leases that are representative of
the interest factor.
(5) Same as the ratio of earnings to fixed charges, excluding interest on
annuities and financial products, except fixed charges and earnings include
interest on annuities and financial products.
(6) Capital invested in Administrative Reinsurance transactions represents the
sum of the consideration paid for life insurance in force acquired and the
related capital to support the business.
(7) Amounts have been derived from the Annual Statements of the Company's
insurance subsidiaries, as filed with insurance regulatory authorities and
prepared in accordance with statutory accounting practices. For purposes of
this presentation, the capital and surplus are defined as statutory capital
and surplus of Life Reassurance only, as its capital and surplus materially
reflect that of the Company's insurance subsidiaries, plus the Asset
Valuation Reserve and the Interest Maintenance Reserve of Life Reassurance
and REALIC.
9
<PAGE> 16
THE SPECIAL MEETING
GENERAL
This Proxy Statement is being furnished to holders of Common Stock in
connection with the solicitation of proxies by and on behalf of the Board for
use at the Special Meeting to be held at 2:00 p.m., eastern time, on November
23, 1998, at the offices of Life Re Corporation, 969 High Ridge Road, Stamford,
Connecticut 06905, and at any adjournments or postponements thereof. This Proxy
Statement and the accompanying Notice and Proxy Card are first being mailed to
holders of Common Stock entitled to notice of, and to vote at, the Special
Meeting, on or about October 26, 1998.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, stockholders will be asked to consider and vote
upon a proposal to approve and adopt the Merger Agreement. The Board has
determined that the Merger Agreement and the Merger are fair to and in the best
interests of the Company and its stockholders and has approved and adopted the
Merger Agreement. ACCORDINGLY, THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. See "The Merger -- Background of
the Merger" and "The Company's Reasons for the Merger -- Recommendation of the
Board of Directors."
STOCKHOLDERS ARE REQUESTED PROMPTLY TO COMPLETE, DATE, SIGN AND RETURN THE
ACCOMPANYING PROXY CARD TO THE COMPANY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL
MEETING WILL HAVE THE SAME EFFECT AS A VOTE "AGAINST" THE MERGER AGREEMENT.
RECORD DATE; VOTING AT THE SPECIAL MEETING
October 23, 1998 has been fixed as the Record Date for the determination of
the holders of Common Stock entitled to notice of, and to vote at, the Special
Meeting. Only stockholders of record at the close of business on the Record Date
will be entitled to notice of, and to vote at, the Special Meeting. At the close
of business on October 19, 1998, the most recent practicable date prior to the
date of this Proxy Statement, there were 17,286,529 shares of Common Stock
outstanding and entitled to vote at the Special Meeting, held by approximately
4,000 stockholders of record.
Stockholders of record on the Record Date are entitled to one vote per
share, exercisable in person or by properly executed proxy, upon each matter
properly submitted for the vote of stockholders at the Special Meeting. The
presence, in person or by properly executed proxy, of the holders of a majority
of the outstanding shares of Common Stock is necessary to constitute a quorum at
the Special Meeting.
Holders of Common Stock on the Record Date who do not vote in favor of
approving and adopting the Merger Agreement and who otherwise comply with the
applicable statutory procedures of Section 262 of the DGCL will be entitled to
appraisal rights under the DGCL in connection with the Merger. Stockholders of
the Company who vote in favor of approving and adopting the Merger Agreement,
however, will thereby waive their appraisal rights. See "The Merger -- Appraisal
Rights."
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock is required to approve and adopt the Merger Agreement.
Abstentions and broker non-votes will be counted as votes "AGAINST" the proposal
to approve and adopt the Merger Agreement.
The Board is not aware of any matters other than those set forth in the
Notice of Special Meeting of Stockholders transmitted with this Proxy Statement
that may be brought before the Special Meeting, and under the Company's Bylaws
only business within the purposes described in such Notice may be transacted at
the Special Meeting. If any other procedural matters properly come before the
Special Meeting, the persons named in the accompanying Proxy Card will vote the
shares represented by all properly executed proxies on such matters in such
manner as shall be determined by a majority of the Board.
10
<PAGE> 17
PROXIES; REVOCATION OF PROXIES
All shares of Common Stock which are represented at the Special Meeting by
properly executed proxies received and not duly and timely revoked will be voted
at the Special Meeting in accordance with the instructions contained therein. In
the absence of contrary instructions, such shares will be voted "FOR" the
approval and adoption of the Merger Agreement and in the discretion of the
proxyholder as to any other matter which may properly come before the Special
Meeting. If necessary, the proxyholder may vote in favor of a proposal to
adjourn or postpone the Special Meeting in order to permit further solicitations
of proxies in the event a quorum is not obtained, or if fewer shares of Common
Stock than the number required therefor are voted in favor of approval and
adoption of the Merger Agreement. However, no proxyholder will vote any proxies
voted against approval of the Merger Agreement for a proposal to adjourn or
postpone the Special Meeting for the purpose of soliciting additional proxies.
The required vote of the stockholders on the Merger Agreement is based upon
the total number of outstanding shares of Common Stock as of the Record Date.
Therefore, the failure to submit a Proxy Card (or to vote in person at the
Special Meeting), the abstention from voting by a stockholder and broker
non-votes will have the same effect as a vote "AGAINST" the approval and
adoption of the Merger Agreement.
A proxy may be revoked prior to its being voted by: (i) delivering to the
Secretary of the Company, at or before the Special Meeting, a written instrument
bearing a later date than the proxy which instrument, by its terms, revokes the
proxy, (ii) duly executing a subsequent proxy relating to the same shares and
delivering it to the Secretary of the Company at or before the Special Meeting,
or (iii) attending the Special Meeting and giving notice of revocation to the
Secretary of the Company or in open meeting prior to the proxy being voted
(although attendance at the Special Meeting without taking other affirmative
action as aforementioned will not constitute a revocation of a proxy). Any
written instrument revoking a proxy should be sent to: Life Re Corporation, 969
High Ridge Road, Stamford, Connecticut 06905, Attention: Secretary.
If a quorum is not obtained, or if fewer shares of Common Stock than the
number required therefor are voted in favor of approval and adoption of the
Merger Agreement, it is expected that the Special Meeting will be postponed or
adjourned in order to permit additional time for soliciting and obtaining
additional proxies or votes, and, at any subsequent reconvening of the Special
Meeting, all proxies will be voted in the same manner as such proxies would have
been voted at the original convening of the Special Meeting, except for any
proxies which have theretofore effectively been revoked or withdrawn. In the
absence of a quorum, the Special Meeting may be adjourned from time to time by
the holders of a majority of the shares represented at the Special Meeting in
person or by proxy, except that no proxyholder will vote any proxies voted
against approval of the Merger Agreement in favor of any proposal to adjourn or
postpone the Special Meeting.
The obligations of the Company and Swiss Re to consummate the Merger are
subject to, among other things, the condition that the stockholders of the
Company, by the requisite vote thereof, approve and adopt the Merger Agreement.
See "The Merger Agreement -- Conditions to the Merger."
STOCKHOLDERS SHOULD NOT FORWARD ANY CERTIFICATES REPRESENTING COMMON STOCK
WITH THEIR PROXY CARDS. IN THE EVENT THE MERGER IS CONSUMMATED, CERTIFICATES
SHOULD BE DELIVERED IN ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A LETTER OF
TRANSMITTAL WHICH WILL BE SENT TO STOCKHOLDERS PROMPTLY AFTER THE EFFECTIVE
TIME. SEE "THE MERGER AGREEMENT -- THE MERGER -- EXCHANGE OF CERTIFICATES."
SOLICITATION OF PROXIES
The Company will bear the costs of soliciting proxies in the accompanying
form from stockholders. In addition to soliciting proxies by mail, directors,
officers and employees of the Company, without receiving additional compensation
therefor, may solicit proxies by telephone, by telegram, or in person. In
addition, the Company has retained Georgeson & Co., at an estimated cost of
$6,000, plus reimbursement of expenses, to assist the Company in the
solicitation of proxies from brokerage firms and other custodians, nominees and
fiduciaries. Arrangements will be made with brokerage firms and other
custodians, nominees and fiduciaries to
11
<PAGE> 18
forward solicitation materials to the beneficial owners of shares of Common
Stock held of record by such persons, and the Company will reimburse such
brokerage firms, custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses incurred by them in connection therewith.
THE MERGER
BACKGROUND OF THE MERGER
In August 1997, the Company received an unsolicited inquiry from a third
party interested in potentially acquiring the Company. Subsequently, in August
1997, the Company engaged Goldman Sachs to serve as its financial advisor and to
assist in its evaluation of strategic alternatives. Additionally, from August
1997 through December 1997, the Company and/or Goldman Sachs spoke with six
other parties, including Swiss Re, in order to ascertain whether such parties
would be prepared to make offers to acquire the Company. By December 1997, none
of the foregoing third parties initiated merger discussions or made a formal
offer to acquire the Company.
On March 27, 1998, Mr. Jeff Hart, Chairman and CEO of Swiss Re Life and
Health, North America contacted Mr. Rodney A. Hawes, Jr., Chairman of the Board
and Chief Executive Officer of the Company, and suggested that Swiss Re might
have an interest in the Company, the first contact since Swiss Re's indication
of no interest in November 1997. The Company did not solicit indications of
interest from other third parties after the contact by Mr. Hart on March 27,
1998. From April 1998 through June 1998, Swiss Re had preliminary discussions
with the Company in order to understand more about the Company's business and to
determine if it had an interest in potentially pursuing an acquisition
transaction. On May 13, 1998, at a regularly scheduled Board meeting, Mr. Hawes
informed the Board of these discussions, and on June 25, 1998, Mr. John Coomber,
Divisional Chief Executive Officer of Swiss Re Life and Health contacted Mr.
Hawes by phone and stated that Swiss Re had determined that it was interested in
initiating formal merger discussions.
Subsequently, on July 1, 1998, Messrs. Hawes, Dubois, Beisenherz and Stroup
met in Switzerland with Mr. Walter Kielholz, Chief Executive Officer of Swiss
Re, Mr. Coomber and several other senior officers of Swiss Re to discuss the
potential acquisition transaction. At the meeting, representatives of Swiss Re
discussed the history of Swiss Re and its current financial position and
reiterated their interest in the Company. The participants established a
timetable for Swiss Re's due diligence review of the Company and the need for a
Confidentiality Agreement. In addition, representatives of Swiss Re indicated
that it was fundamental to a successful combination that certain members of the
Company's senior management remain employees after the Merger.
On July 8, 1998, Swiss Re executed a Confidentiality Agreement with the
Company and commenced its due diligence review of the Company. Additionally,
beginning on July 21, 1998, legal advisors and management of both the Company
and Swiss Re commenced negotiation of a draft merger agreement.
On July 23, 1998, Mr. Dubois met with Mr. Kielholz in Zurich, Switzerland.
Messrs. Dubois and Kielholz discussed the synergies that might be realized with
the Merger, the steps needed for a successful transition after the Merger, and
the commitment of certain members of the Company's senior management to remain
with the Company after the Merger.
On July 24, 1998, Mr. Coomber, John Fitzpatrick and John Hendrickson of
Swiss Re met with Messrs. Hawes and Dubois of the Company in order to make a
formal offer to acquire the Company. After receiving an initial offer from Swiss
Re of $92.00 per share of Common Stock, Messrs. Hawes and Dubois responded that
they believed the offer was insufficient. After discussions among Messrs.
Coomber, Fitzpatrick and Hendrickson, Swiss Re presented a revised offer to
acquire the Company. Messrs. Hawes and Dubois consulted Mr. Schair and
representatives of Goldman Sachs regarding the terms of the revised offer and
decided to present the revised offer to the Company's Board of Directors. The
revised offer consisted of a formal offer to acquire the Company for the Merger
Consideration and on the other terms set forth in the most recent form of draft
merger agreement, including the proposal that certain members of the Company's
senior
12
<PAGE> 19
management enter into employment agreements and continue to work for the Company
after the Merger (the "Swiss Re Proposal"). See "The Merger -- Interests of
Certain Persons in the Merger."
The Board met on July 25, 1998, with its financial and legal advisors and
received presentations about, and discussed the Swiss Re Proposal. Additionally,
later that day, Ms. Carolyn K. McCandless, Dr. K. Fred Skousen and Mr. T.
Bowring Woodbury, II, the independent directors of the Board met separately with
the Company's financial and legal advisors to discuss the Swiss Re Proposal,
including the requirement that certain members of the Company's senior
management agree to enter into employment agreements and continue to work for
the Company after the Merger.
The Board met again on the morning of July 27, 1998, regarding the final
terms of the Swiss Re Proposal, including the employment agreements referred to
above. After questions by the Board to its management and its financial and
legal advisors and further discussions, the Board determined that the Swiss Re
Proposal, as set forth in the Merger Agreement, was advisable and in the best
interest of the Company and its stockholders. The members of the Board then
voted unanimously to approve the Merger Agreement and the transactions
contemplated therein.
Shortly following the conclusion of the Board meeting, the Company and
Swiss Re executed the Merger Agreement and issued a press release announcing the
Merger. For a description of the reasons the Company decided to engage in the
Merger at this time, see "The Company's Reasons for the Merger; Recommendation
of the Board of Directors."
THE COMPANY'S REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board has determined that the Merger is fair to and in the best
interests of the Company and its stockholders and has approved and adopted the
Merger Agreement. Accordingly, the Board recommends that stockholders vote "FOR"
approval and adoption of the Merger Agreement.
In reaching its determination that the Merger is fair to and in the best
interests of the Company and its stockholders, the Board considered a number of
factors, including, without limitation, the following:
(i) The premium of the Merger Consideration to the historical market
prices for the Common Stock, including the fact that the Merger
Consideration represents a premium in excess of 29% over the $73 5/8 per
share closing sales price of the Common Stock on June 18, 1998, the trading
day preceding the date on which the merger of Berkshire Hathaway Inc. and
General Re Corporation was announced which management believes had an
industry-wide impact on the price of selected reinsurance companies, and a
premium of 6.7% over the $89 per share closing sales price per share of the
Common Stock on July 24, 1998, the last trading date prior to the public
announcement of the execution of the Merger Agreement. See "Selected
Financial Data -- Market Prices of Common Stock."
(ii) The Company had previous discussions with other parties which did
not result in formal proposals.
(iii) The consummation of the Merger, which will be financed in the
form of contributions by Swiss Re and its subsidiaries of internally
generated funds to Sub, is not subject to a financing condition.
(iv) The written opinion of Goldman Sachs to the effect that, as of
the date of such opinion and based upon and subject to certain assumptions,
matters considered and limitations stated therein, the Merger Consideration
to be received by the holders of Common Stock pursuant to the Merger
Agreement is fair, from a financial point of view, to such holders. See
"The Merger -- Opinion of the Company's Financial Advisor."
(v) The current and prospective environment in which the Company
operates, including economic conditions and the competitive environment for
reinsurance businesses and Administrative Reinsurance generally.
Specifically, since there is increasing competition in both the traditional
life reinsurance and Administrative Reinsurance businesses due to an
increase in the number of new entrants into these markets, combining with
Swiss Re in the Merger will give the Company access to a broader client
base.
(vi) The Board's view that the terms of the Merger Agreement, as
reviewed by the Board with its legal and financial advisors, are advisable
and fair to the Company and its stockholders and provide the
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<PAGE> 20
Company and its stockholders with the flexibility, under certain
circumstances to accept a Superior Proposal and terminate the Merger
Agreement upon the payment of a termination fee to Swiss Re. See "The
Merger Agreement -- Certain Covenants -- No Solicitation" and
"-- Termination -- Procedure for and Effect of Termination".
(vii) The Board's knowledge of the business, operations, properties,
assets, financial condition and operating results of the Company.
Specifically, in order to achieve future growth in its business and
operations, the Company would need significant amounts of new capital which
could more easily be provided by Swiss Re than the Company could raise on
its own in the public markets. Moreover, future growth in the Company's
business and operating results depends, in part, on increasing the
Company's Administrative Reinsurance business; access to Swiss Re's clients
should enhance the Company's ability to achieve such future growth.
The Board also recognized that certain members of the Board and executive
officers of the Company might have interests in the Merger which are different
from the Company's other stockholders. See "Interests of Certain Persons in the
Merger." The foregoing discussion of the information and factors discussed by
the Board is not meant to be exhaustive but includes all material factors
considered by the Board. The Board did not quantify or attach any particular
weight to the various factors that it considered in reaching its determination
that the Merger Agreement and the Merger are fair to and in the best interests
of the Company and its stockholders. As a result of its consideration of the
foregoing and other relevant considerations, the Board determined that the
Merger Agreement and the Merger are fair to and in the best interests of the
Company and its stockholders and approved and adopted the Merger Agreement.
ACCORDINGLY, THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
The Company has been informed by Swiss Re that the purpose of the Merger is
to enable Swiss Re to acquire the entire equity interest in the Company.
Following the Merger, it is expected that the Company's businesses and
operations will be integrated with the businesses and operations of Swiss Re and
its affiliates.
OPINION OF THE COMPANY'S FINANCIAL ADVISOR
Opinion of Goldman Sachs
On July 25, 1998, Goldman Sachs delivered its oral opinion to the Board
that as of the date of such opinion, the Merger Consideration to be received by
holders of Common Stock pursuant to the Merger Agreement is fair from a
financial point of view to such holders. Goldman Sachs subsequently confirmed
its earlier opinion by delivery of its written opinion dated July 27, 1998.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS, DATED JULY 27, 1998,
WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED HERETO AS ANNEX B
TO THIS PROXY STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE. THE OPINION OF
GOLDMAN SACHS REFERRED TO HEREIN DOES NOT CONSTITUTE A RECOMMENDATION AS TO HOW
ANY STOCKHOLDER SHOULD VOTE WITH RESPECT TO THE TRANSACTION. STOCKHOLDERS ARE
URGED TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things,
(i) the Merger Agreement; (ii) the Annual Reports to Stockholders and Annual
Reports on Form 10-K of the Company for the five years ended December 31, 1997;
(iii) certain interim reports to stockholders and Quarterly Reports on Form 10-Q
of the Company; (iv) certain other communications from the Company to its
stockholders; and (v) certain internal financial analyses and forecasts for the
Company prepared by management. Goldman Sachs also held discussions with members
of the senior management of the Company regarding past and current business
operations, financial condition and future prospects. In addition, Goldman Sachs
reviewed the reported price and trading activity for the Common Stock, compared
certain financial and stock market information for the Company with similar
information for certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business combinations in
the life insurance and reinsurance industries and performed such other studies
and analyses as it considered appropriate.
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<PAGE> 21
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and has assumed such accuracy and
completeness for purposes of rendering its opinion. Goldman Sachs' employees are
not actuaries and Goldman Sachs' services did not include any actuarial
determinations or an at tempt to evaluate actuarial assumptions. In addition,
Goldman Sachs has not made an independent evaluation or appraisal of the assets
and liabilities of the Company or any of its subsidiaries, and Goldman Sachs has
not been furnished with any such evaluation or appraisal. The opinion of Goldman
Sachs referred to herein was provided for the information and assistance of the
Board in connection with its consideration of the transaction contemplated by
the Merger Agreement, and such opinion does not constitute a recommendation as
to how any stockholder should vote with respect to such transaction.
The following is a summary of the material financial analyses used by
Goldman Sachs in connection with providing its oral opinion to the Board on July
25, 1998. Goldman Sachs utilized substantially the same type of financial
analyses in connection with providing the written opinion attached hereto as
Annex B.
(i) Historical Stock Trading Analysis. Goldman Sachs reviewed the
historical trading prices and volumes for the Common Stock and analyzed the
$95.00 per share of Common Stock offered pursuant to the Merger Agreement
in relation to the price of such Common Stock on the dates and in the time
periods referenced below. Such analysis indicated that from July 24, 1997
to July 24, 1998, the closing market price ranged from a low of $49.75 to a
high of $89.00. Furthermore, the analysis showed that the $95.00 per share
of Common Stock offered pursuant to the Merger Agreement represented a 6.7%
premium to the closing market price on July 24, 1998; a 28.3% premium to
the closing market price on June 19, 1998; a 30.7% premium to the closing
market price on June 1, 1998; and a 12.8% premium to the average closing
market price on the NYSE as reported by Bloomberg from July 1, 1998 to July
24, 1998.
In addition, Goldman Sachs reviewed the historical trading prices for
the Common Stock and the relationship between such Common Stock and
movements in (i) the S&P 500, (ii) trading prices for the common stock of
Reinsurance Group of America Inc. ("RGA") and (iii) a composite index of
selected companies in the life insurance industry (the "Life Insurance
Composite"). The Life Insurance Composite was composed of the following
companies: American General Corporation, The Equitable Companies
Incorporated, Jefferson-Pilot Corporation, Lincoln National Corporation,
Protective Life Corporation, Reliastar Finance Corp. and Transamerica
Corporation. For the period beginning July 23, 1997 and ending July 23,
1998, the trading price of the Common Stock outperformed the S&P 500, RGA
and the Life Insurance Composite.
(ii) Comparison of Selected Companies. Goldman Sachs reviewed and
compared certain financial information relating to the Company to
corresponding financial information, ratios and public market multiples for
eight publicly-traded corporations: RGA, American General Corporation, The
Equitable Companies Incorporated, Lincoln National Corporation,
Transamerica Corporation, Jefferson-Pilot Corporation, Protective Life
Corporation and Reliastar Finance Corp. (the "Selected Companies"). The
Selected Companies were chosen because they are publicly-traded companies
in the life insurance or life reinsurance industry and for purposes of
analysis may be considered similar to the Company. Goldman Sachs calculated
and compared various financial multiples and ratios. The multiples and
ratios for the Company were based on historical and projected financial
information provided by the Company's management and the multiples for each
of the Selected Companies were based on the most recent publicly available
information. Furthermore, using such financial information as provided by
management, the multiples for the Company were calculated (i) assuming a
price of $89.00 per share (the closing price of the Common Stock on the
NYSE on July 24, 1998) (the "Market Price Case") and (ii) assuming the
price of $95.00 per share of Common Stock to be received in connection with
the Merger, the exercise of all Options and the present value of the
Contracts under the Units (the "Merger Price Case"). This analysis showed,
among other things, that the price/earnings per share ("PE") ratio or the
consideration/earnings ratio, as the case may be, (i) using estimated 1998
earnings, ranged from a low of 17.2x to a high of 21.9x (with a median of
18.2x) for the Selected Companies and, for the Company, was 22.8x in the
Market Price Case, as compared to 27.2x in the Merger Price Case and (ii)
using estimated 1999 earnings, ranged from a low of 14.4x to a high of
19.1x (with a median of 15.9x) for the Selected Companies and, for the
Company, was 18.1x in the Market Price Case, as
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<PAGE> 22
compared to 20.2x in the Merger Price Case. The analysis also showed that
the purchase price as a multiple of book value at March 31, 1998, excluding
the impact of FAS-115, ranged from a low of 2.1x to a high of 3.9x (with a
median of 2.7x) for the Selected Companies and, for the Company, was 2.8x
in the Market Price Case, as compared to 3.3x in the Merger Price Case.
Earnings estimates for the Selected Companies in the foregoing analyses
were based on latest median earnings estimates from Institutional Brokers
Estimates System ("IBES"). IBES is a data service that monitors and
publishes compilations of earnings estimates by selected research analysts
regarding companies of interest to institutional investors.
(iii) Discounted Cash Flow Analysis. Goldman Sachs performed a
discounted cash flow analysis for the Common Stock on a stand-alone basis
through December 31, 2002. The analysis was performed using three different
earnings per share ("EPS") estimates from 1998 through 2003 (as provided by
management) representing compound annual growth rates ("CAGR") as follows:
(a) an EPS CAGR of 17.3% (the "Base Case"), (b) an EPS CAGR of 19.5% (the
"Aggressive Case"), and (c) an EPS CAGR of 11.3% (the "Conservative Case").
Goldman Sachs calculated the net present value of dividends from the second
quarter of 1998 to 2002, using management's EPS estimates, a constant
dividend payout ratio of 15% of net income, and discount rates of 12.5%,
15.0% and 17.5%. Goldman Sachs calculated terminal values based on PE
multiples ranging from 14x estimated 2003 EPS to 20x estimated 2003 EPS and
then discounted these terminal values using discount rates of 12.5%, 15.0%
and 17.5%. This analysis showed that the implied share values ranged from
(i) a low of $62 to a high of $105 in the Base Case, (ii) a low of $68 to a
high of $116 in the Aggressive Case and (iii) a low of $48 to a high of $81
in the Conservative Case.
(iv) Selected Transactions Analysis. Goldman Sachs analyzed certain
information relating to selected transactions since 1993 in the life
insurance industry (the "Life Insurance Transactions") and selected
transactions since 1989 in the direct reinsurance industry (the "Direct
Reinsurer Transactions") and the broker reinsurance industry (the "Broker
Reinsurer Transactions"). Such analysis indicated that the purchase price
as a multiple of latest twelve months ("LTM") net income at March 31, 1998,
ranged from (i) a low of 7.9x to a high of 37.4x, with a mean of 15.8x and
a median of 14.8x, for the Life Insurance Transactions, (ii) a low of 9.5x
to a high of 22.7x, with a mean of 16.9x and a median of 19.0x, for the
Direct Reinsurer Transactions, and (iii) a low of 1.9x to a high of 25.4x,
with a mean of 10.8x and a median of 9.2x, for the Broker Reinsurer
Transactions, as compared to 35.8x with respect to the Merger Price Case.
The purchase price as a multiple of tangible GAAP book value at March 31,
1998, ranged from (i) a low of 0.5x to a high of 7.4x, with a mean of 2.0x
and a median of 1.5x, for the Life Insurance Transactions, (ii) a low of
1.3x to a high of 3.9x, with a mean of 2.5x and a median of 2.7x, for the
Direct Reinsurer Transactions, and (iii) a low of 0.8x to a high of 1.6x,
with a mean of 1.1x and a median of 1.0x, for the Broker Reinsurer
Transactions, as compared to 3.3x with respect to the Merger Price Case.
The analysis also showed that the purchase price as a multiple of statutory
book value at March 31, 1998, ranged from (i) a low of 1.1x to a high of
9.8x, with a mean of 3.3x and a median of 2.7x, for the Life Insurance
Transactions, (ii) a low of 1.7x to a high of 3.5x, with a mean of 2.5x and
a median of 2.1x, for the Direct Reinsurer Transactions, and (iii) a low of
0.7x to a high of 2.5x, with a mean of 1.2x and a median of 1.1x, for the
Broker Reinsurer Transactions, as compared to 3.4x with respect to the
Merger Price Case.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is directly comparable to
the Company or the contemplated transaction. The analyses were prepared solely
for purposes of Goldman Sachs' providing its opinion to the Board as to the
fairness from a financial point of view of the Merger Consideration and do not
purport to be appraisals or necessarily reflect the prices at which businesses
or securities actually may be sold. Analyses based upon forecasts of future
results are not necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by such analyses. Because
such analyses are inherently subject to uncertainty, being based upon numerous
factors or events beyond the control
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<PAGE> 23
the parties or their respective advisors, none of the Company, Goldman Sachs or
any other person assumes responsibility if future results are materially
different from those forecast. As described above, Goldman Sachs' opinion to the
Board was one of many factors taken into consideration by the Board in making
its determination to approve the Merger Agreement. The foregoing summary does
not purport to be a complete description of the analysis performed by Goldman
Sachs and is qualified by reference to the written opinion of Goldman Sachs set
forth in Annex B hereto.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. The Company selected
Goldman Sachs as its financial advisor because it is a nationally recognized
investment banking firm that has substantial experience in transactions similar
to the Merger. Goldman Sachs is familiar with the Company, having acted as its
lead manager and underwriter in connection with the March 1998 concurrent
offerings of Units and Common Stock to the public, and having acted as its
financial advisor in connection with, and having participated in certain
negotiations leading to, the Merger Agreement. Goldman Sachs provides a full
range of financial advisory and securities services and, in the course of its
normal trading activities may from time to time effect transactions and hold
securities, including derivative securities, of the Company or Swiss Re for its
own account and for the account of customers.
Pursuant to a letter agreement dated August 18, 1997 (the "Engagement
Letter"), the Company engaged Goldman Sachs to act as its financial advisor in
connection with the contemplated transaction. Pursuant to the terms of the
Engagement Letter, the Company has agreed to pay Goldman Sachs upon consummation
of the Merger a transaction fee equal to 0.85% of the aggregate consideration
paid in the Merger (approximately $17 million). The Company has agreed to
reimburse Goldman Sachs for its reasonable out-of-pocket expenses, including
attorney's fees, and to indemnify Goldman Sachs against certain liabilities,
including certain liabilities under the federal securities laws.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board with respect to the Merger,
stockholders of the Company should be aware that the directors and executive
officers of the Company have certain interests in the Merger that may be
substantial or in addition to the interests of stockholders of the Company
generally. The Board was aware of these interests and considered them, among
other factors, in approving the Merger Agreement. These interests are summarized
below.
Interests in Common Stock and Options. As of July 31, 1998, the executive
officers and directors of the Company owned an aggregate of 1,495,469 shares of
Common Stock (excluding shares held by trusts established by Messrs. Hawes and
Schair). Assuming the Merger Consideration equals $95.00 per share and does not
include any "per diem" consideration, the aggregate consideration which would be
received in the Merger by the executive officers and directors of the Company in
respect of such shares would be $142,069,555.
In addition, as of July 31, 1998, the executive officers and directors of
the Company had present and future rights to acquire 2,052,500 shares of Common
Stock upon the exercise of Options (as defined herein) granted to such executive
officers and directors pursuant to the Company's stock option plans. Pursuant to
the Company's stock option plans and agreements thereunder, at the Effective
Time all Options become fully vested. Pursuant to the Merger Agreement and
subject to the consent of the holder of each Option, the holder will receive as
soon as practicable after the Effective Time, in settlement and cancellation of
such Option, a check in the amount of the product of (i) the excess of the
Merger Consideration per share of Common Stock over the exercise price (per
share of Common Stock) of such Option, multiplied by (ii) the number of shares
of Common Stock covered by such Option. Assuming the Merger Consideration equals
$95.00 per share and does not include any "per diem" consideration, the cash
which would be received by the executive officers and directors of the Company
upon consummation of the Merger pursuant to the foregoing formula would be
approximately $123,260,250.
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<PAGE> 24
Existing Employment and Severance Agreements. In 1995 and 1996, the
Company entered into a severance agreement with Mr. Beisenherz and employment
agreements with its other executive officers. As described in the next section
("New Employment Agreements"), the agreements with Messrs. Dubois, Stroup,
Wilson and Beisenherz have been superseded by employment agreements entered into
as of July 27, 1998, which become effective as of the Effective Time of the
Merger.
However, the employment agreements with Messrs. Hawes and Schair (as made
in 1995 and amended in 1996, the "1995 Agreements") have not been superseded and
automatically renew for successive three-year terms. Each 1995 Agreement
provides that the executive may elect to either (i) terminate his employment
with the Company following a Change in Control (defined to include stockholder
approval of the Merger Agreement) or (ii) continue his employment with the
Company. The executive's election to terminate his employment must be made
within the thirty days immediately following a "Triggering Event" (as defined in
the 1995 Agreements) which will be the date of the mailing of this Proxy
Statement to the Company's stockholders. If either Mr. Hawes or Mr. Schair
elects to terminate his employment with the Company following the Change in
Control, the Company will pay the executive (i) cash equal to two times the sum
of (x) the executive's annual base salary at the date of termination and (y) the
executive's highest aggregate incentive award paid in any one year based on the
aggregate incentive awards paid during any one of the three bonus periods
immediately preceding termination, (ii) benefits and service credit for benefits
for three years after the date of termination and (iii) legal fees or other
expenses, if any, due under the 1995 Agreements.
If either Mr. Hawes or Mr. Schair elects to continue his employment with
the Company, each 1995 Agreement provides that after a Change in Control (i) the
salary and annual bonus of the executive will not be reduced, (ii) the regular
increases in salary and bonus occurring before the Change in Control will not be
reduced, and (iii) grants of Options to purchase Common Stock will be made on
the same terms and conditions as Options granted prior to the Change in Control
and the number of Options granted shall not be reduced.
If any payments or distributions to the executive (whether pursuant to the
1995 Agreements or otherwise) are subject to the excise tax imposed by Section
4999 of the Code (the "Excise Tax"), the Company will pay the executive an
additional payment so that the net amount retained by the executive, after
deduction of the Excise Tax and all income taxes and Excise Tax on such
additional payment, will be the same as if the Excise Tax had not been imposed.
The aggregate amounts which will be payable to Messrs. Hawes and Schair pursuant
to their 1995 Agreements upon their anticipated election to terminate their
employment within thirty days following a Triggering Event related to the Merger
in accordance with their respective 1995 Agreements (other than amounts with
respect to the Excise Tax) are estimated to be $4,496,000 for Mr. Hawes and
$4,430,000 for Mr. Schair.
New Employment Agreements. The Company has entered into new employment
agreements with Messrs. Dubois, Stroup, Wilson and Beisenherz (the "Executives")
as of July 27, 1998 (the "1998 Agreements"). The 1998 Agreements will supersede
the Executives' existing employment agreements (or severance agreement in the
case of Mr. Beisenherz). Swiss Re has agreed in the Merger Agreement to cause
the Company (as the Surviving Corporation) and its subsidiaries to honor the
1998 Agreements. The "Term" of the 1998 Agreements will begin on the Effective
Date of the proposed Merger and terminate on December 31, 2001.
Each 1998 Agreement provides that the Executive's annual base salary will
be increased as of January 1, 1999 (to $800,000 for Mr. Dubois and $400,000 for
each of the other Executives), will be reviewed annually, and will not be
reduced. Each Executive is eligible for an annual Performance Bonus to be
calculated with respect to the increase in "Operational Embedded Value" (as
defined in the 1998 Agreements) of the Administrative Reinsurance business of
the Company and its subsidiaries. If the "Management Target" (as defined in the
1998 Agreements) is attained for a given year, the amount of the Performance
Bonus for each Executive will be as follows: for 1999, $1.125 million; for 2000,
$1.4 million; and, for 2001, $1.68 million. If the Management Target for a given
year is at least 50% attained, but not fully attained, the Performance
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<PAGE> 25
Bonus will be reduced ratably. If less than 50% of the Management Target is
attained for a given year, no Performance Bonus will be paid for that year. If
the Management Target for a given year is exceeded, the Executive's Performance
Bonus will be increased ratably, up to the following maximum amounts: for 1999,
$4.5 million; for 2000, $5.6 million; and for 2001, $6.72 million. The Executive
also is eligible for a discretionary annual bonus reflecting group, division,
Company and individual performance in a maximum amount equal to a percentage of
annual base salary (100% as to Mr. Dubois and 83.33% as to the other
executives). Further, the Executive is eligible to receive annually a Special
Bonus. If the Management Target is attained for any year during the Term, the
Executive will receive a Special Bonus (equal to $4 million for Mr. Dubois and
$1,333,400 for each of the other Executives), which will be reduced pro rata if
the Management Target is not attained. If the Management Target for a given year
is exceeded, the Executive's Special Bonus will be increased ratably, up to a
maximum (of $8 million for Mr. Dubois and $2,666,800 for each of the other
Executives) for attainment of 200% or more of the Management Target.
On the Effective Date, the Executive will be granted a number of restricted
shares of Swiss Re common stock determined by dividing a certain amount ($8
million as to Mr. Dubois and $4 million as to each of the other Executives, as
such amounts may be adjusted by the respective Executive and the Company in good
faith) by the closing price per share of the Swiss Re common stock on the
Effective Date. The restrictions on such shares will lapse on December 31, 2001,
unless the Executive's employment is terminated earlier by the Company for
"Cause" (as defined in the 1998 Agreement) or by the Executive without "Good
Reason" (as defined in the 1998 Agreement). Either such termination will result
in forfeiture of all such shares. If the Executive's employment is terminated
before December 31, 2001, by the Company without "Cause", by the Executive with
"Good Reason", by the Executive's death or by the Executive's "Disability" (as
defined in the 1998 Agreement), all restrictions on such shares lapse and they
become vested.
The Executive will be eligible to receive discretionary annual stock option
grants (with exercise prices equal to the fair market value of the underlying
shares). Each annual grant is expected to cover shares having an aggregate fair
market value equal to the then-current amount of the Executive's annual base
salary. If the Executive's employment is terminated by the Company without
"Cause", by the Executive with "Good Reason", by the Executive's death or by the
Executive's "Disability", all stock options so granted will immediately vest and
become exercisable. The stock option grants will otherwise be subject to the
terms of the stock option plan of Holding.
The Executive will be eligible to participate in employee benefit plans
made available to other senior executives of the Company which shall be, in the
aggregate, substantially comparable to the plans (other than the Long-Term
Incentive Plan and stock option plans) in which the Executive participated
immediately prior to the Effective Date. The Executive will be entitled to
perquisites and fringe benefit at least equal to those to which he was entitled
on July 27, 1998.
If the Executive's employment is terminated during the Term by the Company
without "Cause", by the Executive with "Good Reason", by the Executive's death
or by the Executive's "Disability", the Company will pay the Executive (i) with
respect to any complete calendar year remaining in the Term, an amount equal to
50% of the Special Bonus that was or would have been payable upon attainment of
100% of the Management Target for 1999 (the "Termination Bonus Payment"); and
(ii) with respect to a calendar year in which termination occurs before July 1,
an amount equal to the Termination Bonus Payment, or (iii) with respect to a
calendar year in which termination occurs after July 1, an amount equal to the
sum of (x) a pro rata portion of the Special Bonus (based on actual attainment
relative to the Management Target during the entirety of such year) for the
period from January 1 through the date of termination, and (y) a pro rata
portion of the Termination Bonus for the period from the date of termination
through December 31. The Company will pay reasonable attorney's fees and
expenses and court costs incurred by the Executive as a result of the Company's
failure to perform any provision of the 1998 Agreements.
If the Executive's employment is terminated by death, the Company will pay
health insurance benefits for all the Executive's dependents for one year.
If any payments or distributions to the Executive (whether pursuant to the
1998 Agreement or otherwise) are subject to the Excise Tax, the Company will pay
the Executive an additional payment so that
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the net amount retained by the Executive, after deduction of the Excise Tax and
all income taxes and Excise Tax on such additional payment, will be the same as
if the Excise Tax had not been imposed.
If the Company defaults on its obligation to pay certain amounts to the
Executive (and fails to cure the default within thirty days after notice), the
Company is required to pay the Executive a lump sum amount actuarially
equivalent to future payments otherwise payable under the 1998 Agreements, as
well as all past due payments. The Company indemnifies the Executive to the full
extent permitted by law for amounts connected with any action relating to
performance of the Executive's services. The Company will maintain a directors'
and officers' liability insurance policy, using its best efforts to provide
substantially similar protection to the protection provided by the policy in
effect on July 27, 1998.
The Executive agrees that he will not disclose confidential information or
trade secrets of the Company at any time and that, during the Term and for a
period of one year thereafter, he will not engage in competition with the
Company in the business of reinsuring life insurance risks or solicit any
Company employee to leave such employment.
Any controversy related to the 1998 Agreements will be settled by binding
arbitration in Stamford, Connecticut.
Supplemental Retirement Plan. Certain of the executive officers
participate in the Company's Supplemental Executive Retirement Plan which
provides a supplemental retirement benefit which generally becomes payable upon
the later of the participant's termination of employment or the participant's
62nd birthday. The monthly benefit is equal to 2.5 percent of the participant's
Average Monthly Compensation (as defined in the plan) multiplied by the
participant's years of service (up to a maximum of 30 years), subject to offsets
calculated with respect to the participant's defined benefit from a
tax-qualified plan and the participant's Social Security Retirement Benefit.
Upon a Change in Control (defined to include stockholder approval of the Merger
Agreement), the participant is credited with five additional years of service
and fully vested in the recalculated benefit. Payment of the recalculated
benefit begins on the Change in Control and the participant is entitled to elect
any of the optional forms of payment provided in the plan, including payment in
one lump-sum. The aggregate present value of the additional benefit attributable
to crediting five additional years of service for each executive officer
participant is estimated at $2,100,000.
Long-Term Incentive Plan. The executive officers participate in the
Company's Long-Term Incentive Plan and related arrangements which provide for
the payment of certain awards in connection with a merger of the Company as soon
as practicable after the merger. The Merger Agreement provides that, subject to
any agreement executed prior to the Closing, such awards will be paid at the
Closing. The aggregate amount of such awards is estimated at $48,500,000.
Annual Incentive Plan. The executive officers participate in the Company's
Annual Incentive Plan and related arrangements, which provides that, if a
participant's employment terminates or a participant's title, position or duties
are reduced within twelve months after a Change in Control (defined to include
stockholder approval of the Merger Agreement), the participant will receive a
payment equal to the annual incentive award earned by the participant for the
Plan Year immediately preceding the Plan Year in which the Change in Control
occurred, multiplied by a fraction having a numerator equal to the number of
months subsequent to the Change in Control and a denominator of twelve. The
aggregate awards earned by executive officer participants for the Plan Year
which ended December 31, 1997 amounted to $3,900,000.
Indemnification. As more fully described under "The Merger
Agreement -- Indemnification of Officers and Directors," the Merger Agreement
provides for the indemnification by the Surviving Corporation of officers and
directors of the Company with respect to any claim, liability, loss, damage,
cost or expense, 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, to
the full extent a corporation is permitted under the DGCL to indemnify its
officers and directors.
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FINANCING THE MERGER
Swiss Re and its subsidiaries will contribute internally generated funds to
Sub in amounts sufficient to pay the total amount (the "Required Funding")
required to pay the Merger Consideration to the Company's stockholders and
Option holders and pay estimated fees, expenses and other transaction costs of
Swiss Re and Sub in connection with the Merger.
ACCOUNTING TREATMENT
The Merger will be accounted for by Swiss Re as a "purchase" in accordance
with generally accepted accounting principles. Therefore, the aggregate
consideration paid by Swiss Re in connection with the Merger (including the
direct costs related to the transaction) will be allocated to the Company's
assets and liabilities based upon their estimated fair values, with any excess
being allocated to goodwill. The assets and liabilities and results of
operations of the Company will be consolidated into the assets and liabilities
and results of operations of Swiss Re subsequent to the consummation of the
Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion describes certain United States federal income tax
consequences relevant to the Merger. The discussion is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), existing and proposed Treasury
regulations promulgated thereunder, rulings, administrative pronouncements and
judicial decisions, changes to which could materially affect the tax
consequences described herein and could be made on a retroactive basis.
This discussion does not address all aspects of federal income taxation
(including potential application of the alternative minimum tax) that may be
relevant to a particular stockholder based on such holder's particular
circumstances and does not address any aspect of state, local or foreign tax
laws. This summary generally considers only holders that hold their Common Stock
as capital assets (generally, assets held for investment) and may not apply to
all stockholders. In particular, the discussion may not apply to stockholders
(i) who acquired their Common Stock pursuant to the exercise of employee stock
options or other compensation arrangement with the Company; (ii) who are subject
to special tax treatment under the Code (such as broker-dealers, insurance
companies tax-exempt organizations, financial institutions, and regulated
investment companies); (iii) who hold their Common Stock as part of a
"straddle", "hedge", or "conversion transaction", (iv) whose functional currency
is not the U.S. dollar, or (v) who perfect their Appraisal Rights.
The receipt of cash in exchange for Common Stock pursuant to the Merger
will be a taxable transaction for federal income tax purposes and may also be a
taxable transaction under applicable state, local and foreign income and other
tax laws. In general, a stockholder will recognize gain or loss for federal
income tax purposes equal to the difference between the adjusted tax basis of
his or her Common Stock and the amount of cash received in exchange therefor in
the Merger. Gain or loss should be computed separately for different blocks of
Common Stock (Common Stock acquired at the same time and price). Such gain or
loss will be capital gain or loss. Under recently adopted amendments to the
Code, net capital gain (i.e., generally capital gain in excess of capital loss)
recognized by an individual investor upon a disposition of Common Stock that has
been held for more than 12 months at the Effective Time generally will be
subject to a maximum tax rate of 20% or, in the case of Common Stock that has
been held for 12 months or less at the Effective Time, will be subject to tax at
ordinary income tax rates.
The receipt of cash by a stockholder of the Company pursuant to the Merger
may be subject to 31% backup withholding tax unless the stockholder (i) is a
corporation or comes within certain other exempt categories or (ii) provides a
certified taxpayer identification number on Form W-9 and otherwise complies with
the backup withholding rules. Backup withholding is not an additional tax; any
amounts so withheld may be credited against the federal income tax liability of
the stockholder subject to the withholding.
DUE TO THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, STOCKHOLDERS ARE URGED TO
CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE
MERGER, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL OR FOREIGN INCOME OR
OTHER TAX LAWS.
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REGULATORY FILINGS AND APPROVALS
The regulatory filings and approvals described below must be made before
the Merger can be effected and certain of such approvals may take a significant
period of time to obtain. Although the Company and Swiss Re believe that such
approvals will be obtained, there can be no assurance that this will be the case
or that such approvals will be obtained in a timely manner or that such
approvals will not be conditioned temporarily or otherwise encumbered.
State Insurance Regulatory Approvals. The Company and its subsidiaries are
subject to the insurance laws and regulations of Connecticut, Illinois, Texas
and Michigan, the domiciliary states of Company subsidiaries, and the laws and
regulations of the other states in which Company subsidiaries are licensed to do
business. As of the date of the Company's annual report on Form 10-K for the
year ended December 31, 1997, the Company was licensed to do business or was an
authorized reinsurer in all 50 states, the District of Columbia and Puerto Rico.
Reassure America Life Insurance Company ("REALIC"), the Company's subsidiary
acquired from Deere & Company in 1995, was licensed to do business in all such
locations except for New Hampshire, New York, the District of Columbia and
Puerto Rico.
Antitrust. The Merger is subject to the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the rules and regulations thereunder, which provide that certain
transactions may not be consummated until required information and materials are
furnished to the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the Federal Trade Commission (the "FTC") and the requisite
waiting period expires or terminates. The Company and Swiss Re made all filings
required by the Antitrust Division and the FTC on August 20, 1998, commencing a
thirty-day waiting period. The waiting period terminated on September 2, 1998.
Although the waiting period has expired under the HSR Act pursuant to early
termination, at any time before or after the Effective Time, the Antitrust
Division or the FTC could take such action under the antitrust laws as either of
them deems necessary or desirable in the public interest, or certain other
persons could take action under the antitrust laws, including seeking to enjoin
the Merger.
EFFECT OF MERGER ON CORPORATION OBLIGATED, MANDATORILY REDEEMABLE CAPITAL
SECURITIES OF
SUBSIDIARY TRUSTS HOLDING SOLELY PARENT DEBENTURES
8.72% Capital Securities. The Company has outstanding $100 million of
8.72% capital securities of Life Re Capital Trust I ("Trust I"), a subsidiary of
the Company (the "8.72% Capital Securities"). Distributions are cumulative and
payable in arrears beginning December 15, 1997. The 8.72% Capital Securities
have a maturity date of June 15, 2027, and may be redeemed, at the option of the
Company, at any time on or after June 15, 2007. Payments on the 8.72% Capital
Securities are fully and unconditionally guaranteed by the Company. The 8.72%
Capital Securities have an effective interest rate of 8.75%. The assets of Trust
I consist of junior subordinated debentures issues by the Company which have
terms that parallel the terms of the 8.72% Capital Securities. Upon consummation
of the Merger, the 8.72% Capital Securities shall remain outstanding.
6% Adjustable Conversion-rate Equity Securities. The Company, through Life
Re Capital Trust II ("Trust II"), has outstanding 2,070,000 Units. The Units
consist of Quarterly Income Preferred Securities ("QUIPS") and a Contract. The
QUIPS have a maturity of March 15, 2003, and are subject to a put option by the
QUIPS holder on either March 15, 2001, or June 15, 2001. The contract sets March
15, 2001, as the stock purchase date for the settlement of the Contracts.
In the event of a merger of the Company (such as the proposed merger), the
Units provide that the holders thereof will be entitled to receive upon
settlement of the Contracts on the stock purchase date the consideration paid to
the stockholders in the merger, in lieu of the Common Stock otherwise issuable
upon settlement of the Contracts. Assuming the Merger Consideration is $95 per
share, the aggregate payment to Units holders (net of the amount paid by Units
holders to the Company under the Contracts) will be approximately $24,600,000,
which will come from funds available internally to the Company.
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CERTAIN CONSEQUENCES OF THE MERGER
As a result of the merger, Sub will be merged with and into the Company and
the Company will become a wholly owned subsidiary of Swiss Re. Following
consummation of the Merger, the Common Stock will be delisted from the NYSE,
deregistered under the Exchange Act and will no longer be publicly traded.
Since the Units are registered under the Exchange Act and listed on the
NYSE, the Company will continue to be subject to the informational requirements
of the Exchange Act following the consummation of the Merger so long as the
Units remain outstanding.
APPRAISAL RIGHTS
Under the DGCL, any stockholder who does not wish to accept the Merger
Consideration has the right to dissent from the Merger and to seek an appraisal
of, and to be paid the fair value (exclusive of any element of value arising
from the accomplishment or expectation of the Merger) for the shares of Common
Stock, provided that the stockholder complies with the provisions of Section 262
of the DGCL.
Holders of record of Common Stock who do not vote in favor of the Merger
Agreement and who otherwise comply with the applicable statutory procedures
summarized herein will be entitled to appraisal rights under Section 262 of the
DGCL. A person having a beneficial interest in shares of Common Stock held of
record in the name of another person, such as a broker or nominee, must act
promptly to cause the record holder to follow the steps summarized below
properly and in a timely manner to perfect appraisal rights.
THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING
TO APPRAISAL RIGHTS UNDER THE DGCL AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL
TEXT OF SECTION 262 OF THE DGCL WHICH IS REPRINTED IN ITS ENTIRETY AS ANNEX C.
ALL REFERENCES IN SECTION 262 OF THE DGCL AND IN THIS SUMMARY TO A "STOCKHOLDER"
OR "HOLDER" ARE TO THE RECORD HOLDER OF THE SHARES OF COMMON STOCK AS TO WHICH
APPRAISAL RIGHTS ARE ASSERTED.
Under Section 262 of the DGCL, holders of shares of Common Stock
("Appraisal Shares") who follow the procedures set forth in Section 262 of the
DGCL will be entitled to have their Appraisal Shares appraised by the Delaware
Chancery Court and to receive payment in cash of the "fair value" of such
Appraisal Shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, as determined by such court.
Under Section 262 of the DGCL, where a proposed merger is to be submitted
for approval at a meeting of stockholders, the corporation, not less than twenty
days prior to the meeting, must notify each of its stockholders who was a
stockholder on the record date for such meeting with respect to shares for which
appraisal rights are available, that appraisal rights are so available, and must
include in such notice a copy of Section 262 of the DGCL.
This Proxy Statement constitutes such notice to the holders of Appraisal
Shares and the applicable statutory provisions of the DGCL are attached to this
Proxy Statement as Annex C. Any stockholder who wishes to exercise such
appraisal rights or who wishes to preserve his or her right to do so should
review the following discussion and Annex C carefully, because failure timely
and properly to comply with the procedures therein specified will result in the
loss of appraisal rights under the DGCL.
A holder of Appraisal Shares wishing to exercise such holder's appraisal
rights (a) must not vote in favor of the Merger Agreement and (b) must deliver
to the Company prior to the vote on the Merger Agreement at the Special Meeting,
a written demand for appraisal of such holder's Appraisal Shares. This written
demand for appraisal must be in addition to and separate from any proxy or vote
abstaining from or against the Merger. This demand must reasonably inform the
Company of the identity of the stockholder and of the stockholder's intent
thereby to demand appraisal of his or her shares. A holder of Appraisal Shares
wishing to exercise such holder's appraisal rights must be the record holder of
such Appraisal Shares on the date the written demand for appraisal is made and
must continue to hold such Appraisal Shares until the consummation of the
Merger. Accordingly, a holder of Appraisal Shares who is the record holder of
Appraisal Shares on the date the written demand for appraisal is made, but who
thereafter transfers such Appraisal Shares prior to consummation of the Merger,
will lose any right to appraisal in respect of such Appraisal Shares.
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Only a holder of record of Appraisal Shares is entitled to assert appraisal
rights for the Appraisal Shares registered in that holder's name. A demand for
appraisal should be executed by or on behalf of the holder of record, fully and
correctly, as such holder's name appears on such holder's stock certificates. If
the Appraisal Shares are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian execution of the demand should be made in that
capacity, and if the Appraisal Shares are owned of record by more than one owner
as in a joint tenancy or tenancy in common, the demand should be executed by or
on behalf of all joint owners. An authorized agent, including one or more joint
owners, may execute a demand for appraisal on behalf of a holder of record;
however, the agent must identify the record owner or owners and expressly
disclose the fact that, in executing the demand, the agent is agent for such
owner or owners. A record holder such as a broker who holds Appraisal Shares as
nominee for several beneficial owners may exercise appraisal rights with respect
to the Appraisal Shares held for one or more beneficial owners while not
exercising such rights with respect to the Appraisal Shares held for other
beneficial owners; in such case, the written demand should set forth the number
of Appraisal Shares as to which appraisal is sought. When no number of Appraisal
Shares is expressly mentioned, the demand will be presumed to cover all
Appraisal Shares in brokerage accounts or other nominee forms and those who wish
to exercise Appraisal Rights under Section 262 of the DGCL are urged to consult
with their brokers to determine the appropriate procedures for the making of a
demand for appraisal by such a nominee.
ALL WRITTEN DEMANDS FOR APPRAISAL SHOULD BE SENT OR DELIVERED TO LIFE RE
CORPORATION AT 969 HIGH RIDGE ROAD, STAMFORD, CONNECTICUT 06905: ATTENTION:
SECRETARY.
Within ten days after the consummation of the Merger, the Company will
notify each stockholder who has properly asserted appraisal rights under Section
262 of the DGCL and has not voted in favor of the Merger Agreement of the date
the Merger became effective.
Within 120 days after the consummation of the Merger, but not thereafter,
the Company or any stockholder who has complied with the statutory requirements
summarized above may file a petition in the Delaware Chancery Court demanding a
determination of the fair value of the Appraisal Shares. The Company is under no
obligation to and has no present intention to file a petition with respect to
the appraisal of the fair value of the Appraisal Shares. Accordingly, it is the
obligation of stockholders wishing to assert appraisal rights to initiate all
necessary action to perfect their appraisal rights within the time prescribed in
Section 262 of the DGCL.
Within 120 days after the consummation of the Merger, any stockholder who
has complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from the Company a statement setting
forth the aggregate number of Appraisal Shares not voted in favor of adoption of
the Merger Agreement and with respect to which demands for appraisal have been
received and the aggregate number of holders of such Appraisal Shares. Such
statements must be mailed within ten days after a written request therefor has
been received by the Company.
If a petition for an appraisal is filed timely, after a hearing on such
petition, the Delaware Chancery Court will determine the stockholders entitled
to appraisal rights and will appraise the "fair value" of their Appraisal
Shares, exclusive of any element of value arising from the accomplishment or
expectation of the Merger, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value. Stockholders considering
seeking appraisal should be aware that the fair value of their Appraisal Shares
as determined under Section 262 of the DGCL could be more than, the same as or
less than the value of the consideration they would receive pursuant to the
Merger Agreement if they did not seek appraisal of their Appraisal Shares and
that investment banking opinions as to fairness from a financial point of view
are not necessarily opinions as to fair value under Section 262 of the DGCL. The
Delaware Supreme Court has stated that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered in the appraisal
proceedings.
The Delaware Chancery Court will determine the amount of interest, if any,
to be paid upon the amounts to be received by stockholders whose Appraisal
Shares have been appraised. The costs of the action may be determined by the
Delaware Chancery Court and taxed upon the parties as the Delaware Chancery
Court deems equitable. The Delaware Chancery Court may also order that all or a
portion of the expenses incurred
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by any stockholder in connection with an appraisal, including, without
limitation, reasonable attorneys' fees and the fees and expenses of experts
utilized in the appraisal proceeding, be charged pro rata against the value of
all of the Appraisal Shares entitled to appraisal.
Any holder of Appraisal Shares who has duly demanded an appraisal in
compliance with Section 262 of the DGCL will not, after the consummation of the
Merger, be entitled to vote the Appraisal Shares subject to such demand for any
purpose or be entitled to the payment of dividends or other distributions on
those Appraisal Shares (except dividends or other distributions payable to
holders of record of Appraisal Shares as of a record date prior to the
consummation of the Merger).
If any stockholder who properly demands appraisal of his or her Appraisal
Shares under Section 262 of the DGCL fails to perfect, or effectively withdraws
or loses, his or her right to appraisal, as provided in Section 262 of the DGCL,
the Appraisal Shares of such stockholder will be converted into the right to
receive the consideration receivable with respect to such Appraisal Shares in
accordance with the Merger Agreement. A stockholder will fail to perfect, or
effectively lose or withdraw, his or her right to appraisal if, among other
things, no petition for appraisal is filed within 120 days after the
consummation of the Merger, or if the stockholder delivers to the Company a
written withdrawal of his or her demand for appraisal. Any such attempt to
withdraw an appraisal demand more than 60 days after the consummation of the
Merger will require the written approval of the Company.
Failure to follow the steps required by Section 262 of the DGCL for
perfecting appraisal rights may result in the loss of such rights (in which
event a stockholder will be entitled to receive the consideration receivable
with respect to his or her Appraisal Shares in accordance with the Merger
Agreement).
CERTAIN LEGAL MATTERS
A complaint regarding the proposed Merger was filed in the Delaware Court
of Chancery on July 27, 1998. The complaint, purportedly filed by the named
plaintiff on behalf of all holders of Common Stock other than defendants, names
the Company and its directors as defendants. It alleges that the directors
breached their fiduciary duties by entering into the proposed Merger on terms
that are claimed to be unfair and inadequate. Plaintiff seeks to enjoin
consummation of the Merger or, alternatively, damages. The Company intends to
defend the plaintiff's claims vigorously.
THE MERGER AGREEMENT
The following is a brief summary of certain material provisions of the
Merger Agreement, a copy of which is attached as Annex A to this Proxy Statement
and incorporated herein by reference. Such summary does not purport to be
complete and is qualified in its entirety by reference to the Merger Agreement.
All capitalized terms used herein and not defined are used as defined in the
Merger Agreement. Stockholders are urged to review the Merger Agreement
carefully and in its entirety.
THE MERGER
In General. The Merger Agreement provides, among other things that,
following the Stockholder Approval and the satisfaction or waiver of the other
conditions to the Merger, subject to the right of Swiss Re to delay the Closing
described below, Sub will be merged with and into the Company, the separate
existence of Sub will cease and the Company will be the Surviving Corporation.
Following the Merger, the Surviving Corporation will be a wholly owned
subsidiary of Swiss Re and Holding. As a result of the Merger, all the rights,
privileges, immunities, powers and franchises of the Company and Sub will vest
in the Surviving Corporation and all obligations, duties, debts and liabilities
of the Company will become the obligations, duties, debts and liabilities of the
Surviving Corporation.
Effective Time. The Merger Agreement provides that the Closing shall take
place as soon as practicable but in no event later than 10:00 a.m. eastern time
on the second business day after the satisfaction or waiver of all conditions to
the Merger. Notwithstanding the foregoing, Swiss Re, upon giving notice to the
Company,
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has the right to delay the Closing, even if all conditions are otherwise
satisfied or waived, until a business day not later than January 8, 1999. At the
Closing, the Sub will file a certificate of merger ("Certificate of Merger")
with the Secretary of State of the State of Delaware, and the Merger will become
effective upon such filing or at such other time as is specified in the
Certificate of Merger.
Option Plans. At the Effective Time, (i) all options ("Options")
outstanding under the Company's 1992 Stock Option Plan, as amended, or 1993
Non-Employee Directors Stock Option Plan, as amended, will become fully
exercisable and vested, (ii) subject to the consent of the holder, each Option
will be cancelled and (iii) in consideration of such cancellation and surrender
of the Option agreement, as soon as practicable after the Effective Time the
holder of each cancelled Option will be entitled to receive a check in an amount
equal to the product of (A) the excess of the Merger Consideration over the
exercise price of the Option and (B) the number of shares subject to such
Option.
Conversion of Securities. At the Effective Time, (a) each outstanding
share of Common Stock (other than shares held by the Company or any direct or
indirect wholly owned subsidiary of the Company, shares held by Swiss Re or any
direct or indirect wholly owned subsidiary of Swiss Re and shares held by the
stockholders, if any, who properly exercised their appraisal rights under
Delaware law), will be converted into the Merger Consideration, which is the
right to receive $95.00 per share, in cash, plus if Swiss Re exercises its right
to delay the Closing, then an additional $.0208 per share for each day after the
date on which the Closing would have occurred absent the exercise of Swiss Re's
right to delay the Closing and (b) each outstanding share of common stock of Sub
will be converted into one fully paid and nonassessable share of Common Stock of
the Surviving Corporation. The shares of Common Stock will no longer be listed
or traded on the NYSE and the registration of the Common Stock under the
Exchange Act will be terminated. See "The Merger -- Certain Consequences of the
Merger."
Shares of Common Stock outstanding immediately prior to the Effective Time
and held by a holder who has not voted in favor of the Merger or consented
thereto in writing and who has delivered a written demand for appraisal of such
shares in accordance with Section 262 of the DGCL will not be converted into the
Merger Consideration, unless and until such holder fails to perfect his right to
appraisal and payment under the DGCL, whereupon such shares shall be treated as
if they had been converted as of the Effective Time into the Merger
Consideration.
Exchange of Certificates. On or before the Effective Time, Swiss Re shall
deposit sufficient cash required to pay the Merger Consideration for all
outstanding shares of Common Stock and Company Options with an exchange agent
(the "Exchange Agent") selected by mutual agreement of the Company and Swiss Re.
As promptly as practicable after the Effective Time, Swiss Re shall instruct the
Exchange Agent to mail each holder of a certificate which immediately prior to
the Effective Time represented shares of Common Stock or Options a letter of
transmittal and instructions for use in effecting the surrender of the
certificates or Options in exchange for the Merger Consideration. Upon surrender
of the certificate or Option to the Exchange Agent, together with a duly
executed letter of transmittal and any other required documents, the holder of
such certificate or Option shall receive the Merger Consideration. No interest
will be paid or accrued on the cash payable upon the surrender of the
certificates or Options. After the Effective Time, holders of certificates or
Options will have no right to vote or receive dividends or other distributions
with respect to any shares of Common Stock, other than any distributions payable
to holders of record as of a date prior to the Effective Time, and shall have no
other rights other than as provided in the Merger Agreement or by applicable
law. Any cash that has been made available to the Exchange Agent and that has
not been disbursed to holder of certificates or Options within nine months after
the Effective Time will be delivered to Swiss Re and thereafter any stockholders
who have not complied with the provisions of the Merger Agreement and the
instructions set forth in the letter of transmittal shall look only to Swiss Re
for payment of the Merger Consideration. Until surrendered, each certificate or
Option will represent only the right to receive the Merger Consideration with
respect to the number of shares of Common Stock evidenced by such certificate or
Option, without any interest thereon. The Exchange Agent will be entitled to
deduct and withhold from the Merger Consideration such amounts as may be
required under the Code. Such withheld amounts shall be treated as having been
paid to the holder of the certificate or Option in respect of which such
deduction and withholding was made by the Exchange Agent.
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STOCKHOLDERS OF THE COMPANY SHOULD NOT FORWARD THEIR STOCK CERTIFICATES TO
THE EXCHANGE AGENT WITHOUT A LETTER OF TRANSMITTAL, AND SHOULD NOT RETURN THEIR
STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of the
Company and its subsidiaries, subject to certain exceptions, regarding the
Company and its subsidiaries as to, among other things: (i) organization,
existence, good standing, corporate power and authority, and qualifications or
licensing to do business; (ii) capitalization, including the number of shares of
Common Stock, the number of shares of Common Stock issuable upon the exercise of
Options, and obligations to issue, transfer, sell or vote in any particular
manner any equity or debt instrument; (iii) ownership in other entities
including the nature of the Company's ownership of stock in subsidiaries; (iv)
the due authorization, valid execution and delivery of the Merger Agreement and
the consummation of the transactions contemplated thereby, and the validity and
enforceability of the Company's obligations with respect thereto; (v) absence of
conflict between or contravention by the Merger Agreement and any provision of
the certificate of incorporation and bylaws of the Company; (vi) consents and
approvals necessary for consummation of the Merger, and the absence of any
violations, breaches or defaults which would result from compliance by the
Company with any provisions of the Merger Agreement; (vii) government approvals;
(viii) compliance with the Securities Act of 1933, as amended (the "Securities
Act") and the Exchange Act in connection with documents filed by the Company
with the SEC; (ix) financial statements included in Company SEC Filings; (x)
financial statements regarding certain insurance subsidiaries; (xi) the absence
of undisclosed liabilities; (xii) the absence of certain changes or events that
would have a Material Adverse Effect on the Company; (xiii) pending litigation
or violation of any law which is reasonably likely to have a Material Adverse
Affect; (xiv) certain tax matters; (xv) certain employee benefit plan and ERISA
matters; (xvi) information supplied by the Company for this Proxy Statement and
the filing hereof with the SEC; (xvii) finders and investment banking fees;
(xviii) opinions from financial advisors; (xix) compliance with statutory
reserve requirements applicable to the insurance industry; (xx) the absence of
collective bargaining agreements; (xxi) customary insurance coverage; (xxii) the
absence of beneficial interest of officers, directors and their affiliates in
the Company or its subsidiaries; (xxiii) certain intellectual property matters;
(xxiv) the conduct of business by the Company and its subsidiaries in accordance
with charter documents, material company agreements and applicable laws; (xxv)
matters related to real property owned and leased by the Company and its
subsidiaries; (xxvi) compliance with applicable license and permit regulations;
(xxvii) environmental matters; and (xxviii) matters related to certain letters
of credit of which certain Company subsidiaries are beneficiaries.
The Merger Agreement also contains various representations and warranties
of Swiss Re, Holding and Sub, subject to certain exceptions, with respect to,
among other things: (i) due organization, existence, good standing, corporate
power and authority, and qualification or licensing to do business; (ii) due
authorization and valid execution and delivery of the Merger Agreement and
consummation of the transactions contemplated thereby, and the validity and
enforceability of the obligations arising in connection therewith; (iii) absence
of conflict between the Merger Agreement and the certificate of incorporation
and bylaws (or equivalent governing instruments) of Swiss Re, Holding and Sub;
(iv) the absence of consents and approvals necessary for consummation of the
Merger, and the absence of any violations, breaches or defaults which would
result from compliance by Swiss Re, Holding or Sub with any provisions of the
Merger Agreement; (v) absence of the necessity for government approvals; (vi)
finders and investment banking fees; and (vii) the information supplied by Swiss
Re, Holding and Sub for this Proxy Statement and the filing hereof with the SEC.
CERTAIN COVENANTS
Interim Operations. Pursuant to the Merger Agreement, the Company has
agreed that, prior to the Effective Time, it will comply with certain covenants
regarding, inter alia, the conduct of the business of the Company and its
subsidiaries. Among other things, the Company has agreed that, except as
contemplated by the Merger Agreement or as approved in writing by Swiss Re, the
Company and its subsidiaries will each
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conduct its business only in the ordinary course consistent with past practice
and will use reasonable efforts to preserve its business organization intact and
maintain its existing relations with customers, suppliers, employees and others
with which it has business relationships. Without limiting the generality of the
foregoing, and except as otherwise provided in the Merger Agreement, prior to
the Effective Time, neither the Company nor any of its subsidiaries will,
without the prior written consent of Swiss Re: (i) amend or propose to amend its
certificate of incorporation or bylaws (or equivalent governing instruments)
(other than in connection with mergers between subsidiaries of the Company);
(ii) authorize for issuance, issue, sell, pledge, deliver or agree or commit to
issue, sell, pledge or deliver (whether through the issuance or granting of any
options, warrants, calls, subscriptions, stock appreciation rights or other
rights or other agreements) any capital stock of any class or any securities
convertible into or exchangeable for shares of capital stock of any class of the
Company, other than shares of Common Stock issuable upon exercise of Options
outstanding on the date of the Merger Agreement in accordance with the present
terms thereof; (iii) split, combine or reclassify any shares of Common Stock or
declare, pay or set aside for payment any dividend (other than regularly
scheduled dividends on the Common Stock at their current levels) or other
distribution in respect of any Common Stock, or redeem, purchase or otherwise
acquire any shares of Common Stock; (iv) increase or establish any employee
benefit, incentive or welfare plan or otherwise increase in any manner the
compensation payable or to become payable by the Company or any of its
subsidiaries to any of their respective directors, officers or employees, other
than in the ordinary course of business consistent with past practice or as
required under any existing employment agreement or other employee benefit,
incentive or welfare plan, or enter into any employment or severance agreement
with or grant any severance or termination pay to any director, officer or
employee of the Company or any of its subsidiaries, other than in accordance
with existing severance or other employee benefit plans; (v) enter into any
other agreements, commitments or contracts that are material to the Company and
its subsidiaries taken as a whole, other than in the ordinary course of business
consistent with past practice; (vi) purchase, redeem or otherwise acquire or
commit itself to acquire, directly or indirectly, any of the capital stock of
the Company or any subsidiary; provided, however, that the foregoing shall not
prohibit mergers between the subsidiaries or the performance by the Company of
its obligations under the Put Agreement, dated September 30, 1997, between the
Company and J. Dix Druce, Jr.; (vii) sell, assign, transfer or convey certain
intellectual property rights except that the foregoing shall not prohibit
mergers between the subsidiaries; (viii) effect any amendment or supplement to,
or extension of, employee benefit and ERISA plans, excluding administrative or
similar amendments that do not increase the liability of the Company or any of
its subsidiaries under any such plan (other than immaterial adjustments); (ix)
pay to or for the benefit of any of its directors, officers or employees any
compensation of any kind other than wages, salaries, bonuses and benefits at
times and rates in effect prior to December 31, 1997, other than scheduled
increases and increases in the ordinary course of business consistent with past
practice; (x) make any material change in accounting methods or principles used
for financial or regulatory reporting purposes, except for changes which are
required of all life insurers or life reinsurance companies; (xi) acquire or
agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the stock or assets of, or by any other means, any
business or any corporation, partnership, joint venture, association, or other
business organization or division thereof, except that the foregoing shall not
prohibit the acquisition of blocks of life insurance in force (whether by
reinsurance or stock acquisition) in the ordinary course of business in amounts
(calculated with respect to reinsurance, as the ceding commission paid, and
calculated with respect to stock acquisitions, as the excess of the purchase
price over the adjusted capital and surplus acquired) not to exceed (unless
Swiss Re otherwise consents, which consent will not be unreasonably withheld)
$50 million in any single transaction or $200 million in the aggregate; (xii)
incur or assume any indebtedness for borrowed money except (a) borrowings in the
ordinary course of business under that certain Amended and Restated Credit
Agreement dated as of November 2, 1995, among the Company and the financial
institutions party thereto, as amended to date or (b) reverse repurchase
contracts in the ordinary course of business consistent with past practice; or
(xiii) agree, commit or arrange to take any of the actions set forth in (i)
through (xii) above.
Stockholder Approval. Under the Merger Agreement, the Company has agreed
to take all action necessary in connection with applicable law to convene the
Special Meeting as promptly as practicable after the date of the Merger
Agreement to consider and vote upon the Merger Agreement and the transactions
28
<PAGE> 35
contemplated thereby, subject to the rights of the Board. The Company has also
covenanted to, through the Board, subject to fiduciary duty and certain other
exceptions, recommend that the stockholders vote in favor of the adoption of the
Merger Agreement and the transactions contemplated thereby. If any "fair price,"
"moratorium," "control share acquisition" or other form of anti-takeover statute
or regulation shall become applicable to the transactions contemplated by the
Merger Agreement, the Company and Swiss Re shall grant, or cause to be granted,
such approvals and take such actions as are reasonably necessary so that the
transactions contemplated by the Merger Agreement may be consummated as promptly
as practicable on the terms contemplated thereby and otherwise act to eliminate
or minimize the effects of such statute or regulation on the transactions
contemplated thereby.
Access to Information. Under the Merger Agreement, prior to the Effective
Time the Company will (and will cause of each of its subsidiaries) to afford to
Swiss Re and its representatives reasonable access to all of the Company's and
its subsidiaries' books and records, and during such period, furnish promptly to
Swiss Re: (i) a copy of each report and other document filed or received by it
during such period pursuant to the federal securities laws; and (ii) all other
information concerning the business, properties, assets and personnel of the
Company and its subsidiaries as Swiss Re may from time to time reasonably
request, including access to outside counsel of the Company or any subsidiary in
connection with the review of any claim, dispute, action, proceeding, suit,
appeal, investigation or inquiry pending or threatened against the Company or
any subsidiary. In addition, the Company has covenanted to provide Swiss Re
advance notice, to the degree possible, of transactions in which the Company
acquires blocks of life insurance in force for consideration equal to or in
excess of $25 million. Swiss Re and its representatives agree to be bound by a
previously executed confidentiality agreement with respect to information
received from the Company.
No Solicitation. The Merger Agreement contains the following "No
Solicitation" covenant:
(A) The Company shall not, nor shall it permit any of its subsidiaries
to, nor shall it authorize or permit any of its directors, officers or
employees or any investment banker, financial advisor, attorney, accountant
or other representative retained by it or any of its subsidiaries to,
directly or indirectly through another person, (i) solicit, initiate or
encourage (including by way of furnishing information), or take any other
action designed to facilitate, any inquiries or the making of any proposal
which constitutes a Takeover Proposal (as defined below) or (ii)
participate in any discussions or negotiations regarding any Takeover
Proposal (it being understood that the passive receipt of communications
from third parties shall not be deemed participation in discussions or
negotiations); provided, however, that if the Board determines in good
faith, after consultation with outside counsel, that it is necessary to do
so in order to act in a manner consistent with its fiduciary duties to the
Company's stockholders under applicable law, the Company may, in response
to any Superior Proposal (as defined below) made prior to the Stockholder
Approval, which proposal was not solicited by it and which did not
otherwise result from a breach of this covenant, and subject to providing
prior written notice of its decision to take such action to Swiss Re
(including but not limited to the material terms and conditions of such
request or Takeover Proposal and the identity of the person making such
request or Takeover Proposal), (x) furnish information with respect to the
Company and its subsidiaries to any person making a Superior Proposal
pursuant to a customary confidentiality agreement (as determined by the
Company based on the advice of its outside counsel) and (y) participate in
discussions or negotiations regarding such Superior Proposal.
(B) Except as expressly permitted in Paragraph A above, neither the
Board nor any committee thereof shall (i) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to Swiss Re and/or Sub,
the approval or recommendation by the Board or such committee of the Merger
or the Merger Agreement, (ii) approve or recommend, or propose publicly to
approve or recommend, any Takeover Proposal, or (iii) cause the Company to
enter into any Acquisition Agreement. Notwithstanding the foregoing, the
Board, to the extent that it determines in good faith, after consultation
with outside counsel, that in light of a Superior Proposal it is necessary
to do so in order to act in a manner consistent with its fiduciary duties
to the Company's stockholders under applicable law may terminate the Merger
Agreement solely in order that the Company may concurrently enter into an
Acquisition Agreement with respect to any Superior Proposal, but only at a
time that is after the second business day following
29
<PAGE> 36
Swiss Re's receipt of written notice advising the Swiss Re that the Board
is prepared to accept a Superior Proposal, specifying the material terms
and conditions of such Superior Proposal and identifying the person making
such Superior Proposal, all of which information will be kept confidential
by Swiss Re.
(C) Nothing contained in this Non-Solicitation provision shall
prohibit the Company from taking and disclosing to its stockholders a
position contemplated by Rule 14e-2(a) promulgated under the Exchange Act
or from making any disclosure to the Company's stockholders if, in the good
faith judgment of the Board, after consultation with outside counsel and
based as to legal matters on the written advice of the Company's
independent legal counsel, failure to make such disclosure would be
inconsistent with its obligations under applicable law; provided, however,
that, except as contemplated by Paragraph B above, neither the Company nor
the Board nor any committee of the Board shall withdraw or modify, or
propose publicly to withdraw or modify, its position with respect to the
Merger Agreement or the Merger or approve or recommend, or propose publicly
to approve or recommend, a Takeover Proposal.
For purposes of the Merger Agreement "Takeover Proposal" means any inquiry,
proposal or offer from any person relating to any direct or indirect acquisition
or purchase of a business that constitutes 20% or more of the net revenues, net
income or assets of the Company and its subsidiaries, taken as a whole, or 20%
or more of any class of equity securities of the Company, any tender offer or
exchange offer that if consummated would result in any person beneficially
owning 20% or more of any class of any equity securities of the Company, or any
merger, consolidation, business combination, recapitalization, reorganization,
liquidation, dissolution or similar transaction involving the Company or any
subsidiary whose business constitutes 20% or more of the net revenues, net
income or assets of the Company and its subsidiaries, taken as a whole, other
than the transactions contemplated by the Merger Agreement.
For purposes of the Merger Agreement, a "Superior Proposal" is any proposal
made by a third party to acquire, directly or indirectly, including pursuant to
a tender offer, exchange offer, merger, consolidation, business combination,
recapitalization, reorganization, liquidation, dissolution or similar
transaction, for consideration to the Company's stockholders consisting of cash
and/or securities, all of the shares of the Company's capital stock then
outstanding or all or substantially all the assets of the Company, on terms
which the Board determines in its good faith judgment to be more favorable to
the Company's stockholders than the Merger and for which financing, to the
extent required, is then committed or which, in the good faith judgment of the
Board, is reasonably capable of being obtained by such third party.
For purposes of the Merger Agreement "Acquisition Agreement" means any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement related to any Takeover Proposal.
Further Actions. Each of the parties to the Merger Agreement agreed to use
all reasonable efforts to take, or cause to be taken, all action, and to do or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by the Merger Agreement,
including using all reasonable efforts to (a) obtain all consents, amendments to
or waivers under the terms of any of the Company's and Swiss Re's borrowing or
other contractual arrangements required by the transactions contemplated by the
Merger Agreement, (b) effect promptly all necessary or appropriate registrations
and filings with governmental entities, (c) effect promptly and prosecute
diligently all approvals, filings and/or notices required under any applicable
insurance laws for the consummation of the transactions contemplated by the
Merger Agreement, (d) defend any lawsuit or other legal proceedings, whether
judicial or administrative, challenging the Merger Agreement or the consummation
of the transactions contemplated thereby and (e) fulfill or cause the
fulfillment of the conditions to Closing set forth in the Merger Agreement. If
at any time after the Effective Time, the Surviving Corporation shall determine
or be advised that any deeds, bills of sale, assignments, assurances or any
other actions or things are necessary or desirable to vest, perfect or confirm
of record or otherwise in the Surviving Corporation the right, title or interest
in, to or under any of the rights, properties or assets of either of Sub or the
Company ("Constituent Corporations") acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or otherwise to
carry out the provisions of the Merger Agreement, the officers and directors of
the Surviving Corporation shall be authorized to
30
<PAGE> 37
execute and deliver, in the name and on behalf of each of the Constituent
Corporations or otherwise, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of each of the
Constituent Corporations or otherwise, all such other actions and things as may
be necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out the Merger Agreement.
Notification of Certain Matters. The Company shall give notice to Swiss
Re, and Swiss Re and Sub shall give notice to the Company, promptly upon
becoming aware of (a) any occurrence or non-occurrence of any event, which has
caused or could reasonably be expected to cause any representation or warranty
in the Merger Agreement to be untrue or inaccurate in any material respect at
any time after the date of the Merger Agreement and prior to the Effective Time
and (b) any material failure on its part to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under the Merger
Agreement; provided, that the delivery of any notice shall not limit or
otherwise affect the remedies available under the Merger Agreement to the party
receiving such notice.
Public Announcements. Pursuant to the Merger Agreement, the Company, Swiss
Re and Sub agreed to have the initial press release with respect to the
transactions contemplated by the Merger Agreement sent in a form decided upon by
mutual agreement of the Company and Swiss Re. Thereafter, for as long as the
Merger Agreement is in effect, Swiss Re, Sub and the Company have agreed not,
and to cause their subsidiaries and affiliates not to, issue or cause the
publication of any press release or any other announcement (including without
limitation announcements to employees, agents or policyholders) with respect to
the Merger, the Merger Agreement or the other transactions contemplated by the
Merger Agreement without the consent of the other, except where such release or
announcement is required by applicable law or pursuant to any listing agreement
with, or the rules or regulations of, any securities exchange or any other
regulatory requirements.
Employee Matters. The Merger Agreement contains the following covenants
relating to certain employee matters:
(A) The Company shall, at or prior to the Effective Time, terminate
all employee benefit plans providing for the granting of options or any
securities of the Company to any employee, director or consultant of the
Company or any of its subsidiaries.
(B) Subject to any written agreement among Swiss Re, Holding, Sub and
a payee executed prior to the Closing, Swiss Re and Holding shall cause the
Surviving Corporation and its subsidiaries to honor certain employment and
severance agreements with employees of the Company and its subsidiaries.
Swiss Re and Holding acknowledge that consummation of the transactions
contemplated by the Merger Agreement will constitute a change in control of
the Company (to the extent such concept is applicable) for the purpose of
all employee benefit plans.
(C) Subject to any written agreement among Swiss Re, Holding, the
Company and a payee to be executed prior to the Closing, Swiss Re, Holding
and the Company agree that payments calculated pursuant to the Company's
Long-Term Incentive Plan (the "LTIP") and related arrangements shall be
made at the Closing in specified amounts and the Company shall cause the
LTIP to be terminated at the Effective Time, subject to the making of such
payments.
(D) For purposes of determining eligibility to participate, vesting
and accrual or entitlement to benefits where length of service is relevant
under any employee benefit plan or arrangement of the Surviving Corporation
and its subsidiaries (or of Swiss Re, Holding and their respective
subsidiaries to the extent an employee of the Company or its subsidiaries
shall become eligible to participate therein), employees of the Company and
its subsidiaries immediately prior to the Effective Time ("Affected
Employees") shall receive service credit for service with the Company and
any of its subsidiaries to the same extent such service was credited under
similar employee benefit plans and arrangements of the Company and its
subsidiaries; provided, however, that such service need not be credited to
the extent that it would result in a duplication of benefits.
(E) Swiss Re, Holding and their respective subsidiaries will, or will
cause the Surviving Corporation and its subsidiaries to: (i) waive all
limitations as to preexisting conditions, exclusions and waiting periods
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<PAGE> 38
with respect to participation and coverage requirements applicable to the
Affected Employees under any welfare benefit plans that such employees may
be eligible to participate in after the Closing Date, other than
limitations or waiting periods that are already in effect with respect to
such employees and that have not been satisfied as of the Closing Date
under any welfare plan maintained for the Affected Employees immediately
prior to the Closing Date; and (ii) provide each Affected Employee with
credit for any co-payments and deductibles paid prior to the Closing Date
in satisfying any applicable deductible or out-of-pocket requirements under
any welfare plans that such employees are eligible to participate in after
the Closing Date.
(F) Except as specified in the Merger Agreement, nothing is intended
to create any right of employment for any person or to create any
obligation for Swiss Re, Holding or the Surviving Corporation or their
respective subsidiaries to continue any employee benefit plan following the
Effective Time.
Investment Portfolio. The Company shall cause the investments of the
subsidiaries to be maintained prior to the Effective Time in accordance with
past investment policies and practices of the Subsidiaries in the ordinary
course of business.
Accession of Holding. After the date of the Merger Agreement, Holding had
the option to become a party to the Merger Agreement and otherwise to be bound
by its terms (the "Accession"). The Accession occurred on July 27, 1998.
Indemnification of Officers and Directors. The Merger Agreement provides
that: (i) the certificates of incorporation and bylaws of the Surviving
Corporation and each of its subsidiaries shall contain indemnification
provisions that are no less favorable than those contained in the certificate of
incorporation and bylaws of the Company and its subsidiaries, without amendment
for a period of six years from the Effective Time; (ii) the Surviving
Corporation shall indemnify, defend and hold harmless each person who is, or has
been at any time prior to the date of the Merger Agreement, or who becomes prior
to the Effective Time, a director or officer of the Company or any of its
subsidiaries ("Indemnified Person" or "Indemnified Persons") with respect to any
claim, liability, loss, damage, cost, judgment, or expense, whenever asserted or
claimed, 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, including,
without limitation, matters arising out of or pertaining to the Merger or the
Merger Agreement and transactions contemplated thereby, in each case to the full
extent a corporation is permitted under the DGCL to indemnify its officers and
directors; and further (iii) the Surviving Corporation shall pay expenses in
advance of the final disposition of any such claim, action, suit, proceeding or
investigation to each Indemnified Person to the full extent permitted by law,
subject to receipt of a written undertaking from such Indemnified Person to
repay all amounts advanced in the event a final and non-appealable judicial
determination is made that such person was not entitled to indemnification under
DGCL. If Accession does not occur, all references to Holding in this paragraph
shall instead be deemed to be references to Swiss Re.
In addition, the Merger Agreement provides that the Surviving Corporation
shall cause to be maintained in effect, for a period of six years, directors'
and officers' liability insurance covering each Indemnified Person who is
currently covered by the Company's directors' and officers' insurance with
respect to claims arising from facts or events which occurred at or prior to the
Effective Time, which insurance shall be no less favorable than such insurance
maintained in effect by the Company on the date of the Merger Agreement in terms
of coverage and amounts; provided, that in no event shall the Surviving
Corporation be required to expend in any one year an amount in excess of 150% of
the annual premiums currently paid by the company for such insurance; and
provided, further, the Surviving Corporation shall be obligated to obtain a
policy with the greatest coverage available for a cost not exceeding such
amount. In the event Holding disposes of all or substantially all of its assets
or otherwise ceases to be sufficiently creditworthy to meet its obligations
under this covenant, Swiss Re agrees it shall cause another of its wholly owned
subsidiaries incorporated in the United States which is sufficiently
creditworthy to assume the obligations of Holding under this section.
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<PAGE> 39
CONDITIONS TO THE MERGER
The respective obligations of the Company, Swiss Re, Holding and Sub to
consummate the Merger are subject to the following conditions: (i) the Merger
Agreement shall have been approved and adopted by the stockholders of the
Company in accordance with the DGCL; (ii) no governmental entity shall have
issued any order and there shall not be any new statute, rule, decree or
regulation restraining, prohibiting or making illegal the consummation of the
Merger; (iii) (a) all consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental entity required in connection
with the execution, delivery and performance of the Merger Agreement shall have
been obtained or made (as the case may be), except for filings in connection
with the Merger and any other documents required to be filed after the Effective
Time and except where the failure to have obtained or made any such consent,
authorization, order approval, filing or registration would not (A) have a
Material Adverse Effect on the Company or Swiss Re or (B) materially adversely
affect the ability of the Company, Swiss Re, Holding or Sub to perform their
respective obligations under the Merger Agreement or the other agreements
entered into in connection therewith and (b) such consents, authorizations,
orders and approvals shall be subject to no conditions other than (A) conditions
customarily imposed by insurance regulatory authorities or (B) other conditions
that could not reasonably be expected to have a Material Adverse Effect on the
Company; and (iv) any waiting period to the Merger under the HSR Act shall have
expired or been terminated.
The obligations of Swiss Re, Holding and Sub to consummate the Merger shall
be subject to the fulfillment or waiver at the Effective Time of the following
additional conditions: (i) the Company shall have performed in all material
respects the covenants and obligations required to be performed by it under the
Merger Agreement on or prior to the Effective Time; (ii) the representations and
warranties of the Company contained in the Merger Agreement shall be true and
correct in all material respects on Effective Time unless the Merger Agreement
specifies another date in which case such representations shall have been true
and correct as of that date; and (iii) Swiss Re shall have received a
certificate signed by an executive officer of the Company to the effect that (i)
and (ii) above have been complied with.
The obligations of the Company to effect the merger shall be subject to the
fulfillment or waiver at the Effective Time of the following additional
conditions: (i) Swiss Re, Holding and Sub shall have performed in all material
respects the covenants and obligations required to be performed by each of them
under the Merger Agreement on or prior to the Effective Time; (ii) the
representations and warranties of Swiss Re and Sub contained in the Merger
Agreement shall be true and correct in all material respects on Effective Time
unless the Merger Agreement specifies another date in which case such
representations shall have been true and correct as of such date; and (iii) and
the Company shall have received a certificate signed by an executive officer of
each of Swiss Re, Holding and Sub to the effect that (i) and (ii) above have
been complied with.
TERMINATION
The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time, whether before or after Stockholder Approval: (i)
by the mutual written consent of Swiss Re, Holding, Sub and the Company; (ii) by
Swiss Re, Holding, Sub or the Company if: (a) a court of competent jurisdiction
or other governmental entity shall have issued an order or taken any other
action permanently restraining, enjoining or otherwise prohibiting the Merger
and such order or other action shall have become final and nonappealable or (b)
if the Effective Time shall not have occurred on or before January 31, 1999,
provided, however, that this right shall not be available to any party whose
failure to fulfill materially any covenant or obligation under the Merger
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date; (iii) by Swiss Re, Holding, Sub or the
Company if the Stockholder Approval shall not have been obtained by reason of
the failure to obtain the requisite vote at a duly held meeting of stockholders
or at any adjournment thereof; and (iv) by the Company if the Company receives a
Superior Proposal and the Board determines in good faith, after consultation
with outside counsel, that failing to terminate the Merger Agreement would
constitute a breach of the fiduciary duty of the Board under applicable law.
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<PAGE> 40
Procedure for and Effect of Termination. In the event that the Merger
Agreement is terminated and the Merger is abandoned by Swiss Re, Holding, Sub,
or the Company, written notice of such termination and abandonment shall
forthwith be given to the other parties, the Merger Agreement shall terminate,
and the Merger shall be abandoned without any further action. If the Merger
Agreement is terminated as provided by Merger Agreement in the absence of a
Takeover Proposal, no party to the Agreement shall have any liability or further
obligation to any other party under the terms of the Merger Agreement except
with respect to the willful breach by any party to the Merger Agreement, and
certain confidentiality agreements among the parties.
In the event that the Merger Agreement is terminated by the Company
pursuant to the Merger Agreement because a Superior Proposal shall have been
made, then the Company shall promptly pay Swiss Re by wire transfer of same day
funds a fee equal to $60 million. If, following termination of the Agreement by
the Company, the Company enters into an Acquisition Agreement within 12 months
of such termination with a person (or any affiliate of a person) who made a
Takeover Proposal to the Company or any of its subsidiaries or stockholders, or
announced an intention to make a Takeover Proposal (whether or not conditional),
then the Company shall promptly pay Swiss Re by wire transfer of same day funds
a fee equal to $60 million.
THE COMPANIES
THE COMPANY
The Company through its principal wholly owned subsidiary, Life
Reassurance, provides ordinary and group life reinsurance in the United States.
The Company's two core lines of business are traditional life reinsurance,
which involves the transfer of mortality risks on new sales from primary (or
ceding) insurers of ordinary and group life insurance to the Company, and
Administrative Reinsurance, which involves the acquisition of blocks of life
insurance in force and, frequently, the assumption of administrative
responsibility by the Company.
SWISS RE
Swiss Reinsurance Company is one of the world's leading reinsurers, with
more than seventy offices in over thirty countries. Swiss Re and its
subsidiaries operate in both the property and casualty and life and health
reinsurance business. In fiscal year 1997, Swiss Re reported gross premium
revenues of approximately $11.9 billion, an increase of approximately 22% from
fiscal year 1996, of which approximately 20% can be attributed to the first-time
inclusion of Mercantile & General Re in its results of operations. Swiss Re
reported profits of approximately $1.5 billion last year, an increase of
approximately 45% from fiscal year 1996.
The acquisition of the Company is an important step in advancing Swiss Re's
strategy of growth in the life and health reinsurance business. The acquisition
will also provide Swiss Re with access to the Administrative Reinsurance skills
of the Company. Further benefits will also arise out of the integration of the
two organizations.
At the end of 1997, Swiss Re and its subsidiaries employed approximately
7,600 people. Swiss Re was organized in 1863 under the laws of Switzerland.
Swiss Re's principal executive offices are located at Mythenquai 50/60, Ch-8002
Zurich, Switzerland, telephone: 411 285 2121.
HOLDING
Holding, a wholly owned subsidiary of Swiss Re, is the U.S. holding company
for Swiss Re's U.S. operations. Holding's subsidiaries are engaged primarily in
the property and casualty and life reinsurance businesses. Its two principal
subsidiaries are Swiss Reinsurance America Corporation and Swiss Re Life &
Health America Inc.
Holding was incorporated in the State of Delaware in 1973. Holding's
principal executive office is located at 237 Park Avenue, New York, N.Y. 10017,
telephone (212) 907-8000.
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<PAGE> 41
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data for the
Company for the periods indicated. The data set forth below should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, and the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, incorporated by reference herein. See
"Incorporation of Certain Documents by Reference." The selected consolidated
financial data at and for the years ended December 31, 1997, 1996, 1995, 1994
and 1993 are derived from the consolidated financial statements of the Company.
The selected consolidated financial data at June 30, 1998 and for the six months
ended June 30, 1998 and 1997 are derived from the unaudited condensed
consolidated financial statements of the Company, which have been prepared on
the same basis as the Company's audited consolidated financial statements and,
in the opinion of management, contain all adjustments consisting of only normal
recurring adjustments necessary for a fair presentation of the financial
position and results of operations for these periods. The results of operations
for the six months ended June 30, 1998 may not be indicative of results for the
full year.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
---------------------- ------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- -------- --------- --------- -------- -------- --------
(UNAUDITED) (IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues
Policy revenues............................... $ 302.4 $ 237.3 $ 490.3 $ 451.0 $ 383.2 $ 350.9 $ 289.0
Investment income............................. 105.3 71.2 151.0 124.3 98.6 82.4 73.5
Realized investment gains..................... .7 1.8 4.5 17.2 3.7 .1 21.0
-------- -------- --------- --------- -------- -------- --------
Total revenues.............................. 408.4 310.3 645.8 592.5 485.5 433.4 383.5
-------- -------- --------- --------- -------- -------- --------
Benefits and Expenses
Policy benefits............................... 206.0 168.6 341.0 332.5 281.5 245.8 208.7
Acquisition costs............................. 85.6 68.2 142.2 111.9 95.7 88.7 71.1
Interest credited to policyholder accounts.... 33.2 18.1 40.7 34.6 21.2 15.0 15.0
Interest expense.............................. 3.9 4.0 8.0 8.4 10.7 9.1 9.9
Distributions on corporation obligated,
mandatorily redeemable capital securities of
subsidiary trusts holding solely parent
debentures.................................. 6.7 .6 5.0 -- -- -- --
Other operating expenses...................... 23.9 16.8 32.7 29.0 21.6 22.0 18.1
-------- -------- --------- --------- -------- -------- --------
Total benefits and expenses............. 359.4 276.4 569.6 516.5 430.8 380.6 322.8
-------- -------- --------- --------- -------- -------- --------
Income before federal income taxes and
extraordinary charge.......................... 49.1 34.0 76.2 76.1 54.8 52.8 60.6
Provision for federal income taxes.............. 17.2 11.9 26.7 21.9 19.2 18.5 21.4
-------- -------- --------- --------- -------- -------- --------
Income before extraordinary charge.............. 31.9 22.1 49.5 54.2 35.6 34.3 39.2
Extraordinary charge, net of federal income tax
benefit....................................... -- -- -- -- 1.0 -- --
-------- -------- --------- --------- -------- -------- --------
Net income...................................... $ 31.9 $ 22.1 $ 49.5 $ 54.2 $ 34.6 $ 34.3 $ 39.2
======== ======== ========= ========= ======== ======== ========
Diluted Earnings Per Share(1):
Income before extraordinary charge............ $ 1.92 $ 1.57 $ 3.48 $ 3.89 $ 2.39 $ 2.21 $ 2.50
Extraordinary charge, net of federal income
tax benefit................................. -- -- -- -- (.07) -- --
-------- -------- --------- --------- -------- -------- --------
Net income.................................... $ 1.92 $ 1.57 $ 3.48 $ 3.89 $ 2.32 $ 2.21 $ 2.50
Common dividends per share...................... $ 0.30 $ 0.26 $ 0.52 $ 0.40 $ 0.28 $ 0.24 $ 0.20
Weighted average common and common equivalent
shares........................................ 16.6 14.1 14.2 13.9 14.9 15.5 15.7
BALANCE SHEET DATA (AT PERIOD END):
Invested assets................................. $3,840.3 $1,914.3 $ 2,784.6 $ 1,833.2 $1,504.2 $ 998.5 $ 944.6
Total assets.................................... $4,909.7 $2,618.0 $ 3,700.2 $ 2,519.3 $2,024.1 $1,442.3 $1,339.7
Loans payable................................... $ 125.0 $ 125.0 $ 125.0 $ 125.0 $ 140.0 $ 140.0 $ 150.0
Corporation obligated, mandatorily redeemable
capital securities of subsidiary trusts
holding solely parent debentures.............. $ 236.6 $ 100.0 $ 100.0 -- -- -- --
Common shareholders' equity..................... $ 631.8 $ 307.4 $ 373.8 $ 290.1 $ 279.3 $ 194.9 $ 230.7
</TABLE>
35
<PAGE> 42
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
---------------------- ------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- -------- --------- --------- -------- -------- --------
(UNAUDITED) (IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA (AS OF OR FOR THE PERIOD
ENDED):
Return on average shareholders' equity.......... 13% 15% 15% 19% 15% 16% 20%
Return on average shareholders' equity, as
adjusted(2)................................... 14% 15% 16% 15% 14% 16% 14%
Book value per common share..................... $ 36.55 $ 22.61 $ 27.42 $ 21.44 $ 19.99 $ 12.56 $ 14.87
Book value per common share, as adjusted(3)..... $ 32.49 $ 20.95 $ 22.92 $ 19.61 $ 16.45 $ 14.75 $ 12.77
Ratio of earnings to fixed charges:
Excluding interest on annuities and financial
products(4)................................. 5.5x 8.2x 6.7x 9.8x 6.0x 6.6x 6.9x
Including interest on annuities and financial
products(5)................................. 2.1x 2.5x 2.4x 2.8x 2.7x 3.2x 3.4x
First year reinsurance premiums assumed......... $ 35.5 $ 28.6 $ 61.3 $ 38.2 $ 22.6 $ 19.3 $ 13.6
Capital invested in Administrative Reinsurance
transactions(6)............................... $ 152.8 $ 16.2 $ 85.1 $ 32.0 $ 35.9 -- --
Life insurance in force(7)...................... N.A. N.A. $ 148,986 $ 116,012 $ 91,283 $ 81,213 $ 79,652
Statutory capital and surplus(7)................ $ 327.3 $ 277.3 $ 210.5 $ 209.3 $ 208.2 $ 193.8 $ 187.4
</TABLE>
- ---------------
N.A. -- Not Available.
(1) Diluted earnings per share have been calculated in accordance with Financial
Accounting Standards Board Statement No. 128, Earnings Per Share ("SFAS
128"). Basic earnings per share in accordance with SFAS 128 for the six
months ended June 30, 1998 and 1997 were $2.02 and $1.63, respectively, and
for the years ended 1997, 1996, 1995, 1994 and 1993 were $3.64, $3.97,
$2.32, $2.21 and $2.53, respectively. The adoption of SFAS 128 did not
result in the restatement of previously reported earnings per share, as
diluted earnings per share calculated in accordance with SFAS 128 results in
the same per share amounts as previously reported by the Company.
(2) Return on shareholders' equity is calculate by dividing net income
(excluding realized investment gains and extraordinary charge) by average
shareholders' equity for the period (which is the simple average of
beginning and end of period shareholders' equity excluding unrealized
investment gains or losses).
(3) Book value per share is calculated by dividing end of period shareholders'
equity (excluding unrealized investment gains and losses) by end of period
common shares outstanding.
(4) For purposes of determining this ratio, earnings consist of income before
federal income taxes and extraordinary charge (1995), plus fixed charges.
Fixed charges consist of interest expense on debt, distributions on capital
securities and the portion of operating leases that are representative of
the interest factor.
(5) Same as the ratio of earnings to fixed charges, excluding interest on
annuities and financial products, except fixed charges and earnings include
interest on annuities and financial products.
(6) Capital invested in Administrative Reinsurance transactions represents the
sum of the consideration paid for life insurance in force acquired and the
related capital to support the business.
(7) Amounts have been derived from the Annual Statements of the Company's
insurance subsidiaries, as filed with insurance regulatory authorities and
prepared in accordance with statutory accounting practices. For purposes of
this presentation, the capital and surplus are defined as statutory capital
and surplus of Life Reassurance only, as its capital and surplus materially
reflect that of the Company's insurance subsidiaries, plus the Asset
Valuation Reserve and the Interest Maintenance Reserve of Life Reassurance
and REALIC.
36
<PAGE> 43
MARKET PRICES OF COMMON STOCK
The Common Stock of the Company has been listed for trading on the NYSE
since October 28, 1992, the date of the Company's initial public offering, under
the symbol LRE. Based upon information reported in the Bloomberg consolidated
transaction reporting system, the high and low sales prices for each quarterly
period from January 1, 1996 to the date hereof were:
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996
First Quarter............................................... $ 27 3/8 $ 22 1/2
Second Quarter.............................................. 31 27 1/2
Third Quarter............................................... 36 26 5/8
Fourth Quarter.............................................. 38 5/8 33 3/4
YEAR ENDED DECEMBER 31, 1997
First Quarter............................................... $ 45 3/8 $ 38 5/8
Second Quarter.............................................. 48 1/8 37 3/8
Third Quarter............................................... 56 46 5/8
Fourth Quarter.............................................. 65 3/8 52 1/16
YEAR ENDING DECEMBER 31, 1998
First Quarter............................................... $ 74 5/6 $ 58 1/8
Second Quarter.............................................. 71 1/8 82 7/8
Third Quarter............................................... 91 15/16 83 1/16
Fourth Quarter (through 10/19/98)........................... 91 15/16 90 1/8
</TABLE>
As of October 19, 1998, there were approximately 4,000 holders of the
outstanding shares of Common Stock, including individual participants in
securities position listings.
Stockholders are urged to obtain current market quotations for the Common
Stock prior to making any decision with respect to the Merger.
As of July 30, 1998, there were 17,286,279 shares of Common Stock
outstanding and 91 record holders of Common Stock.
Dividends of $0.10 per share and $0.13 per share were declared in each
calendar quarter of 1996 and 1997, respectively. The Company paid dividends of
$0.15 per share on March 25, 1998, and June 24, 1998. On July 30, 1998, the
Board declared a dividend of $0.15 per share to be paid on September 30, 1998.
The declaration and payment of future dividends to holders of its Common
Stock by the Company will be at the discretion of the Board and will depend upon
the Company's earnings and financial condition, capital requirements of its
subsidiaries, regulatory considerations and other factors the Board deems
relevant. The Company's general policy is to retain most of its earnings to
finance the growth and development of business.
37
<PAGE> 44
CERTAIN PROJECTIONS OF FUTURE OPERATING RESULTS
The Company does not as a matter of course make public forecasts as to its
future financial performance and conditions. However, in connection with its
discussions with Swiss Re, the Company furnished Swiss Re with certain data
relating to projected future operating results and financial conditions. The
projections set forth below were included in the data provided by the Company to
Swiss Re. These projections were not prepared in compliance with the published
guidelines of the American Institute of Certified Public Accountants or the SEC
regarding projections or financial forecasts and are included herein only
because such information was provided to Swiss Re. These projections constitute
forward-looking statements and were based upon numerous assumptions, the more
material of which are summarized below. Although the Company believes that such
assumptions were reasonable when made, such assumptions are inherently subject
to significant uncertainties and contingencies which are difficult or impossible
to predict and are beyond the Company's control. Accordingly, there can be no
assurance, and no representation or warranty is made, that the actual results of
operations and financial position achieved by the Company would not vary
materially from the results of operations and financial condition set forth in
these projections. For a list of important factors that, in the view of the
Company, could cause actual results to differ materially from those set forth in
these projections, see "Forward-Looking Statements." The projections set forth
below have not been adjusted to reflect the effects of the Merger.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1998 1999 2000 2001
-------- -------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues
Policy revenues..................................... $ 553.8 682.4 869.2 1081.8
Investment income................................... 241.8 376.8 547.5 764.7
Realized investment gains........................... -- -- -- --
-------- -------- --------- ---------
Total revenues................................... 795.6 1059.2 1416.7 1846.5
-------- -------- --------- ---------
Benefits and Expenses
Policy benefits..................................... 384.2 499.1 660.3 852.8
Acquisition costs................................... 159.5 202.7 264.4 332.2
Interest credited to policyholder accounts............ 82.8 138.3 207.5 293.3
Interest expense and distributions on corporation
obligated, mandatorily redeemable capital
securities of subsidiary trusts holding solely
parent debentures................................ 23.0 24.8 35.9 41.9
Other operating expenses............................ 43.3 56.0 70.7 88.0
-------- -------- --------- ---------
Total benefits and expenses...................... 692.8 920.9 1238.8 1608.2
-------- -------- --------- ---------
Income before federal income taxes.................... 102.8 138.2 177.9 238.3
Provision for federal income taxes.................... 35.8 48.2 62.0 83.2
-------- -------- --------- ---------
Net income............................................ $ 67.0 90.1 115.9 155.2
======== ======== ========= =========
Diluted earnings per share............................ $ 3.91 4.92 5.75 6.60
======== ======== ========= =========
Common dividends per share............................ $ 0.60 0.69 0.79 0.91
======== ======== ========= =========
Weighted average common and common equivalent
shares.............................................. 17.1 18.3 20.1 23.5
======== ======== ========= =========
</TABLE>
38
<PAGE> 45
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1998 1999 2000 2001
-------- -------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END):
Invested assets....................................... $4,685.0 $7,025.8 $ 9,815.3 $13,370.1
Total assets.......................................... $5,673.9 $8,258.3 $11,323.6 $15,207.6
Loans payable......................................... $ 125.0 $ 310.0 $ 410.0 $ 610.0
Corporation obligated, mandatorily redeemable capital
securities of subsidiary trusts holding solely
parent debentures................................... $ 236.6 $ 236.6 $ 236.6 $ 236.6
Common shareholders' equity........................... $ 586.1 $ 813.1 $ 1,112.3 $ 1,421.4
OTHER FINANCIAL DATA:
First year reinsurance premiums, net.................. $ 78.1 $ 87.1 $ 96.2 $ 105.2
Consideration paid for life insurance in force
acquired............................................ $ 175.0 $ 225.0 $ 275.0 $ 350.0
ADDITIONAL CAPITAL RAISED:
Loans................................................. -- $ 185.0 $ 100.0 $ 200.0
Equity................................................ -- 150.0 200.0 175.0
-------- -------- --------- ---------
$ 335.0 $ 300.0 $ 375.0
======== ======== ========= =========
</TABLE>
The following represents the most significant assumptions made in the
determination of the financial projections presented above:
1. New business investments and margins thereon:
(i) First year reinsurance premiums of $78.1 million in 1998,
growing to $105.2 million in 2001; margins consistent with new business
written in 1997;
(ii) Consideration paid for life insurance in force acquired of
$175.0 million in 1998, growing to $350.0 million in 2001; margins
consistent with recently completed Administrative Reinsurance
transactions.
2. New funds invested in long-term investments consistent with the
Company's current investment guidelines; effective yield of 6.70%.
3. Operating expense growth (i) consistent with the investments in
Administrative Reinsurance transactions (principally fees paid to third
party administrators) and (ii) at a 5% rate for all other costs
(principally compensation).
4. New bank borrowings at 6% and new equity issuances at 18x trailing
earnings per share. Capital raising consistent with established targets for
statutory risk-based capital and holding company leverage.
The projections set forth above were prepared by the Company in January and
May 1998 in connection with the Company's annual profit planning process, the
Company's March 1998 public offerings and the discussions with Swiss Re.
Forecasts of future financial performance and condition could differ materially
from the data set forth above if management were to prepare projections based
upon circumstances existing as of the date of this Proxy Statement. Pursuant to
Section 21E(d) of the Exchange Act and Section 27A(d) of the Securities Act,
neither the Company nor Swiss Re intends or has any duty or obligation publicly
to disclose updates or revisions to any of the projections set forth above to
reflect the occurrence of unanticipated events. The Company and Swiss Re are
aware, however, of their responsibility, pursuant to Item 10(b)(3)(iii) of
Regulation S-K (Standard Instructions for Filing Forms under Securities Act of
1933, Securities Exchange Act of 1934 and Energy Policy and Conservation Act of
1975), to make full and prompt disclosure of material facts, both favorable and
unfavorable, regarding their financial condition. The Company's independent
accountants have not reviewed, examined or compiled the foregoing
forward-looking statements and accordingly do not provide any assurance with
respect to such statements.
39
<PAGE> 46
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of the date of this Proxy Statement, based upon a review of schedules
and reports filed with the SEC, there is no person known to the Company to be
the beneficial owner of more than 5% of the Common Stock.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of the Common Stock as of July 31, 1998, by each director of the
Company, each executive officer of the Company and all directors and executive
officers of the Company as a group. Except as otherwise indicated, each person
listed below has sole voting and dispositive power with respect to such
stockholder's shares of Common Stock.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME COMMON SHARES CLASS(1)(2)
- ---- ------------- -----------
<S> <C> <C>
Rodney A. Hawes, Jr................................... 825,766(2)(3)(4) 4.7%
Douglas M. Schair..................................... 837,816(2)(3)(5) 4.8%
Jacques E. Dubois..................................... 859,168(2)(3) 4.9%
Chris C. Stroup....................................... 63,500(2)(3) *
Robert L. Beisenherz.................................. 62,500(2)(3) *
W. Weldon Wilson...................................... 121,561(2)(3) *
Carolyn K. McCandless................................. 7,000(3)(6) *
K. Fred Skousen....................................... 6,700(3)(6) *
T. Bowring Woodbury, II............................... 6,797(3)(6) *
All Directors and Executive Officers as a Group (9
persons)............................................ 2,790,808(3)(4)(5)(7) 15.2%
</TABLE>
- ---------------
* Represents fewer than 1% of shares of Common Stock
(1) Based on the number of shares of Common Stock outstanding on August 3, 1998.
Beneficial ownership is determined in accordance with rules of the SEC and
includes shares over which the indicated beneficial owner exercises voting
and/or investment power. Shares of Common Stock subject to Options currently
exercisable or exercisable within 60 days of August 3, 1998 are deemed
outstanding for purposes of computing the percentage ownership of the person
holding the Options but not deemed outstanding for purposes of computing the
percentage ownership of any other person.
(2) Shares of Common Stock held by Messrs. Hawes, Schair and Dubois include
vested Options to acquire (i) 100,000 shares of Common Stock each at $22 per
share, (ii) 50,000 shares of Common Stock each at $20.125 per share, (iii)
37,500 shares of Common Stock each at $19.625 per share, (iv) 50,000 shares
of Common Stock each at $25 per share, and (v) 25,000 shares of Common Stock
each at $39.625 per share, all of which may be purchased within sixty days
of August 3, 1998. Shares of Common Stock held by Mr. Stroup include vested
Options to acquire (i) 50,000 shares of Common Stock at $30.25 per share,
and (ii) 12,500 shares of Common Stock at $39.625 per share, all of which
may be purchased within sixty days of August 3, 1998. Shares of Common Stock
held by Mr. Beisenherz include vested Options to acquire (i) 50,000 shares
of Common Stock at $29.50 per share, and (ii) 12,500 shares of Common Stock
at $39.625 per share, all of which may be purchased within sixty days of
August 3, 1998. Shares of Common Stock held by Mr. Wilson include vested
Options to acquire (i) 40,000 shares of Common Stock at $22 per share, (ii)
20,000 shares of Common Stock at $20.125 per share, (iii) 15,000 shares of
Common Stock at $19.625 per share, (iv) 12,500 shares of Common Stock at $25
per share, and (v) 8,750 shares of Common Stock at $39.625 per share, all of
which may be purchased within sixty days of August 3, 1998.
(3) Excludes unvested Options to purchase an aggregate of 1,021,250 shares of
Common Stock granted to Messrs. Hawes, Schair, Dubois, Stroup, Beisenherz
and Wilson and unvested Options to purchase an
40
<PAGE> 47
aggregate of 3,000 shares of Common Stock granted to Ms. McCandless, Dr.
Skousen and Mr. Woodbury.
(4) Includes 83,250 shares of Common Stock owned by a trust established by Mr.
Hawes for the benefit of his heirs.
(5) Includes (i) 159,689 shares of Common Stock owned by a trust established by
Mr. Schair, and (ii) 24,150 shares of Common Stock owned by a non-profit
organization qualified under Section 501(c)(3) of the Code, for which Mr.
Schair shares voting and investment power. Mr. Schair expressly disclaims
beneficial ownership of the 24,150 shares of Common Stock owned by the
non-profit organization.
(6) Includes vested Options to acquire (i) 2,500 shares of Common Stock each at
$31.50 per share, (ii) 1,000 shares of Common Stock each at $20.125 per
share, (iii) 1,000 shares of Common Stock each at $17.375 per share, (iv)
1,000 shares of Common Stock each at $24.875 per share, and (v) 1,000 shares
of Common Stock each at $39.625 per share, all of which may be purchased
within sixty days of August 3, 1998, and excludes unvested Options to
purchase an additional 1,000 shares of Common Stock each granted to Ms.
McCandless, Dr. Skousen and Mr. Woodbury.
(7) Includes vested Options to purchase 1,028,250 shares of Common Stock within
sixty days of August 3, 1998 by the directors and executive officers of the
Company.
STOCKHOLDER PROPOSALS
The Company will hold a 1999 Annual Meeting only if the Merger is not
consummated. In the event of such a meeting, in order to have been considered
for inclusion in the Company's proxy materials for the 1999 Annual Meeting of
Stockholders, stockholder proposals must have been received at the Company's
principal executive offices in Stamford, Connecticut no later than December 11,
1998.
INDEPENDENT AUDITORS
The consolidated financial statements and schedule of the Company appearing
in the Company's Annual Report on Form 10-K for the year ended December 31,
1997, have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
With respect to the unaudited condensed consolidated interim financial
information for the three-month periods ended March 31, 1998 and March 31, 1997,
and the three-month and six-month periods ended June 30, 1998 and June 30, 1997,
incorporated by reference in this Proxy Statement, Ernst & Young LLP have
reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their separate
reports, included in the Company's Quarterly Report on Form 10-Q for the
quarters ended March 31, 1998 and June 30, 1998, and incorporated herein by
reference, state that they did not audit and they do not express an opinion on
that interim financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted considering the limited nature
of the review procedures applied.
Representatives of Ernst & Young LLP will attend the Special Meeting and
will have an opportunity to make a statement and to respond to appropriate
questions from stockholders.
41
<PAGE> 48
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company (File No.
1-11340) with the SEC under the Exchange Act, are incorporated herein by
reference:
(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1997.
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.
(c) The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1998.
(d) The Company's Proxy Statement on Schedule 14A dated April 10, 1998.
(e) The Company's Report on Form 8-K dated February 12, 1998.
(f) The Company's Report on Form 8-K dated July 27, 1998.
All documents filed with the SEC by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and prior
to the date of the Special Meeting shall be deemed to be incorporated by
reference herein and to be a part hereof from the date any such document is
filed.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein (or in any other subsequently filed documents
that also is or is deemed to be incorporated by reference herein) modifies or
supercedes such statement. Any statement so modified or superceded shall not be
deemed, except as so modified or superceded, to constitute a part hereof. All
information appearing in this Proxy Statement is qualified in its entirety by
the information and financial statements (including the notes thereto) contained
in the documents incorporated herein by reference, except to the extent set
forth in the immediately preceding sentence.
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THE COMPANY WILL PROVIDE WITHOUT CHARGE
TO EACH PERSON TO WHOM THIS PROXY STATEMENT IS DELIVERED, UPON THE WRITTEN OR
ORAL REQUEST OF SUCH PERSON, BY FIRST-CLASS MAIL OR OTHER EQUALLY PROMPT MEANS
WITHIN ONE BUSINESS DAY OF RECEIPT OF SUCH REQUEST, A COPY OF ANY OR ALL OF THE
DOCUMENTS THAT ARE INCORPORATED BY REFERENCE HEREIN (OTHER THAN EXHIBITS TO SUCH
DOCUMENTS THAT ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE HEREIN). REQUESTS
SHOULD BE DIRECTED TO INVESTOR RELATIONS, LIFE RE CORPORATION, 969 HIGH RIDGE
ROAD, STAMFORD, CONNECTICUT, 06905 (TELEPHONE NUMBER (800) 292-2726; (203)
321-3084; OR (203) 321-3167).
42
<PAGE> 49
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
SWISS REINSURANCE COMPANY,
SRC ACQUISITION CORP.,
LIFE RE CORPORATION
AND, IF APPLICABLE,
SWISS RE AMERICA HOLDING CORPORATION
------------------------------
JULY 27, 1998
------------------------------
<PAGE> 50
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 THE MERGER....................................... 1
1.1 The Merger........................................... 1
1.2 Closing; Effective Time.............................. 1
1.3 Certificate of Incorporation......................... 1
1.4 By-laws.............................................. 1
1.5 Directors and Officers............................... 2
ARTICLE 2 CONVERSION OF SECURITIES......................... 2
2.1 Common Stock......................................... 2
2.2 Treasury Stock and Parent-Owned Stock................ 2
2.3 Dissenting Shares.................................... 2
2.4 Merger Sub Stock..................................... 2
2.5 Exchange of Certificates............................. 2
2.6 Options.............................................. 3
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.... 4
3.1 Organization......................................... 4
3.2 Capitalization....................................... 4
3.3 Subsidiaries......................................... 4
3.4 Authorization; Binding Agreement..................... 5
3.5 Noncontravention..................................... 5
3.6 Approvals............................................ 5
3.7.A SEC Filings; Financial Statements.................. 5
3.7.B Insurance Subsidiary Statements.................... 6
3.7.C No Undisclosed Liabilities......................... 6
3.8 Absence of Certain Changes or Events................. 6
3.9 Litigation, Judgments, No Default, Etc............... 7
3.10 Compliance.......................................... 7
3.11 Tax Returns and Tax Payments........................ 7
3.12 Employee Benefit Plans.............................. 8
3.13 Information Supplied................................ 10
3.14 Finders and Investment Bankers...................... 10
3.15 Opinion of Financial Advisor........................ 10
3.16 Reserves............................................ 10
3.17 Collective Bargaining Agreements.................... 10
3.18 No Default.......................................... 11
3.19 Insurance........................................... 11
3.20 Related Parties..................................... 11
3.21 Proprietary Rights.................................. 11
3.22 Compliance with Law................................. 11
3.23 Real Property....................................... 12
3.24 Licenses and Permits................................ 12
3.25 Environmental Matters............................... 12
3.26 Letters of Credit................................... 12
</TABLE>
i
<PAGE> 51
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PARENT,
HOLDING AND THE MERGER SUB................................ 13
4.1 Organization......................................... 13
4.2 Authorization; Binding Agreement..................... 13
4.3 Noncontravention..................................... 13
4.4 Governmental Approvals............................... 13
4.5 Finders and Investment Bankers....................... 13
4.6 Information Supplied................................. 14
ARTICLE 5 COVENANTS........................................ 14
5.1 Conduct of Business of the Company................... 14
5.2 Stockholder Approval; Proxy Statement................ 15
5.3 Access and Information............................... 15
5.4 Takeover Statutes.................................... 15
5.5 No Solicitation...................................... 15
5.6 Reasonable Efforts; Additional Actions............... 17
5.7 Notification of Certain Matters...................... 17
5.8 Public Announcements................................. 18
5.9 Certain Employee Matters............................. 18
5.10 Investment Portfolio................................ 19
5.11 Swiss Re America Holding Corporation................ 19
5.12 Indemnification of Directors and Officers........... 19
ARTICLE 6 CONDITIONS....................................... 20
6.1 Conditions to Each Party's Obligations............... 20
6.2 Conditions to Obligation of the Parent, Holding and
the Merger Sub....................................... 20
6.3 Conditions to Obligation of the Company.............. 21
ARTICLE 7 TERMINATION...................................... 21
7.1 Termination.......................................... 21
7.2 Procedure for and Effect of Termination.............. 21
ARTICLE 8 MISCELLANEOUS.................................... 22
8.1 Certain Definitions.................................. 22
8.2 Amendment and Modification........................... 22
8.3 Waiver of Compliance; Consents....................... 22
8.4 Survival............................................. 23
8.5 Notices.............................................. 23
8.6 Assignment........................................... 23
8.7 Expenses............................................. 23
8.8 Governing Law........................................ 23
8.9 Counterparts......................................... 24
8.10 Interpretation...................................... 24
8.11 Entire Agreement.................................... 24
8.12 No Third Party Beneficiaries........................ 24
</TABLE>
ii
<PAGE> 52
ANNEX A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of July 27, 1998 (the "Agreement"),
by and between Swiss Reinsurance Company, a Swiss corporation (the "Parent"),
SRC Acquisition Corp., a Delaware corporation wholly-owned by the Parent (the
"Merger Sub"), Life Re Corporation, a Delaware corporation (the "Company") and,
if applicable, Swiss Re America Holding Corporation, a Delaware corporation
wholly-owned by the Parent ("Holding").
WHEREAS, the respective boards of directors of the Parent, the Merger Sub
and the Company have approved this Agreement pursuant to which, among other
things, the Merger Sub will be merged with and into the Company (the "Merger")
on the terms and conditions contained herein and in accordance with the General
Corporation Law of the State of Delaware (the "DGCL"); and
WHEREAS, the Parent, the Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and to prescribe various conditions to the Merger;
NOW THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.2) and in accordance
with the DGCL, the Merger Sub shall be merged with and into the Company, which
shall be the surviving corporation in the Merger (the "Surviving Corporation").
At the Effective Time, the separate existence of the Merger Sub shall cease and
the other effects of the Merger shall be as set forth in Section 259 of the
DGCL. The Merger Sub and the Company are sometimes collectively referred to
herein as the "Constituent Corporations."
1.2 Closing; Effective Time. Subject to the provisions of Article 6, the
closing of the Merger (the "Closing") shall take place in New York City at the
offices of Paul, Weiss, Rifkind, Wharton & Garrison, as soon as practicable but
in no event later than 10:00 a.m. New York City time on the second business day
after the date on which each of the conditions set forth in Article 6 (other
than conditions that are satisfied by the delivery of documents or the payment
of money at the Closing) have been satisfied or waived by the party or parties
entitled to the benefit of such conditions, or at such other place, at such
other time or on such other date as the Parent and the Company may mutually
agree. Notwithstanding the foregoing, upon notice given to the Company by the
Parent, the Parent may delay the Closing until a business day not later than
January 8, 1999. The date on which the Closing actually occurs is hereinafter
referred to as the "Closing Date." At the Closing, the Merger Sub and the
Company shall cause a certificate of merger (the "Certificate of Merger") to be
executed and filed with the Secretary of State of the State of Delaware in
accordance with the DGCL. The Merger shall become effective as of the date and
time of such filing or as of such subsequent date or time as the Parent and the
Company shall agree to and shall be set forth in the Certificate of Merger (the
"Effective Time").
1.3 Certificate of Incorporation. The certificate of incorporation of the
Merger Sub, as in effect immediately prior to the Effective Time, shall be, from
and after the Effective Time, the certificate of incorporation of the Surviving
Corporation, until thereafter altered, amended or repealed as provided therein
and in accordance with applicable law.
1.4 By-laws. The by-laws of the Merger Sub, as in effect immediately
prior to the Effective Time, shall become, from and after the Effective Time,
the by-laws of the Surviving Corporation, until thereafter altered, amended or
repealed as provided therein and in accordance with applicable law.
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1.5 Directors and Officers. The directors and officers of the Merger Sub
immediately prior to the Effective Time shall become, from and after the
Effective Time, the directors and officers of the Surviving Corporation, until
their respective successors are duly elected or appointed and qualified or their
earlier resignation or removal.
ARTICLE 2
CONVERSION OF SECURITIES; OPTIONS
2.1 Common Stock. Each share of Common Stock, par value $.001 per share,
of the Company (the "Company Common Stock") issued and outstanding immediately
prior to the Effective Time (other than Dissenting Shares (as defined in Section
2.3) and Parent Shares (as defined in Section 2.2), if any) shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into the right to receive an amount in cash equal to $95.00 per share
plus, if the Closing is delayed by the Parent in accordance with Section 1.2, an
additional payment per share equal to $.0208 per day from, but not including,
the date on which the Closing would have occurred absent the exercise by the
Parent of its right to delay the Closing to, and including, the Closing Date
(the "Common Stock Price Per Share") payable to the holder thereof, without
interest thereon, upon surrender of the certificate formerly representing such
share of Company Common Stock in accordance with Section 2.5. Notwithstanding
the foregoing, if between the date of this Agreement and the Effective Time the
outstanding shares of the Company Common Stock shall have been changed into a
different number of shares or a different class, by reason of any dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares, the Common Stock Price Per Share shall be correspondingly adjusted on
a per-share basis to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares.
2.2 Treasury Stock and Parent-Owned Stock. Each share of Company Common
Stock held in the Company's treasury immediately prior to the Effective Time, if
any, and each share of Company Common Stock then owned by the Parent, Holding,
the Merger Sub or any other wholly-owned subsidiary of the Parent (collectively,
"Parent Shares"), if any, shall, by virtue of the Merger, automatically be
canceled and retired and cease to exist and no consideration shall be delivered
in exchange therefor.
2.3 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, each share of Company Common Stock that is issued and outstanding
immediately prior to the Effective Time and that is held by a stockholder who
has properly exercised and perfected appraisal rights under Section 262 of the
DGCL ("Dissenting Shares"), shall not be converted into or exchangeable for the
right to receive the Common Stock Price Per Share, but shall be entitled to
receive such 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 have effectively withdrawn or lost its right to appraisal and payment
under the DGCL, each share of Company Common Stock of such holder shall
thereupon be deemed to have been converted into and to have become exchangeable
for, as of the Effective Time, the right to receive the Common Stock Price Per
Share, without any interest thereon, in accordance with Section 2.5, and such
shares shall no longer be Dissenting Shares.
2.4 Merger Sub Stock. Each share of common stock and each share of
preferred stock of the Merger Sub issued and outstanding immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into one share of common stock and one
share of preferred stock, respectively, of the Surviving Corporation.
2.5 Exchange of Certificates.
2.5.1 On or before the Effective Time, the Parent shall deposit or cause
to be deposited in trust with a bank or trust company mutually acceptable to the
Parent and the Company (the "Exchange Agent") cash in the aggregate amount
required to make the payments in respect of (i) the Company Common Stock issued
and outstanding at the Effective Time (other than Dissenting Shares and Parent
Shares, if any), and (ii) the Company Options (as defined in Section 2.6)
(collectively, the "Merger Consideration"), such sum being hereinafter referred
to as the "Exchange Fund." The Exchange Agent shall, pursuant to irrevocable
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instructions, make the payments provided for in this Article 2 out of the
Exchange Fund. If any cash deposited with the Exchange Agent pursuant to this
Section 2.5 remains unclaimed by the former stockholders or former option
holders of the Company following the expiration of nine months after the
Effective Time, such cash (together with all interest earned thereon) shall be
delivered, upon demand, to the Parent by the Exchange Agent and, thereafter, any
former stockholders and any former option holders of the Company who have not
heretofore complied with this Article 2 shall be entitled to look only to the
Parent (subject to abandoned property, escheat or similar laws) as general
creditors thereof with respect to the payment of their claim for any Merger
Consideration; provided, however, that the term "former option holders" shall
not include any holder of a Company Option who has not consented to its
cancellation in accordance with Section 2.5.3.
2.5.2 As soon as reasonably practicable following the Closing Date, the
Parent shall instruct the Exchange Agent to mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (collectively, the
"Certificates") and to each holder of an agreement evidencing a Company Option
who has consented to its cancellation in accordance with Section 2.5.3 (each
such agreement as to which such consent has been obtained being hereinafter
called an "Option Agreement"), (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
and the Option Agreements shall pass, only upon delivery of the Certificates and
the Option Agreements to the Exchange Agent and shall be in such form and have
such other provisions as the Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates and the
Option Agreements for payment therefor.
2.5.3 After the Effective Time, each holder of shares of Company Common
Stock or Option Agreements shall surrender and deliver the Certificates or
Option Agreements, as the case may be, to the Exchange Agent together with a
duly completed and executed transmittal letter. Upon such surrender and
delivery, following the Effective Time, the holder shall be entitled to receive
in exchange therefor, a check in the amount of the cash payment which such
holder is entitled to receive pursuant to this Article 2, and such Certificates
and Option Agreements shall forthwith be canceled. No interest will be paid or
accrued on the cash payable upon the surrender of the Certificates or Option
Agreements. If the payment is to be made to a person other than the person in
whose name a Certificate surrendered is registered, it shall be a condition of
payment that (a) the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and (b) the person requesting such payment
shall pay any transfer or other taxes required by reason of the payment to a
person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Parent that such tax has been paid or is
not applicable. Until so surrendered, each outstanding Certificate or Option
Agreement after the Effective Time shall be deemed for all purposes to evidence
the right to receive such payment of cash, without any interest thereon.
2.5.4 Subject to applicable law with respect to any Company Option whose
holder has not consented to its cancellation in accordance with Section 2.5.3,
at the Effective Time, the stock transfer books of the Company shall be closed
and no transfer of shares of Company Common Stock shall be made thereafter. In
the event that, after the Effective Time, Certificates or Option Agreements are
presented to the Surviving Corporation or the Parent, they shall be canceled and
exchanged for cash as provided in this Article 2.
2.6 Options.
2.6.1 All outstanding options obligating the Company to issue, transfer or
sell any shares of Company Common Stock and issued pursuant to the Company's
1992 Stock Option Plan, as amended (the "1992 Plan"), or the Company's 1993
Non-Employee Directors Stock Option Plan, as amended (the "1993 Plan" and,
together with the 1992 Plan, the "Company Option Plans") (such options issued
under both Company Option Plans, the "Company Options"), are vested or, by
action of the Stock Option Plan Committee of the Board of Directors of the
Company prior to the date hereof, will become fully vested at the Effective
Time. Each holder of a Company Option shall be entitled to receive as soon as
practicable after the Effective Time, in settlement and cancellation of such
Company Option, a check in the amount of the product of (i) the excess of the
Common Stock Price Per Share over the exercise price (per share of Company
Common Stock) of each such Company Option, multiplied by (ii) the number of
shares of Company Common Stock covered by such Company Option.
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2.6.2 Prior to the Effective Time, the Company, the Merger Sub and the
Parent shall cooperate and take such other action as may be necessary to
facilitate the cancellation of all outstanding Company Options in consideration
for the payment provided herein and to facilitate the arrangements described in
this Section 2.6.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to the Parent and the Merger Sub and,
if applicable, upon the Accession (as defined in Section 5.11), to Holding, as
follows:
3.1 Organization. The Company and each of its subsidiaries (collectively,
the "Subsidiaries") is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization and has
all requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted. The Company 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 for such failures to be so duly qualified or licensed and in
good standing that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect (as defined in Section 8.1) on
the Company. The Company has previously delivered or made available to the
Parent correct and complete copies of the certificates of incorporation and
by-laws (or equivalent governing instruments) as currently in effect, of the
Company and each of its Subsidiaries.
3.2 Capitalization. As of the date hereof, the authorized capital stock
of the Company is as disclosed in the Company SEC Filings (as defined in Section
3.7.A). Except as disclosed in the Company SEC Filings or as set forth on
Schedule 3.2, no shares of capital stock of the Company are authorized, reserved
for issuance or issued and outstanding and there are no outstanding Company
Options. All issued and outstanding shares of Company Common Stock have been
duly authorized and are validly issued, fully paid, nonassessable and free of
preemptive rights. Except as disclosed in the Company SEC Filings or as set
forth in Schedule 3.2, the Company does not have outstanding any subscription,
option, put, call, warrant or other right or commitment to issue or any
obligation or commitment to redeem or purchase, any of its authorized capital
stock or any securities convertible into or exchangeable for any of its
authorized capital stock. Except as disclosed in the Company SEC Filings, there
are no shareholder agreements, voting agreements, voting trusts or other similar
arrangements to which the Company is a party which have the effect of
restricting or limiting the transfer, voting or other rights associated with the
capital stock of the Company.
3.3 Subsidiaries. Except as disclosed in the Company SEC Filings, as set
forth on Schedule 3.3 and its interest in its Subsidiaries, the Company does not
own, directly or indirectly, any material equity interest in any person,
domestic or foreign. All of the outstanding shares of capital stock of each of
the Subsidiaries that are owned by the Company or any other Subsidiary
(collectively, the "Company Subsidiary Shares") have been duly authorized and
are validly issued, fully paid and nonassessable and free of preemptive rights.
There are no irrevocable proxies or similar obligations with respect to any of
the Company Subsidiary Shares and, except as set forth on Schedule 3.3, all of
the Company Subsidiary Shares are owned by the Company free and clear of all
liens, claims, charges, encumbrances or security interests (collectively,
"Liens") with respect thereto. Schedule 3.3 sets forth, with respect to each
Subsidiary (other than Life Re Capital Trust I and Life Re Capital Trust II) as
of the date hereof, (i) the number of authorized shares of each class of its
capital stock and (ii) the number of issued and outstanding shares of each class
of capital stock, with a true, correct and complete list of the record and
beneficial holders of such shares (subject to such changes from the date hereof
through the Closing Date as are otherwise permitted by this Agreement). Except
as set forth on Schedule 3.3, no Subsidiary as of the date hereof has
outstanding any subscription, option, put, call, warrant or other right or
commitment to issue, nor any obligation or commitment to redeem or purchase, any
of its authorized capital stock, or any securities convertible into or
exchangeable for any of its authorized capital stock.
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3.4 Authorization; Binding Agreement. The Company has the full legal
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of the Company,
subject to the adoption of this Agreement by the stockholders of the Company in
accordance with the DGCL. This Agreement has been duly and validly executed and
delivered by the Company and (assuming the accuracy of the representations and
warranties in Section 4.2) constitutes a legal, valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms.
3.5 Noncontravention. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (a)
conflict with or result in any breach of any provision of the certificate of
incorporation or by-laws (or equivalent governing instruments) of the Company or
any of its Subsidiaries, (b) except as set forth on Schedule 3.5, require any
consent or approval under or conflict with or result in a violation or breach
of, or constitute (with or without notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration) under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation (collectively,
"Contracts and Other Agreements") to which the Company or any of its
Subsidiaries is a party or by which any of them or any portion of their
properties or assets may be bound or (c) violate any order, judgment, writ,
injunction, determination, award, decree, law, statute, rule or regulation
(collectively, "Legal Requirements") applicable to the Company or any of its
Subsidiaries or any portion of their properties or assets; provided that no
representation or warranty is made in the foregoing clause (b) with respect to
matters that, individually or in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect on the Company.
3.6 Approvals. No consent, approval or authorization of or declaration or
filing with any foreign, federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality (each, a
"Government Entity") on the part of the Company or any of its Subsidiaries that
has not been obtained or made is required in connection with the execution or
delivery by the Company of this Agreement or the consummation by the Company of
the transactions contemplated hereby, other than (a) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware, (b)
filings and other applicable requirements under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") and the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), (c) approvals, filings and/or
notices required under any applicable insurance or banking laws, and (d)
consents, approvals, authorizations, declarations or filings that, if not
obtained or made, could not reasonably be expected to result in a Material
Adverse Effect on the Company or prevent the Company from consummating the
transactions contemplated hereby.
3.7.A SEC Filings; Financial Statements. The Company has made all filings
required to be made with the Securities and Exchange Commission (the "SEC")
since January 1, 1996 and has delivered or made available to the Parent true,
correct and complete copies of the Company's (a) Annual Reports on Form 10-K for
the years ended December 31, 1996 and December 31, 1997 (the "Company 1996 Form
10-K" and the "Company 1997 Form 10-K," respectively), as filed with the SEC,
(b) proxy statements relating to all of the Company's meetings of stockholders
(whether annual or special) since December 31, 1996 and (c) all other reports,
statements and registration statements (including Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K) filed by the Company with the SEC since
December 31, 1996 (collectively, and in each case including all exhibits and
schedules thereto and documents incorporated by reference therein, the "Company
SEC Filings"). As of their respective dates, the Company SEC Filings did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company and its Subsidiaries included or
incorporated by reference in the Company 1996 Form 10-K, the Company 1997 Form
10-K and the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998 (the "Company 1998 First Quarter Form 10-Q") have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes to
such financial statements) and fairly present in all
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material respects the consolidated financial position of the Company and its
Subsidiaries at the respective dates thereof and the consolidated results of
operations and cash flows for the respective periods then ended (subject, in the
case of unaudited interim financial statements, to normal year-end adjustments).
3.7.B Insurance Subsidiary Statements. The Company has delivered or made
available or, with respect to (c) below, will make available, to the Parent
true, correct and complete copies of (a) the statutory financial statements
filed in its state of domicile and, to the extent applicable, the State of New
York, for each of TexasRe Life Insurance Company, Life Reassurance Corporation
of America, Reassure America Life Insurance Company and American Merchants Life
Insurance Company for the years 1995 (or, if later, the year in which such
Subsidiary became a Subsidiary) through 1997 and (b) the statutory financial
statements filed in its state of domicile and, to the extent applicable, the
State of New York, for each such Subsidiary referred to in (a) above as well as
for Mission Life Insurance Company for the quarter ending March 31, 1998, and
(c) the statutory financial statements filed in its state of domicile and, to
the extent applicable, the State of New York, for all quarters ending thereafter
and prior to the Effective Time for all of the Subsidiaries referred to in (a)
above, Mission Life Insurance Company and any Subsidiaries acquired or formed
after the date hereof (to the extent such acquired or newly formed Subsidiaries
file statutory financial statement after the date of the acquisition or
formation of such Subsidiary except, in the case of an acquired Subsidiary,
where the statutory financial statements are prepared by the seller and such
seller indemnifies the Company in respect of the contents thereof). All such
statements shall be referred to as the "Insurance Subsidiary Statements." The
Insurance Subsidiary Statements do (and, with respect to any Insurance
Subsidiary Statement for any quarter after March 31, 1998, and prior to the
Effective Time, will) present fairly, on a consistent basis and in accordance
with practices prescribed or permitted by the appropriate regulatory agencies of
each state in which the Insurance Subsidiary Statements have been filed or may
be required to be filed ("SAP"), the financial position at the date of each such
statement and results of each such Subsidiary's operations for each such
referenced periods. The exhibits and schedules included in the Insurance
Subsidiary Statements are fairly stated in all material respects in relation to
the subject Insurance Subsidiary Statements taken as a whole, and the Insurance
Subsidiary Statements comply in all material respects with all applicable
regulatory requirements.
3.7.C No Undisclosed Liabilities. Neither the Company nor any Subsidiary
has any liabilities or obligations (absolute, accrued, contingent or otherwise)
which are not reflected in its financial statements referenced in Sections
3.7.A. or 3.7.B., except for (i) liabilities and obligations incurred in the
ordinary course of business since March 31, 1998, none of which, individually or
in the aggregate, has had or would reasonably be expected to have a Material
Adverse Effect on the Company (or, to the knowledge of the Company as of the
date hereof, has resulted in or would reasonably be expected to result in a
material loss to the Company and its Subsidiaries, taken as a whole), (ii)
liabilities or obligations arising as a result of the transactions contemplated
hereby, or (iii) liabilities or obligations disclosed in Schedule 3.7.C.
3.8 Absence of Certain Changes or Events. Since December 31, 1997 (or, in
the case of a Subsidiary acquired after such date, since the acquisition date
thereof), except as disclosed on Schedule 3.8 or in the Company SEC Filings
filed to the date hereof, the Company and the Subsidiaries have conducted
business only in the ordinary and usual course and, without limiting the
generality of the foregoing:
(a) There have been no changes, events or conditions which,
individually or in the aggregate, have had or would reasonably be expected
to have a Material Adverse Effect on the Company.
(b) As of the date hereof, no rating presently held by the Company or
any of its Subsidiaries has been, and the Company has no knowledge of any
reason to believe that any such rating will be, modified, qualified,
lowered or placed under surveillance for a possible downgrade (except in
connection with the transactions contemplated hereby).
(c) Neither the Company nor any Subsidiary has purchased, redeemed or
otherwise acquired or committed itself to acquire, directly or indirectly,
any of the capital stock of the Company or any Subsidiary; provided,
however, that the foregoing shall not prohibit mergers between the
Subsidiaries or the performance by the Company of its obligations under
that certain Put Agreement, dated September 30, 1997, between the Company
and J. Dix Druce.
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(d) Neither the Company nor any Subsidiary has sold, assigned,
transferred or conveyed any Proprietary Right (as defined in Section 3.21),
except that the foregoing shall not prohibit mergers between the
Subsidiaries.
(e) Neither the Company nor any Subsidiary has effected any amendment
or supplement to, or extension of, any Plan (as defined in Section
3.12(b)), excluding administrative or similar amendments that do not
increase the liability of the Company or any of its Subsidiaries under any
such Plan (other than immaterial adjustments).
(f) Neither the Company nor any Subsidiary has paid to or for the
benefit of any of its directors, officers or employees any compensation of
any kind other than wages, salaries, bonuses and benefits at times and
rates in effect prior to December 31, 1997, other than scheduled increases
and increases in the ordinary course of business consistent with past
practice.
(g) Neither the Company nor any Subsidiary has effected any amendment
or modification to its certificate of incorporation or by-laws (or
equivalent governing documents), except that the foregoing shall not
prohibit mergers between the Subsidiaries.
(h) Neither the Company nor any Subsidiary has made any material
change, and the Company has no knowledge of any change, in accounting
methods or principles used for financial or regulatory reporting purposes,
except for changes which are required of all life insurers or life
reinsurance companies.
3.9 Litigation, Judgments, No Default, Etc. Except as described in
Schedule 3.9, (a) there is no action or proceeding, pending or, to the best
knowledge of the Company, threatened before any federal or state court or agency
to which the Company or any Subsidiary is a party, the outcome of which
individually or in the aggregate would have a Material Adverse Effect on the
Company (or, to the knowledge of the Company as of the date hereof, has resulted
or would reasonably be expected to result in a material loss to the Company and
its Subsidiaries, taken as a whole), (b) there is no judgment, decree,
injunction, rule or order (collectively "Orders") of any court, arbitrator or
Government Entity outstanding against the Company or any Subsidiary, or (c) to
the best knowledge of the Company, there are no facts that would result in any
such claim, dispute, action, proceeding, suit, appeal, investigation or inquiry
which would have such a Material Adverse Effect on the Company.
3.10 Compliance. Except as disclosed in the Company SEC Filings or as set
forth on Schedule 3.10, neither the Company nor any of its Subsidiaries is in
default or violation of any term, condition or provision of (a) its certificate
of incorporation or by-laws (or equivalent governing instruments), or (b) any
Contracts and Other Agreements to which the Company or any of its Subsidiaries
is a party or by which any of them or any portion of their properties or assets
may be bound; provided that no representation or warranty is made in the
foregoing clause (b) with respect to matters that, individually or in the
aggregate, have not had and would not reasonably be expected to result in a
Material Adverse Effect on the Company.
3.11 Tax Returns and Tax Payments. The Company and its Subsidiaries have
timely filed (or, as to Subsidiaries, the Company has filed on behalf of such
Subsidiaries) all Tax Returns (as defined below) required to be filed by it,
except to the extent that any failure to have filed would not, individually or
in the aggregate, have a Material Adverse Effect on the Company. The Company and
its Subsidiaries have paid (or, as to Subsidiaries, the Company has paid on
behalf of such Subsidiaries) all Taxes (as defined below) shown to be due on
such Tax Returns or has provided (or, as to Subsidiaries, the Company has made
provision on behalf of such Subsidiaries) reserves in its financial statements
for any Taxes that have not been paid, whether or not shown as being due on any
Tax Returns, in each case, except to the extent that any failure so to pay or
reserve would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. No claim for unpaid Taxes has been asserted against the
Company or any of its Subsidiaries in writing by a Tax authority which, if
resolved in a manner unfavorable to the Company or any of its Subsidiaries, as
the case may be, would result, individually or in the aggregate, (x) in the case
of U.S. federal income taxes, in a material Tax liability to the Company and its
Subsidiaries, taken as a whole, and (y) in all other cases a Tax liability
having a Material Adverse Effect on the Company. There are no material Liens for
Taxes upon the
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assets of the Company or any Subsidiary except for Liens for Taxes not yet due
and payable or for Taxes that are being disputed in good faith by appropriate
proceedings and with respect to which adequate reserves have been taken. No
audit of any Tax Return of the Company or any of its Subsidiaries is being
conducted by a Tax authority, which, if resolved in a manner unfavorable to the
Company or any of its Subsidiaries, as the case may be, would result,
individually or in the aggregate, in a Tax liability having a Material Adverse
Effect on the Company. No extension of the statute of limitations on the
assessment of any Federal income Taxes has been granted by the Company or any of
its Subsidiaries that is currently in effect. As used herein, "Taxes" shall mean
all taxes of any kind, including, without limitation, those on or measured by or
referred to as income, gross receipts, sales, use, ad valorem, franchise,
profits, license, 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.
3.12 Employee Benefit Plans.
(a) Except for the plans, programs or arrangements, contractual or
otherwise, previously made available to Parent (and except for plans, programs
and arrangements of Mission Life Insurance Company, acquired in early 1998,
which will all be terminated or assumed by a successor entity other than the
Company or any Subsidiary thereof as of August 1, 1998 when the employment of
all employees of Mission Life Insurance Company is terminated), (i) neither the
Company nor any Subsidiary, with respect to employees, directors or officers of
the Company or any Subsidiary, maintains, sponsors or contributes to any plan,
program or arrangement providing for (A) payment of deferred compensation or
retirement benefits, (B) the accrual or payment of bonuses or special or
incentive compensation of any kind, (C) any severance or termination payments,
(D) loans, loan guarantees or other extensions of credit to directors, officers
or employees, (E) life, health, disability or other welfare benefits, or (F)
moving or other relocation expense benefits or reimbursements; and (ii) neither
the Company nor any Subsidiary, with respect to employees, directors or officers
of the Company or any Subsidiary, maintains, sponsors or contributes to any
other stock bonus, stock option, stock incentive, employee stock ownership,
stock purchase or similar plans or practices, whether formal or informal. As
soon as practicable following the date hereof, the Company shall provide Parent
with a complete list of all Plans (as defined in Section 3.12(b) below), which
shall include any Plan that could give rise to the payment of any money or other
property or accelerate or provide for any other rights or benefits to any
employee or former employee of the Company or its Subsidiaries as a result of
the transactions contemplated by this Agreement.
(b) With respect to any plan, program or arrangement of the nature
described in Section 3.12(a) above (hereinafter, the "Plans"), except as
disclosed on Schedule 3.12(b):
(i) the financial statements, if any, relating to the Plans for the
most recent plan year available have been furnished or were made available
to the Parent, have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved
and are in accordance with the books and records of such Plans, which books
and records are correct and complete in all material respects;
(ii) all such Plans comply in all material respects with the
applicable requirements of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), the Internal Revenue Code of 1986, as amended
(the "Code") and the applicable requirements for tax-exempt status under
the Code and each Plan has been operated substantially in accordance with
its terms and no penalties or excise taxes have been incurred under ERISA
or the Code which would reasonably be expected to result in a material
liability to the Company and its Subsidiaries, taken as a whole;
(iii) no material adverse change in the assets or liabilities of any
such Plan has occurred after the date of the most recent financial
statement available relating thereto (other than any change resulting from
the normal and anticipated accrual of benefits, payment of benefits or
receipt of contributions);
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(iv) all required contributions to the Plans have been timely made or,
if not timely made, any such failure would not reasonably be expected to
result in a material liability to the Company and its Subsidiaries, taken
as a whole;
(v) all applicable reporting and disclosure obligations to any
governmental agency or entity and to any Plan participant or beneficiary
have been materially satisfied or, if not satisfied, any such failure would
not reasonably be expected to result in a material liability to the Company
and its Subsidiaries, taken as a whole;
(vi) there have been no transactions between any such Plan and any
"party in interest" or "disqualified person," within the meaning of ERISA
or the Code, which might subject the Company or any Subsidiary to a tax or
penalty on prohibited transactions or to a civil penalty under Section
502(i) of ERISA or, if any such transactions have occurred, they would not
reasonably be expected to result in a material liability to the Company and
its Subsidiaries, taken as a whole;
(vii) all such Plans that are funded Plans have sufficient assets to
pay all accrued benefits, expenses and liabilities;
(viii) the Internal Revenue Service ("IRS") has not informed the
Company in writing and, to the best knowledge of the Company, no
investigation or review by the IRS is pending or is contemplated in which
the IRS may assert, that any Plan is not qualified under the Code or that
any related trust, including any trust for a welfare Plan, is not exempt
from tax under Section 501 of the Code. No assessment of any federal income
taxes has been made or, to the best knowledge of the Company, is
contemplated against any of the Company or any Subsidiary or any related
trust of any such Plan on the basis of failure of such qualification or
exemption nor, to the best knowledge of the Company, is there any basis for
any such investigation, review, assertion or assessment;
(ix) no event has occurred or, to the best knowledge of the Company,
is threatened or about to occur with respect to any Plan for which is
required to be filed a notice of a reportable event, within the meaning of
Section 4043(b) of ERISA and the Pension Benefit Guaranty Corporation (the
"PBGC ") regulations issued thereunder. No notice of termination has been
filed by the Plan administrator pursuant to Section 4041 of ERISA or issued
by the PBGC pursuant to Section 4042 of ERISA with respect to any such Plan
nor is there any basis for the issuance of any such notice of termination
by the PBGC; and
(x) after the Effective Time, neither the Company nor any Subsidiary
will have any liability with respect to any obligation to contribute to, or
any duty to provide any benefits under, any such Plan except those
liabilities accrued and duties assumed prior to or at the Effective Time
and those liabilities accrued and duties assumed at or after the Effective
Time by the Company (as the Surviving Corporation) and its Subsidiaries.
(c) Neither the Company nor any Subsidiary is or has ever been a
contributing employer to any multi-employer pension plan (within the meaning of
Section 3(37) of ERISA); neither the Company nor any Subsidiary is under any
obligation to make contributions to any multi-employer pension plan; and neither
the Company nor any Subsidiary has actual or potential liability under Section
4201 of ERISA for any complete or partial withdrawal from any multi-employer
pension plan.
(d) Neither the Company nor any Subsidiaries has any current or projected
liability in respect of post-employment or post-retirement health or medical or
life insurance benefits for retired, former or current employees of the Company,
except as required to avoid excise tax under Section 4980B of the Code and to
comply with Section 601 of ERISA.
(e) With respect to the Plans of Mission Life Insurance Company, (i) to the
best knowledge of the Company no such Plan (including, without limitation, any
termination thereof) would reasonably be expected to result in a material
liability to the Company and its Subsidiaries, taken as a whole, and (ii) as
soon as practicable following the date hereof, the Company shall provide Parent
with a list of all Plans of Mission Life Insurance Company and shall make
available all material documents relating to such Plans.
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3.13 Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the proxy
statement (the "Proxy Statement") to be filed with the SEC by the Company in
connection with the meeting of the Company's stockholders (the "Company
Stockholders' Meeting") to be held in connection with the Merger will, at the
time the Proxy Statement is mailed to the Company's stockholders or at the time
of the Company Stockholders' Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. The Proxy Statement
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder, except that
no representation is made by the Company with respect to statements made therein
based on information supplied in writing by the Parent, Holding or the Merger
Sub for inclusion therein.
3.14 Finders and Investment Bankers. Neither the Company nor any of its
officers or directors has employed any investment banker, financial advisor,
broker or finder in connection with the transactions contemplated by this
Agreement, except for Goldman, Sachs & Co. ("Goldman Sachs"), or incurred any
liability for any investment banking, business consultancy, financial advisory,
brokerage or finders' fees or commissions in connection with the transactions
contemplated hereby, except for fees payable to Goldman Sachs (including any
fees for the opinion provided pursuant to Section 3.15), all of which fees have
been or will be paid by the Company in accordance with the agreement between the
Company and Goldman Sachs, a copy of which has been made available to the
Parent.
3.15 Opinion of Financial Advisor. The Company has received an opinion of
Goldman Sachs to the effect that, as of the date of this Agreement, the
consideration to be received by the stockholders of the Company is fair from a
financial point of view.
3.16 Reserves. All statutory reserves with respect to insurance and
annuities as established or reflected in the respective December 31, 1996 and
1997 Insurance Subsidiary Statements were determined in accordance with SAP
(applied on a consistent basis during the periods involved) and generally
accepted actuarial assumptions, and meet in all material respects the
requirements of the insurance laws of each state in which such Subsidiaries are
domiciled (and, if applicable, the State of New York). All such reserves (when
considered together with premiums to be received on such insurance and annuities
and investment income to be earned on assets held in respect of such reserves
and future premiums) were adequate, as of December 31, 1997, to cover the total
amount of all reasonably anticipated matured and unmatured benefits, dividends,
claims, and other liabilities (as of December 31, 1997) of the respective
Subsidiaries of the Company chartered as insurance companies under state law
under all insurance and annuity contracts under which such Subsidiaries had any
liability on December 31, 1997 (including any liability arising under or as a
result of any reinsurance, coinsurance, or other similar contract). The reserves
of the Subsidiaries of the Company chartered as insurance companies under state
law established in respect of policies assumed since December 31, 1997 (when
considered together with premiums to be received in respect of such policies and
investment income to be earned on assets held in respect of such reserves and
premiums) were adequate, as of the date of such establishment, to cover the
total amount of all reasonably anticipated matured and unmatured benefits,
dividends, claims and other liabilities (as of such date) under the policies so
assumed by each such Subsidiary. Each Subsidiary of the Company chartered as an
insurance company under state law owns assets that qualify as legal reserve
assets under applicable insurance laws of the states of domicile of such
Subsidiaries, in an amount, determined in accordance with SAP, at least equal to
all such statutory reserves of such Subsidiary. Notwithstanding the foregoing,
no representation or warranty is made by the Company in this Section 3.16 to the
effect that benefits, dividends, and claims actually paid, and other liabilities
actually incurred, by any Subsidiary of the Company chartered as an insurance
company under state law under all insurance and annuity contracts under which
such Subsidiary has any liability (including any liability arising under or as a
result of any reinsurance, coinsurance or other similar contract) will not
exceed the statutory reserves established therefor by the Subsidiary unless such
benefits, dividends, claims, or liabilities were reasonably anticipated as of
December 31, 1997.
3.17 Collective Bargaining Agreements. Neither the Company nor any
Subsidiary is a party to or subject to any collective bargaining agreement with
any labor union. There are no labor controversies pending
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or, to the best knowledge of the Company, threatened against the Company or any
Subsidiary which would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
3.18 No Default. Each of the Company and the Subsidiaries has in all
respects performed, or is now performing, the obligations of, and is not in
default (and would not by the lapse of time and/or the giving of notice be in
default), nor has it received notice of default, in respect of, any Contract and
Other Agreements, binding upon it or its assets or properties, except where such
nonperformance or default would not reasonably be expected to result in a
Material Adverse Effect on the Company.
3.19 Insurance. Each of the Company and the Subsidiaries carries
insurance with insurers that, to the knowledge of the Company, are solvent, in
amount and types of coverage which are customary in the industry and against
risks and losses which are usually insured against by persons holding or
operating similar properties and similar businesses. No material claims have
been asserted under any of such insurance policies or relating to the
properties, assets or operations of the Company or any Subsidiary since December
31, 1997.
3.20 Related Parties. Except as set forth in the Company SEC Filings or
otherwise disclosed in writing to the Parent prior to the date hereof, (a) no
officer or director of the Company or any Subsidiary, or any affiliate of any
such person, has, either directly or indirectly, a beneficial interest, or
alleges a claim of beneficial interest, in any contract or agreement to which
the Company or any Subsidiary may be bound (excluding any reinsurance policies
under which any officer or director may be a policyholder or beneficiary) or (b)
no officer or director of the Company or any Subsidiary has, either directly or
indirectly, an interest in any corporation, partnership, firm or other person or
entity which furnishes or sells services or products which are similar to those
furnished or sold by the Company or any Subsidiary other than shares of publicly
held companies not in excess of 1% of such companies' outstanding shares.
3.21 Proprietary Rights. Schedule 3.21 is a true, correct and complete
list of material patents, patent applications, trademarks, trademark
registrations, applications for trademark registrations, trade secrets, service
marks, service mark registrations, applications for service mark registrations,
trade names, copyright registrations or applications for copyright registrations
or copyrights (collectively referred to as "Proprietary Rights") owned by the
Company or the Subsidiaries in their respective businesses. The Company and the
Subsidiaries own or possess adequate licenses or other rights to use the
Proprietary Rights and all other intellectual property rights material to the
Company and its Subsidiaries, and the same are sufficient to conduct the
business of the Company and the Subsidiaries as they are now being conducted.
The operations of the Company and the Subsidiaries do not infringe and, to the
best knowledge of the Company, no one has asserted to the Company nor any
Subsidiary that such operations infringe, any Proprietary Rights owned,
possessed or used by any third party. To the best knowledge of the Company,
there are no third parties whose operations infringe nor has anyone asserted
that such operations conflict with or infringe, any Proprietary Rights owned,
possessed or used by the Company or any Subsidiary.
3.22 Compliance with Law. The businesses of the Company and each
Subsidiary have been conducted in all material respects in accordance with all
Legal Requirements applicable to the Company or any of its Subsidiaries
(excluding ERISA, which is covered by Section 3.12, and Environmental Laws,
which are covered by Section 3.25) and accepted insurance industry practices
applicable to the Company or any of its Subsidiaries, including all insurance
company holding laws, all laws, regulations and orders relating to the ownership
and operation of insurance companies (including their reserving, marketing,
investment, financial, claims, underwriting, premium collection and refunding
and other practices), insurance, antitrust or trade regulation, employment and
discrimination practices and procedures, and the health and safety of employees,
consumer credit and other consumer protection laws; provided that no
representation or warranty is made in this sentence with respect to conduct not
in accordance with any of the foregoing (i) of which the Company does not have
knowledge and (ii) that could not reasonably be expected to result in the
imposition of material liability on, or to interfere materially with the
business of, the Company and its Subsidiaries, taken as a whole. Neither the
Company nor any Subsidiary has received any written notice of alleged violations
of the foregoing, other than written notices received prior to January 1, 1997
which have been cured or otherwise remedied or responded to, and there are no
pending or, to the best knowledge of the Company, threatened hearings or
investigations with respect to any of the foregoing.
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3.23 Real Property. Except as disclosed in the Company SEC Filings, each
of the Company and its Subsidiaries has good, clear and marketable title to all
of the real property reflected in the December 31, 1997 Balance Sheet as being
owned by the Company or one of its Subsidiaries or acquired after the date
thereof (except real property sold or otherwise disposed of since the date
thereof in the ordinary course of business), free and clear of all Liens except
(i) statutory liens securing payments not yet due and (ii) such imperfections or
irregularities of title or other Liens (other than real property mortgages or
deeds of trust) as do not materially affect the use of the real property subject
thereto or affected thereby or otherwise materially impair business operations
at such properties.
3.24 Licenses and Permits. Each of the Company and the Subsidiaries has
obtained, and is in compliance in all material respects with, all necessary
licenses, permits, consents, approvals, orders, certificates, authorizations,
declarations and filings required by all Government Entities (including, without
limitation, any federal, state and local laws and regulations and authorities or
agencies regulating insurance companies and their operations) and all courts and
other tribunals for the conduct of the businesses and operations of the Company
and such Subsidiary as now conducted (collectively, the "Required Licenses"),
and there are no proceedings pending or, to the best knowledge of the Company,
threatened which may result in the revocation, cancellation or suspension, or
any adverse modification, of any such Required License; provided that no
representation or warranty is made in this Section 3.24 with respect to
revocations, cancellations, suspensions or modifications of Required Licenses
(i) of which the Company does not have knowledge and (ii) that could not
reasonably be expected to result in the imposition of material liability on, or
interfere materially with the business of, the Company and its Subsidiaries,
taken as a whole.
3.25 Environmental Matters. Except as set forth on Schedule 3.25, there
are no legal, administrative, arbitral or other proceedings, claims, actions,
causes of action, investigations or remediation activities seeking to impose, or
that reasonably could be expected to result in the imposition, on the Company or
any of its Subsidiaries of any liability or obligations arising under common law
standards relating to environmental protection, human health or safety, or under
any local, state or federal environmental statute, regulation or ordinance
relating to pollution or protection of the environment, including the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended (collectively, "Environmental Laws"), pending or, to the best knowledge
of the Company threatened, against the Company or any of its Subsidiaries, which
liability or obligation would have or would reasonably be expected to have a
Material Adverse Effect on the Company. Except as set forth on Schedule 3.25, to
the best knowledge of the Company, there is no reasonable basis for any such
proceeding, claim, action or governmental investigation that would impose any
liability or obligation pursuant to Environmental Laws that would have or would
reasonably be expected to have a Material Adverse Effect on the Company. Except
as set forth on Schedule 3.25, to the knowledge of the Company, during or prior
to the period of (i) it or any of its Subsidiaries' ownership or operation of
any of their respective current properties or (ii) its or any of its
Subsidiaries' holding of a security interest or other interest in any property,
there has been no release of hazardous, toxic or radioactive materials regulated
under Environmental Laws and there is no threat of such release in, on, under or
affecting any such property, which release or threat or release would reasonably
be expected to have a Material Adverse Effect on the Company. Except as set
forth on Schedule 3.25, to the best knowledge of the Company, neither the
Company nor any of its Subsidiaries is subject to any agreement, order, judgment
or decree by or with any Government Entity or third party imposing any material
liability or obligations pursuant to or under any Environmental Law that would
have or would reasonably be expected to have a Material Adverse Effect on the
Company.
3.26 Letters of Credit. The Subsidiaries of the Company chartered as
insurance companies under state law are beneficiaries under letters of credit
which provide security for all reinsurance ceded by such Subsidiaries to
unauthorized reinsurers that is not secured by trust agreements and/or funds
deposited by and withheld from reinsurers (copies of which letters of credit
will be provided to the Parent as soon as reasonably practicable and in any
event prior to the Closing Date), subject to such exceptions as could not
reasonably be expected to result in a material loss to such Subsidiary. Such
letters of credit are clean, irrevocable letters of credit, containing an
evergreen clause and issued by a qualified United States financial institution,
termed to be funds held subject to withdrawal by and under control of the ceding
insurer (in each case as such terms are defined in the rules of the NAIC),
subject to such exceptions as could not reasonably be expected to result,
individually or in the aggregate, in a material loss to the Subsidiary that is
the beneficiary of such letters of credit.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
THE PARENT, HOLDING AND THE MERGER SUB
The Parent and the Merger Sub and, if applicable, upon the Accession,
Holding represent and warrant to the Company as follows, provided that any
representation and warranty relating to Holding shall be as of the date Holding
executes this Agreement:
4.1 Organization. Each of the Parent, Holding and the Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Each of the Parent and Holding 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 make such qualification or licensing necessary, except for such failures
to be so duly qualified or licensed and in good standing that, individually or
in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect on the Parent or Holding, as the case may be. The Merger Sub is a
newly formed, directly and indirectly wholly-owned subsidiary of the Parent and,
except for activities incident to the acquisition of the Company, the Merger Sub
has not engaged in any business activities of any type or kind whatsoever.
4.2 Authorization; Binding Agreement. Each of the Parent, Holding and the
Merger Sub has the full legal power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of each of the Parent, Holding and the Merger Sub.
This Agreement has been duly and validly executed and delivered by each of the
Parent, Holding and the Merger Sub and (assuming the accuracy of the
representations and warranties in Section 3.4) constitutes a legal, valid and
binding agreement of each of the Parent, Holding and the Merger Sub, enforceable
against each of them in accordance with its terms.
4.3 Noncontravention. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (a)
conflict with or result in any breach of any provision of the certificate of
incorporation or by-laws (or equivalent governing instruments) of the Parent,
Holding or the Merger Sub, (b) require any consent, approval or notice under or
conflict with or result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms, conditions
or provisions of any Contracts and Other Agreements to which the Parent, Holding
or the Merger Sub is a party or by which any of them or any material portion of
their properties or assets may be bound or (c) violate any Legal Requirements
applicable to the Parent, Holding or the Merger Sub or any material portion of
their properties or assets; provided that no representation or warranty is made
in the foregoing clause (b) with respect to matters that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect on the Parent.
4.4 Governmental Approvals. No consent, approval or authorization of, or
declaration or filing with, any Governmental Entity on the part of any of the
Parent, Holding or the Merger Sub that has not been obtained or made is required
in connection with the execution or delivery by the Parent, Holding or the
Merger Sub of this Agreement or the consummation by the Parent, Holding or the
Merger Sub of the transactions contemplated hereby, other than (a) the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware,
(b) filings under the HSR Act and the Exchange Act, (c) approvals, filings
and/or notices required under any applicable insurance laws, and (d) consents,
approvals, authorizations, declarations or filings that, if not obtained or
made, could not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect on the Parent or prevent the Parent, Holding
or the Merger Sub from consummating the transactions contemplated hereby.
4.5 Finders and Investment Bankers. None of the Parent, Holding or the
Merger Sub or any of their respective officers or directors has employed any
investment banker, financial advisor, broker or finder in
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connection with the transactions contemplated by this Agreement, except for
Morgan Stanley & Co. Incorporated ("Morgan Stanley"), or incurred any liability
for any investment banking, business consultancy, financial advisory, brokerage
or finders' fees or commissions in connection with the transactions contemplated
hereby, except for fees payable to Morgan Stanley, all of which fees have been
or will be paid by the Parent or Holding.
4.6 Information Supplied. None of the information supplied or to be
supplied by the Parent, Holding or the Merger Sub in writing for inclusion or
incorporation by reference in the Proxy Statement to be filed with the SEC by
the Company in connection with the Company Stockholders' Meeting to be held in
connection with the Merger will, at the time the Proxy Statement is mailed to
the Company's stockholders or at the time of the Company Stockholders' Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
ARTICLE 5
COVENANTS
5.1 Conduct of Business of the Company. Except as contemplated by this
Agreement, during the period commencing on the date hereof and ending at the
Effective Time, the Company shall, and shall cause each of its Subsidiaries to,
conduct its operations according to its ordinary course of business consistent
with past practice, and the Company shall, and shall cause each of its
Subsidiaries to, use all reasonable efforts to preserve intact its business
organization and to maintain satisfactory relationships with its customers,
suppliers and employees and others with which it has business relationships.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement, prior to the Effective Time, neither the
Company nor any or its Subsidiaries will, without the prior written consent of
the Parent:
(a) amend or propose to amend its certificate of incorporation or
by-laws (or equivalent governing instruments) (other than in connection
with mergers between Subsidiaries of the Company);
(b) authorize for issuance, issue, sell, pledge, deliver or agree or
commit to issue, sell, pledge or deliver (whether through the issuance or
granting of any options, warrants, calls, subscriptions, stock appreciation
rights or other rights or other agreements) any capital stock of any class
or any securities convertible into or exchangeable for shares of capital
stock of any class of the Company, other than shares of Company Common
Stock issuable upon exercise of Company Options outstanding on the date of
this Agreement in accordance with the present terms thereof;
(c) split, combine or reclassify any shares of Company Common Stock or
declare, pay or set aside for payment any dividend (other than regularly
scheduled dividends on the Company Common Stock at their current levels) or
other distribution in respect of any Company Common Stock, or redeem,
purchase or otherwise acquire any shares of Company Common Stock;
(d) increase or establish any Plan or otherwise increase in any manner
the compensation payable or to become payable by the Company or any of its
Subsidiaries to any of their respective directors, officers or employees,
other than in the ordinary course of business consistent with past practice
or as required under any existing employment agreement or other Plan, or
enter into any employment or severance agreement with or grant any
severance or termination pay to any director, officer or employee of the
Company or any of its Subsidiaries, other than in accordance with existing
Plans;
(e) enter into any other agreements, commitments or contracts that are
material to the Company and its Subsidiaries taken as a whole, other than
in the ordinary course of business consistent with past practice;
(f) except as contemplated by this Agreement, without the prior
written consent of the Parent, otherwise take or cause to be taken any
action described in clauses (c) through (h) of Section 3.8 between the date
of this Agreement and the Effective Time;
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(g) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the stock or assets of, or by any
other means, any business or any corporation, partnership, joint venture,
association, or other business organization or division thereof, except
that the foregoing shall not prohibit the acquisition of blocks of life
insurance in force (whether by reinsurance or stock acquisition) in the
ordinary course of business in amounts (calculated with respect to
reinsurance, as the ceding commission paid, and calculated with respect to
stock acquisitions, as the excess of the purchase price over the adjusted
capital and surplus acquired) not to exceed (unless the Parent otherwise
consents, which consent will not be unreasonably withheld) $50 million in
any single transaction or $200 million in the aggregate;
(h) incur or assume any indebtedness for borrowed money except (i)
borrowings in the ordinary course of business under that certain Amended
and Restated Credit Agreement dated as of November 2, 1995 among the
Company and the financial institutions party thereto, as amended to date or
(ii) reverse repurchase contracts in the ordinary course of business
consistent with past practice; or
(i) agree, commit or arrange to do any of the foregoing.
5.2 Stockholder Approval; Proxy Statement. The Company shall take all
action necessary in connection with applicable law to convene the Company
Stockholders' Meeting as promptly as practicable after the date hereof to
consider and vote upon this Agreement and the transactions contemplated hereby,
subject to the rights of its Board of Directors (the "Company Board") under
Section 5.5(b). The Company shall, through the Company Board, recommend that its
stockholders vote in favor of the adoption of this Agreement and the
transactions contemplated hereby, subject to the Company Board's rights under
Section 5.5(b).
5.3 Access and Information. Between the date of this Agreement and the
Effective Time, the Company shall, and shall cause its Subsidiaries to, afford
the Parent and its authorized representatives (including its accountants,
financial advisors and legal counsel) reasonable access during normal business
hours to all of the properties, personnel, Contracts and Other Agreements, any
documents relating to Tax Returns of the Company and its Subsidiaries and other
books and records of the Company and its Subsidiaries and shall promptly deliver
or make available to the Parent (a) a copy of each report, schedule and other
document filed by the Company pursuant to the requirements of federal securities
laws and (b) all other information concerning the business, properties, assets
and personnel of the Company and its Subsidiaries as the Parent may from time to
time reasonably request, including access to outside counsel of the Company or
any Subsidiary in connection with the review of any claim, dispute, action,
proceeding, suit, appeal, investigation or inquiry pending or threatened against
the Company or any Subsidiary. In addition, the Company shall utilize reasonable
efforts to provide advance notice to the Parent of any transaction permitted by
the exception contained in Section 5.1(g) to the extent the consideration to be
paid equals or exceeds $25 million. The Parent shall hold, and shall cause its
Representatives (as defined in the letter agreement dated July 6, 1998 (the
"Company Confidentiality Agreement") between the Company and the Parent) to
hold, all Evaluation Material (as defined in the Company Confidentiality
Agreement) in confidence in accordance with the terms of the Company
Confidentiality Agreement and, in the event of the termination of this Agreement
for any reason, the Parent promptly shall return or destroy all Evaluation
Material in accordance with the terms of the Company Confidentiality Agreement.
5.4 Takeover Statutes. If any "fair price," "moratorium," "control share
acquisition" or other form of antitakeover statute or regulation shall become
applicable to the transactions contemplated hereby, the parties hereto and the
members of their respective Boards of Directors shall grant such approvals and
take such actions as are reasonably necessary so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate or minimize the effects of
such statute or regulation on the transactions contemplated hereby.
5.5 No Solicitation.
(a) The Company shall not, nor shall it permit any of its Subsidiaries to,
nor shall it authorize or permit any of its directors, officers or employees or
any investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its Subsidiaries to, directly or
indirectly through another person,
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(i) solicit, initiate or encourage (including by way of furnishing information),
or take any other action designed to facilitate, any inquiries or the making of
any proposal which constitutes a Takeover Proposal (as defined in Section
5.5(e)) or (ii) participate in any discussions or negotiations regarding any
Takeover Proposal (it being understood that the passive receipt of
communications from third parties shall not be deemed participation in
discussions or negotiations); provided, however, that if the Company Board
determines in good faith, after consultation with outside counsel, that it is
necessary to do so in order to act in a manner consistent with its fiduciary
duties to the Company's stockholders under applicable law, the Company may, in
response to any Superior Proposal (as defined in Section 5.5(e)) made prior to
the Stockholder Approval (as defined in Section 6.1(a)), which proposal was not
solicited by it and which did not otherwise result from a breach of this Section
5.5(a), and subject to providing prior written notice of its decision to take
such action to the Parent and compliance with Section 5.5(c), (x) furnish
information with respect to the Company and its Subsidiaries to any person
making a Superior Proposal pursuant to a customary confidentiality agreement (as
determined by the Company based on the advice of its outside counsel) and (y)
participate in discussions or negotiations regarding such Superior Proposal.
(b) Except as expressly permitted by this Section 5.5, neither the Company
Board nor any committee thereof shall (i) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to the Parent and/or Merger
Sub, the approval or recommendation by such Company Board or such committee of
the Merger or this Agreement, (ii) approve or recommend, or propose publicly to
approve or recommend, any Takeover Proposal, or (iii) cause the Company to enter
into any Acquisition Agreement (as defined in Section 5.5(e)). Notwithstanding
the foregoing, the Company Board, to the extent that it determines in good
faith, after consultation with outside counsel, that in light of a Superior
Proposal it is necessary to do so in order to act in a manner consistent with
its fiduciary duties to the Company's stockholders under applicable law may
terminate this Agreement (and take any action prohibited by the first sentence
of this Section 5.1(b)) solely in order that the Company may concurrently enter
into an Acquisition Agreement with respect to any Superior Proposal, but only at
a time that is after the second business day following the Parent's receipt of
written notice advising the Parent that the Company Board is prepared to accept
a Superior Proposal, specifying the material terms and conditions of such
Superior Proposal and identifying the person making such Superior Proposal, all
of which information will be kept confidential by the Parent.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 5.5, the Company shall promptly advise the Parent
orally and in writing of any request for information or any Takeover Proposal,
the material terms and conditions of such request or Takeover Proposal and the
identity of the person making such request or Takeover Proposal. The Company
will keep the Parent reasonably informed of the status and details (including
amendments or proposed amendments) of any such request or Takeover Proposal.
(d) Nothing contained in this Section 5.5 shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders if, in the good faith judgment of the Company Board,
after consultation with outside counsel and based as to legal matters on the
written advice of the Company's independent legal counsel, failure so to
disclose would be inconsistent with its obligations under applicable law;
provided, however, that, except as contemplated by Section 5.5(b), neither the
Company nor the Company Board nor any committee thereof shall withdraw or
modify, or propose publicly to withdraw or modify, its position with respect to
this Agreement or the Merger or approve or recommend, or propose publicly to
approve or recommend, a Takeover Proposal.
(e) For purposes of this Agreement:
(i) "Takeover Proposal" means any inquiry, proposal or offer from any
person relating to any direct or indirect acquisition or purchase of a
business that constitutes 20% (or as used in Section 7.2(b), 50%) or more
of the net revenues, net income or assets of the Company and its
Subsidiaries, taken as a whole, or 20% (or as used in Section 7.2(b), 50%)
or more of any class of equity securities of the Company, any tender offer
or exchange offer that if consummated would result in any person
beneficially owning 20% (or as used in Section 7.2(b), 50%) or more of any
class of any equity securities of the Company, or any
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merger, consolidation, business combination, recapitalization,
reorganization, liquidation, dissolution or similar transaction involving
the Company or any Subsidiary whose business constitutes 20%(or as used in
Section 7.2(b), 50%) or more of the net revenues, net income or assets of
the Company and its Subsidiaries, taken as a whole, other than the
transactions contemplated by this Agreement.
(ii) "Superior Proposal" means any proposal made by a third party to
acquire, directly or indirectly, including pursuant to a tender offer,
exchange offer, merger, consolidation, business combination,
recapitalization, reorganization, liquidation, dissolution or similar
transaction, for consideration to the Company's stockholders consisting of
cash and/or securities, all of the shares of the Company's capital stock
then outstanding or all or substantially all the assets of the Company, on
terms which the Company Board determines in its good faith judgment to be
more favorable to the Company's stockholders than the Merger and for which
financing, to the extent required, is then committed or which, in the good
faith judgment of the Company Board, is reasonably capable of being
obtained by such third party.
(iii) "Acquisition Agreement" means any letter of intent, agreement in
principle, acquisition agreement or other similar agreement related to any
Takeover Proposal.
5.6 Reasonable Efforts; Additional Actions.
5.6.1 Upon the terms and subject to the conditions of this Agreement, each
of the parties hereto shall use all reasonable efforts to take, or cause to be
taken, all action, and to do or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement, including using all reasonable efforts to (a)
obtain all consents, amendments to or waivers under the terms of any of the
Company's and the Parent's borrowing or other contractual arrangements required
by the transaction contemplated by this Agreement, (b) effect promptly all
necessary or appropriate registrations and filings with Governmental Entities,
including, filings and submissions pursuant to the HSR Act, the Exchange Act and
the DGCL, (c) effect promptly and prosecute diligently (including responding to
all reasonable requests for supplemental information) all approvals, filings
and/or notices required under any applicable insurance laws for the consummation
of the transactions contemplated by this Agreement, (d) defend any lawsuit or
other legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the transaction contemplated hereby and (e)
fulfill or cause the fulfillment of the conditions to Closing set forth in
Article 6.
5.6.2 If, at any time after the Effective Time, the Surviving Corporation
shall determine or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving Corporation the
right, title or interest in, to or under any of the rights, properties or assets
of either of the Constituent Corporations acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger or
otherwise to carry out this Agreement, the officers and directors of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of each of the Constituent Corporations or otherwise, all such
deeds, bills of sale, assignments and assurances and to take and do, in the name
and on behalf of each of the Constituent Corporations or otherwise, all such
other actions and things as may be necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
5.7 Notification of Certain Matters. The Company shall give notice to the
Parent, and the Parent and the Merger Sub shall give notice to the Company,
promptly upon becoming aware of (a) any occurrence, or failure to occur, of any
event, which occurrence or failure to occur has caused or could reasonably be
expected to cause any representation or warranty in this Agreement to be untrue
or inaccurate in any material respect at any time after the date hereof and
prior to the Effective Time and (b) any material failure on its part to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided that the delivery of any notice pursuant to
this Section 5.7 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
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5.8 Public Announcements. The initial press release or releases with
respect to the transactions contemplated by this Agreement shall be in the form
agreed to by the Parent and the Company. Thereafter, for as long as this
Agreement is in effect, the Parent and the Merger Sub, on the one hand, and the
Company, on the other hand, shall not, and shall cause their subsidiaries and
affiliates not to, issue or cause the publication of any press release or any
other announcement (including without limitation announcements to employees,
agents or policyholders) with respect to the Merger, this Agreement or the other
transactions contemplated hereby without the consent of the other, except where
such release or announcement is required by applicable law or pursuant to any
listing agreement with, or the rules or regulations of, any securities exchange
or any other regulatory requirements. By letters exchanged simultaneously with
the execution and delivery of this Agreement, the Parent and the Company have
identified representatives authorized to provide the consent contemplated by the
proceeding sentence.
5.9 Certain Employee Matters.
(a) The Company shall, at or prior to the Effective Time, terminate all
Plans providing for the granting of options or any securities of the Company to
any employee, director or consultant of the Company or any of its Subsidiaries.
(b) Subject to any written agreement among Parent, Holding, the Company and
a payee executed prior to the Closing, Parent and Holding shall cause the
Surviving Corporation and its subsidiaries to honor all employment and severance
agreements of employees of the Company and its Subsidiaries set forth on
Schedule 5.9(b). Parent and Holding acknowledge that consummation of the
transactions contemplated by this Agreement will constitute a change in control
of the Company (to the extent such concept is applicable) for the purpose of all
the Plans.
(c) Subject to any written agreement among Parent, Holding, the Company and
a payee executed prior to the Closing, Parent, Holding and the Company agree
that payments calculated pursuant to the Life Re Corporation Long-Term Incentive
Plan (the "LTIP") and related arrangements shall be made at the Closing (by wire
transfer as directed by the respective payees) in the amounts indicated and to
the employees listed on Schedule 5.9(c). The Company shall cause the LTIP to be
terminated at the Effective Time, subject to the making of such payments.
(d) For purposes of determining eligibility to participate, vesting and
accrual or entitlement to benefits where length of service is relevant under any
employee benefit plan or arrangement of the Surviving Corporation and its
subsidiaries (or of Parent, Holding and their subsidiaries, to the extent an
employee of the Company or its Subsidiaries shall become eligible to participate
therein), employees of the Company and its Subsidiaries immediately prior to the
Effective Time ("Affected Employees") shall receive service credit for service
with the Company and any of its Subsidiaries to the same extent such service was
credited under similar employee benefit plans and arrangements of the Company
and its Subsidiaries; provided, however, that such service need not be credited
to the extent that it would result in a duplication of benefits.
(e) Parent, Holding and their respective subsidiaries will, or will cause
the Surviving Corporation and its subsidiaries to, (i) waive all limitations as
to preexisting conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to the Affected Employees
under any welfare benefit plans that such employees may be eligible to
participate in after the Closing Date, other than limitations or waiting periods
that are already in effect with respect to such employees and that have not been
satisfied as of the Closing Date under any welfare plan maintained for the
Affected Employees immediately prior to the Closing Date, and (ii) provide each
Affected Employee with credit for any co-payments and deductibles paid prior to
the Closing Date in satisfying any applicable deductible or out-of-pocket
requirements under any welfare plans that such employees are eligible to
participate in after the Closing Date.
(f) Nothing in this Agreement (other than the first sentence of Section
5.9(b)) is intended to create any right of employment for any person or to
create any obligation for Parent, Holding, the Surviving Corporation or their
respective subsidiaries to continue any Plan following the Effective Time.
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5.10 Investment Portfolio. The Company shall cause the investments of the
Subsidiaries to be maintained prior to the Effective Time in accordance with
past investment policies and practices of the Subsidiaries in the ordinary
course of business.
5.11 Swiss Re America Holding Corporation. After the date hereof, Holding
may opt to become a party hereto and otherwise to be bound by the terms hereof
(the "Accession"). All references herein to the Agreement shall, after the
Accession, mean this Agreement as executed and delivered by the Parent, the
Company, the Merger Sub and Holding.
5.12 Indemnification of Directors and Officers.
(a) The certificate of incorporation and by-laws (or equivalent governing
instruments) of the Surviving Corporation and each of its subsidiaries shall
contain provisions no less favorable with respect to indemnification than are
set forth in the certificate of incorporation and by-laws of the Company and its
Subsidiaries, which provisions shall not be amended, repealed or otherwise
modified for a period of six years after the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at or prior to
the Effective Time were directors, officers, agents or employees of the Company
or any of its Subsidiaries or who were otherwise entitled to indemnification
pursuant to the certificate of incorporation and by-laws (or equivalent
governing instruments) of the Company or any of its Subsidiaries.
(b) Holding and the Surviving Corporation shall, jointly and severally,
indemnify, defend and hold harmless each person who is now, or has been at any
time prior to the date of this Agreement or who becomes prior to the Effective
Time, a director or officer of the Company or any of its Subsidiaries
(individually, an "Indemnified Person," and collectively, the "Indemnified
Persons") against (i) all losses, claims, damages, costs, expenses, liabilities
or judgements arising out of or relating to, or amounts that are paid in
settlement (with the approval of the indemnifying party, which approval shall
not be unreasonably withheld) of, or in connection with, any claim, action,
suit, proceeding or investigation based in whole or in part on or arising in
whole or in part out of the fact that such person is or was a director or
officer or the Company or any of its Subsidiaries, whether pertaining to any
matter existing or occurring at or prior to the Effective Time and whether
asserted or claimed prior to or at or after, the Effective Time ("Indemnifiable
Claims") and (ii) all Indemnifiable Claims based in whole or in part on, or
arising in whole or in part out of, or pertaining to this Agreement, the Merger
or any other transaction contemplated hereby or thereby, in each case to the
full extent a corporation is permitted under the DGCL to indemnify its own
directors or officers, as the case may be (and Holding and the Surviving
Corporation, as the case may be, will pay expenses in advance of the final
disposition of any such claim, action, suit, proceeding or investigation to each
Indemnified Person to the full extent permitted by law, subject to receipt of a
written undertaking from such Indemnified Person to repay all amounts advanced
in the event a final and non-appealable judicial determination is made that such
person was not entitled to indemnification under DGCL). Any Indemnified Person
wishing to claim indemnification under this Section 5.12(b), upon learning of
any such claim, action, suit, proceeding or investigation, shall notify Holding
and the Surviving Corporation (but the failure so to notify an indemnifying
party shall not relieve it from any liability which it may have under this
Section 5.12(b) except to the extent such failure prejudices such party).
Indemnified Persons as a group may retain only one law firm to represent them
with respect to each such matter unless there is, under applicable standards of
professional conduct, a conflict on any significant issue between the positions
of any two or more Indemnified Parties. Notwithstanding anything to the contrary
contained herein, if the Accession does not occur, all references to Holding in
this Section 5.12(b) shall instead by deemed to be to the Parent.
(c) For a period of six (6) years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect directors' and officers'
liability insurance covering each Indemnified Person who is currently covered by
the Company's directors' and officers' insurance with respect to claims arising
from facts or events which occurred at or prior to the Effective Time, which
insurance shall be no less favorable than such insurance maintained in effect by
the Company on the date hereof in terms of coverage and amounts; provided,
however, that in no event shall the Surviving Corporation be required to expend
in any one year an amount in excess of 150% of the annual premiums currently
paid by the Company for such insurance; and, provided, further, that if annual
premiums of such insurance coverage exceed such amount, the Surviving
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Corporation shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount.
(d) With respect to each Indemnified Person who is party to, or the
beneficiary of, an agreement with the Company or any of its Subsidiaries
providing for the indemnification of such person by the Company or any of its
Subsidiaries in effect on the date hereof, the Surviving Corporation hereby
agrees to be bound, and perform all obligations required to be performed, by the
Company or any of its Subsidiaries under any such agreement.
(e) The provisions of this Section 5.12 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Person, his or her heirs and
representatives.
(f) With respect to the indemnification obligations of Holding contained in
Section 5.12(b), in the event Holding disposes of all or substantially all of
its assets or otherwise ceases to be sufficiently creditworthy to meet its
obligations under Section 5.12(b), Parent agrees that it shall cause another of
its wholly-owned Subsidiaries incorporated in the United States which is
sufficiently creditworthy to assume the obligations of Holding under Section
5.12(b).
ARTICLE 6
CONDITIONS
6.1 Conditions to Each Party's Obligations. The respective obligations of
each party to effect the Merger shall be subject to the fulfillment or waiver at
or prior to the Effective Time of the following conditions:
(a) this Agreement shall have been adopted by the affirmative vote of
the stockholders of the Company by the requisite vote in accordance with
applicable law (the "Stockholder Approval");
(b) no Legal Requirements shall have been enacted, entered,
promulgated or enforced by any court or Governmental Entity that prohibit
or prevent the consummation of the Merger;
(c) (i) all consents, authorizations, orders and approvals of (or
filings or registrations with) any Governmental Entity required in
connection with the execution, delivery and performance of this Agreement
shall have been obtained or made (as the case may be), except for filings
in connection with the Merger and any other documents required to be filed
after the Effective Time and except where the failure to have obtained or
made any such consent, authorization, order, approval, filing or
registration would not (A) have a Material Adverse Effect on the Company or
the Parent or (B) materially adversely affect the ability of the Company,
the Parent, Holding or the Merger Sub to perform their respective
obligations hereunder or the other agreements entered into in connection
herewith and (ii) such consents, authorizations, orders and approvals shall
be subject to no conditions other than (A) conditions customarily imposed
by insurance regulatory authorities or (B) other conditions that could not
reasonably be expected to have a Material Adverse Effect on the Company;
and
(d) any waiting period applicable to the Merger under the HSR Act
shall have expired or been terminated.
6.2 Conditions to Obligation of the Parent, Holding and the Merger
Sub. The obligation of the Parent, Holding and the Merger Sub to effect the
Merger shall be subject to the fulfillment or waiver at the Effective Time of
the following additional conditions:
(a) the Company shall have performed in all material respects the
covenants and obligations required to be performed by it under this
Agreement on or prior to the Effective Time;
(b) the representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects on and as
of the Effective Time as if made on and as of such date (except to the
extent that any such representation or warranty had by its terms been made
as of a specific
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date in which case such representation or warranty shall have been true and
correct as of such specific date); and
(c) the Parent shall have received a certificate signed by an
executive officer of the Company to the effect of Sections 6.2(a) and (b).
6.3 Conditions to Obligation of the Company. The obligation of the
Company to effect the Merger shall be subject to the fulfillment or waiver at
the Effective Time of the following additional conditions:
(a) the Parent, Holding and the Merger Sub shall have performed in all
material respects the covenants and obligations required to be performed by them
under this Agreement on or prior to the Effective Time;
(b) the representations and warranties of the Parent, Holding and the
Merger Sub contained in this Agreement shall be true and correct in all material
respects on and as of the Effective Time as if made on and as of such date; and
(c) the Company shall have received a certificate signed by an executive
officer of each of the Parent, Holding and Merger Sub to the effect of Sections
6.3 (a) and (b).
ARTICLE 7
TERMINATION
7.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time,
whether before or after the Stockholder Approval:
(a) By the mutual written consent of the Parent, Holding, the Merger
Sub and the Company;
(b) By the Parent, Holding, the Merger Sub or the Company:
(i) if a court of competent jurisdiction or other Governmental
Entity shall have issued an Order or taken any other action permanently
restraining, enjoining or otherwise prohibiting the Merger and such
Order or other action shall have become final and nonappealable; or
(ii) if the Effective Time shall not have occurred on or before
January 31, 1999, provided, however, that the right to terminate this
Agreement under this Section 7.1(b)(ii) shall not be available to any
party whose failure to fulfill materially any covenant or obligation
under this Agreement has been the cause of, or resulted in, the failure
of the Effective Time to occur on or before such date;
(c) By the Parent, Holding, the Merger Sub or the Company, if the
Stockholder Approval shall not have been obtained by reason of the failure
to obtain the requisite vote at a duly held meeting of stockholders or at
any adjournment thereof; and
(d) By the Company if the Company receives a Superior Proposal and the
Company Board determines in good faith, after consultation with outside
counsel, that failing to terminate this Agreement would constitute a breach
of the Company Board's fiduciary duty under applicable law.
7.2 Procedure for and Effect of Termination.
(a) In the event that this Agreement is terminated and the Merger is
abandoned by the Parent, Holding or the Merger Sub, on the one hand, or by the
Company, on the other hand, pursuant to Section 7.1, written notice of such
termination and abandonment shall forthwith be given to the other parties and
this Agreement shall terminate and the Merger shall be abandoned without any
further action. If this Agreement is terminated as provided herein, no party
hereto shall have any liability or further obligation to any other party under
the terms of this Agreement except (i) with respect to the willful breach by any
party hereto, and (ii) this Section 7.2, the third sentence of Section 5.3, and
Article 8 shall survive the termination of this Agreement.
(b) In the event that (i) this Agreement is terminated by the Company
pursuant to Section 7.1(d) or (ii) (x) a Takeover Proposal shall have been made
to the Company or any of its Subsidiaries or stockholders
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or any person shall have announced an intention (whether or not conditional) to
make a Takeover Proposal, (y) this Agreement is thereafter terminated pursuant
to Section 7.1(c) and (z) within 12 months following such termination the
Company or any Subsidiary enters into an Acquisition Agreement with the person
(or any affiliate of the person) who made or announced the intention to make
such Takeover Proposal, then the Company shall promptly pay the Parent by wire
transfer of same day funds a fee equal to $60 million.
(c) The Company acknowledges that the agreements contained in Section
7.2(b) are an integral part of the transactions contemplated by this Agreement,
and that the amounts to be paid pursuant thereto constitute liquidated damages
and not a penalty.
ARTICLE 8
MISCELLANEOUS
8.1 Certain Definitions. For purposes of this Agreement, the following
terms shall have the meanings ascribed to them in this Section 8.1:
(a) "affiliate," with respect to any person, shall mean any person
controlling, controlled by or under common control with such person and
shall also include any person 10% or more of whose outstanding voting power
is owned by the specified person either directly or indirectly through
subsidiaries;
(b) "including" shall, unless the context clearly requires otherwise,
mean including but not limited to the items or things following such term;
(c) "knowledge" or "best knowledge," with respect to the Company,
shall mean the actual knowledge of Rodney A. Hawes, Jr., Douglas M. Schair,
Jacques E. DuBois, Chris C. Stroup, W. Weldon Wilson, Alan D. Head and
Robert L. Beisenherz;
(d) "Material Adverse Effect," with respect to any person, shall mean
a material adverse effect on the business, assets, liabilities, financial
condition or results of operations of such person and its subsidiaries
taken as a whole; provided, that a change in economic conditions (such as a
movement in interest rates) that adversely affects the insurance industry
generally shall not, by itself, be deemed a Material Adverse Effect in
respect of the Company;
(e) "person" shall mean and include an individual, a partnership, a
joint venture, a limited liability company, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof; and
(f) "subsidiary," with respect to any person, shall mean any
corporation 50% or more of the outstanding voting power of which, or any
partnership, joint venture, limited liability company or other entity 50%
or more of the total equity interest of which, is directly or indirectly
owned by such person. For purposes of this Agreement, all references to
"subsidiaries" of a person shall be deemed to mean "subsidiary" if such
person has only one subsidiary.
8.2 Amendment and Modification. Subject to applicable law, this Agreement
may be amended, modified or supplemented, whether before or after stockholder
approval, only by a written agreement signed by each of the parties hereto at
any time prior to the Effective Time with respect to any of the terms contained
herein; provided, however, that after this Agreement is adopted by the Company's
stockholders pursuant to Section 5.2, no such amendment or modification shall
(a) alter or change the amount or kind of the consideration to be delivered to
the stockholders of the Company, (b) alter or change any term of the certificate
of incorporation of the Surviving Corporation to be effected by the Merger or
(c) alter or change any of the terms or conditions of this Agreement if such
alteration or change would adversely affect the stockholders of the Company.
8.3 Waiver of Compliance; Consents. Any failure of the Parent, Holding or
the Merger Sub, on the one hand, or the Company, on the other hand, to comply
with any obligation, covenant, agreement or condition herein may be waived by
the Parent, Holding, the Merger Sub or the Company, respectively, only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict
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compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
8.3.
8.4 Survival. The respective representations and warranties of the Parent,
Holding, the Merger Sub and the Company contained herein shall not survive the
Closing hereunder.
8.5 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person, by
telecopier (with a confirmed receipt thereof) or registered or certified mail
(postage prepaid, return receipt requested), and on the next business day when
sent by 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 the Parent, Holding or the Merger Sub, to:
Swiss Reinsurance Company
Mythenquai 50/60
CH-8002 Zurich
Switzerland
Attention: Markus Diethelm
Telecopier: 411 285 4709
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Albert P. Hand, Esq.
David K. Lakhdhir, Esq.
Telecopier: (212) 757-3990
(b) if to the Company, to:
Life Re Corporation
969 High Ridge Road
Stamford, Connecticut 06905
Attention: W. Weldon Wilson, Esq.
Telecopier: (203) 968-0920
with copies to:
Skadden, Arps, Slate, Meagher & Flom, LLP
919 Third Avenue
New York, NY 10022-3897
Attention: Morris J. Kramer, Esq.
Telecopier: (212) 735-2000
8.6 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties; provided,
however, that the rights (but not the obligations) of Holding or Merger Sub may
be transferred to any direct or indirect wholly owned subsidiary of the Parent
with an appropriate amendment to this Agreement.
8.7 Expenses. Whether or not the Merger is consummated, all fees, charges
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such fees, charges or
expenses.
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State, without regard to the choice of
law principles thereof.
A-23
<PAGE> 75
8.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.10 Interpretation. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement.
8.11 Entire Agreement. This Agreement (including the schedules, exhibits,
documents or instruments referred to herein) and the Confidentiality Agreement
embody the entire agreement and understanding of the parties hereto in respect
of the subject matter hereof and thereof and supersede all prior agreements and
understandings, both written and oral, among the parties, or between any of
them, with respect to the subject matter hereof and thereof.
8.12 No Third Party Beneficiaries. Except as provided in Sections 5.9(b),
5.9(c) or 5.12, this Agreement is not intended to, and does not, create any
rights or benefits of any party other than the parties hereto.
IN WITNESS WHEREOF, the Parent, the Merger Sub and the Company have caused
this Agreement to be signed by their respective duly authorized officers as of
the date first above written.
SWISS REINSURANCE COMPANY
By: /s/ JOHN J. HENDRICKSON
------------------------------------
Name:
Title:
By: /s/ MARKUS DIETHELM
------------------------------------
Name:
Title:
SWISS RE AMERICA
HOLDING CORPORATION
By: /s/ HEIDI E. HUTTER
------------------------------------
Name: Heidi E. Hutter
Title: President and CEO
SRC ACQUISITION CORP.
By: /s/ JOHN J. HENDRICKSON
------------------------------------
Name:
Title:
LIFE RE CORPORATION
By: /s/ RODNEY A. HAWES, JR.
------------------------------------
Name: Rodney A. Hawes, Jr.
Title: Chairman of the Board, Chief
Executive Officer and Office of
the Chairman
A-24
<PAGE> 76
ANNEX B
PERSONAL AND CONFIDENTIAL
GOLDMAN, SACHS & CO.
85 BROAD STREET
NEW YORK, NEW YORK 10004
July 27, 1998
Board of Directors
Life Re Corporation
969 High Ridge Road
Stamford, CT 06905
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $0.001
per share (the "Shares"), of Life Re Corporation (the "Company") of the Merger
Consideration (as defined below) to be received by such holders pursuant to the
Agreement and Plan of Merger, dated as of July 27, 1998, by and between Swiss
Reinsurance Company (the "Buyer"), SRC Acquisition Corp., a directly and
indirectly wholly-owned subsidiary of the Buyer, the Company and Swiss Re
America Holding Corporation, a wholly-owned subsidiary of the Buyer (the
"Agreement"). For purposes of this opinion, the term "Merger Consideration"
shall mean $95.00 per Share in cash plus, in accordance with the Agreement, an
additional payment per Share equal to $.0208 per day from, but not including,
the date on which the closing of the merger would have occurred absent the
exercise of the Buyer's right to delay the closing to, and including, the
closing date.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having acted as its lead manager and underwriter in
connection with the March 1998 concurrent offerings of 6.00% Adjustable
Conversion-rate Equity Security Units ("ACES") and Shares to the public, and
having acted as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Agreement. Goldman,
Sachs & Co. provides a full range of financial advisory and securities services
and, in the course of its normal trading activities may from time to time effect
transactions and hold securities, including derivative securities, of the
Company or the Buyer for its own account and for the accounts of customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company for the five years ended December 31, 1997; certain interim reports to
stockholders and Quarterly Reports on Form 10-Q of the Company; certain other
communications from the Company to its stockholders; and certain internal
financial analyses and forecasts for the Company prepared by its management. We
also have held discussions with members of the senior management of the Company
regarding past and current business operations, financial condition and future
prospects. In addition, we have reviewed the reported price and trading activity
for the Shares, compared certain financial and stock market information for the
Company with similar information for certain other companies the securities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations in the life insurance and reinsurance industries and
performed such other studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. We are not actuaries and
our services did not include any actuarial determinations or an attempt to
evaluate actuarial assumptions. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities
<PAGE> 77
Life Re Corporation
July 27, 1998
Page Two
of the Company or any of its subsidiaries and we have not been furnished with
any such evaluation or appraisal. Our advisory services and the opinion
expressed herein are provided for the information and assistance of the Board of
Directors of the Company in connection with its consideration of the transaction
contemplated by the Agreement and such opinion does not constitute a
recommendation as to how any holder of Shares should vote with respect to such
transaction.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the Merger
Consideration to be received by the holders of Shares pursuant to the Agreement
is fair from a financial point of view to such holders.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
- --------------------------------------
(Goldman, Sachs & Co.)
<PAGE> 78
ANNEX C
DELAWARE GENERAL CORPORATION LAW
SEC.262 APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec.228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec.251 (other than a merger effected pursuant to sec.251
(g) of this title), sec.252, sec.254, sec.257, sec.258, sec.263 or sec.264 of
this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec.251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec.251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof,
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec.253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
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<PAGE> 79
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec.228 or
sec.253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights or the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
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<PAGE> 80
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
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<PAGE> 81
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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<PAGE> 82
FORM OF PROXY CARD
LIFE RE CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 23, 1998
AT LIFE RE CORPORATION, 969 HIGH RIDGE ROAD, STAMFORD, CONNECTICUT 06905
AT 2:00 P.M. EASTERN TIME
The undersigned hereby appoints Rodney A. Hawes, Jr., Douglas M. Schair and
Jacques E. Dubois, or any of them acting in the absence of the other, as
attorneys and proxies of the undersigned, with full power of substitution, to
vote all of the shares of the common stock of Life Re Corporation, a Delaware
corporation, held or owned by the undersigned or standing in the name of the
undersigned at the Special Meeting of Stockholders of the Company and at any
adjournment thereof, and the undersigned hereby instructs said attorneys to vote
as follows:
(Continued and to be signed on the other side.)
LIFE RE CORPORATION
P.O. BOX 11026
NEW YORK, N.Y. 10203-0026
<PAGE> 83
FORM OF PROXY CARD continued
- --------------------------------------------------------------------------------
1. Proposal to approve and adopt an Agreement and Plan of Merger, dated as of
July 27, 1998, by and among Swiss Reinsurance Company, a Swiss corporation
("Swiss Re"), SRC Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of Swiss Re ("Sub"), Swiss Re America Holding Corporation, a
Delaware corporation and a wholly owned subsidiary of Swiss Re ("Holding")
and Life Re Corporation, a Delaware corporation (the "Company"), providing
for the merger of Sub with and into the Company, with the Company continuing
as the surviving corporation and becoming a wholly owned subsidiary of Swiss
Re and Holding.
For [ ] Against [ ] Abstain [ ]
THIS PROXY WILL BE VOTED AS INSTRUCTED. IN THE ABSENCE OF SUCH
INSTRUCTIONS, THIS PROXY WILL BE VOTED "FOR" PROPOSAL (1) ABOVE, AND THE PROXIES
HEREIN NAMED WILL VOTE ON OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT THEREOF IN ACCORDANCE WITH THEIR JUDGMENT.
Change of Address and
or Comments Mark Here [ ]
(Please sign exactly as shown on
envelope addressed to you. If shares
are held by joint tenants, both should
sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as
such. If a corporation, please sign in
full corporate name by an authorized
officer. If a partnership, please sign
in partnership name by an authorized
person.)
Date:
--------------------------------------
--------------------------------------
Signature
--------------------------------------
Signature, if held jointly
Votes must be indicated
(X) in Black or Blue ink.
(Please sign, date and return this proxy in the enclosed postage prepaid
envelope.)
