<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 26, 1997
REGISTRATION NO. 333-33395
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------
EXECUTIVE RISK INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 06-1388171
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
------------------------
82 HOPMEADOW STREET
SIMSBURY, CONNECTICUT 06070
(860) 408-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ROBERT H. KULLAS
CHAIRMAN
EXECUTIVE RISK INC.
82 HOPMEADOW STREET
SIMSBURY, CT 06070
(860) 408-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES OF ALL COMMUNICATIONS, INCLUDING ALL COMMUNICATIONS SENT TO THE AGENT FOR
SERVICE, SHOULD BE SENT TO:
<TABLE>
<S> <C>
JAMES A. FITZPATRICK, JR., ESQ. PETER R. O'FLINN, ESQ.
JONATHAN L. FREEDMAN, ESQ. STEPHEN G. ROONEY, ESQ.
DEWEY BALLANTINE LEBOEUF, LAMB, GREENE & MACRAE, L.L.P.
1301 AVENUE OF THE AMERICAS 125 WEST 55TH STREET
NEW YORK, NEW YORK 10019-6092 NEW YORK, NEW YORK 10019-5389
(212) 259-8000 (212) 424-8000
</TABLE>
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 26, 1997
PROSPECTUS
SEPTEMBER , 1997
1,000,000 SHARES
LOGO
COMMON STOCK
All of the 1,000,000 shares (the "Shares") of common stock, par value $0.01
per share (the "Common Stock"), offered hereby (the "Offering") are being sold
by Executive Risk Inc. ("ERI" or the "Company"). The Common Stock is listed on
the New York Stock Exchange ("NYSE") under the symbol "ER". The closing price of
the Common Stock on the NYSE on August 25, 1997 was $58.38 per share. See "Price
Range of Common Stock and Dividends."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.......................... $ $ $
Total(3)........................... $ $ $
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $300,000.
(3) The Company has granted the Underwriters an option, exercisable within 30
days after the date of this Prospectus, to purchase up to an additional
150,000 shares of Common Stock, at the Price to the Public, less
Underwriting Discounts and Commissions, solely to cover over-allotments, if
any. If such option is exercised in full, the total Price to the Public,
Underwriting Discounts and Commissions and Proceeds to the Company will be
$ , $ and $ , respectively. See "Underwriting."
The Shares offered hereby are being offered by the several Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters and subject to various prior conditions, including their right to
reject orders in whole or in part. It is expected that delivery of the Shares
will be made in New York, New York on or about September , 1997.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CONNING & COMPANY
OPPENHEIMER & CO., INC.
<PAGE> 3
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
OFFERED HEREBY. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH
THE OFFERING, AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE
OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
------------------------
NORTH CAROLINA INVESTORS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA
(THE "NORTH CAROLINA INSURANCE COMMISSIONER") NOR HAS THE NORTH CAROLINA
INSURANCE COMMISSIONER RULED UPON THE ACCURACY OR THE ADEQUACY OF THIS
PROSPECTUS.
ERI, A DELAWARE CORPORATION, OWNS ALL OF THE SHARES OF CAPITAL STOCK OF
CERTAIN INSURANCE COMPANIES DOMICILED IN THE STATES OF CONNECTICUT AND DELAWARE.
THE CONNECTICUT AND DELAWARE INSURANCE LAWS REQUIRE PRIOR APPROVAL BY THEIR
RESPECTIVE STATE INSURANCE COMMISSIONERS OF ANY ACQUISITION OF CONTROL OF A
DOMESTIC INSURANCE COMPANY OR OF ANY COMPANY WHICH CONTROLS A DOMESTIC INSURANCE
COMPANY. "CONTROL" IS GENERALLY PRESUMED TO EXIST THROUGH THE OWNERSHIP OF, OR
THE HOLDING OF PROXIES WITH RESPECT TO, 10% OR MORE OF THE VOTING SECURITIES OF
AN INSURANCE COMPANY OR OF ANY COMPANY WHICH CONTROLS AN INSURANCE COMPANY. ANY
PURCHASER OF COMMON STOCK HOLDING POWER TO VOTE 10% OR MORE OF THE OUTSTANDING
SHARES OF COMMON STOCK WILL BE PRESUMED TO HAVE ACQUIRED CONTROL OF ERI'S
INSURANCE SUBSIDIARIES UNLESS THE RELEVANT INSURANCE COMMISSIONER, FOLLOWING
APPLICATION BY SUCH PURCHASER, DETERMINES OTHERWISE. ACCORDINGLY, ANY PURCHASE
RESULTING IN A PURCHASER'S HOLDING THE POWER TO VOTE 10% OR MORE OF THE
OUTSTANDING SHARES OF COMMON STOCK WOULD REQUIRE PRIOR APPROVAL BY THE INSURANCE
COMMISSIONERS OF THE ABOVE-REFERENCED STATES.
NO ACTION HAS BEEN OR WILL BE TAKEN IN ANY JURISDICTION BY THE COMPANY OR
BY ANY UNDERWRITER THAT WOULD PERMIT A PUBLIC OFFERING OF THE COMMON STOCK OR
POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN ANY JURISDICTION WHERE ACTION
FOR THAT PURPOSE IS REQUIRED, OTHER THAN IN THE UNITED STATES AND CANADA.
PERSONS INTO WHOSE POSSESSION THIS PROSPECTUS COMES ARE REQUIRED BY THE COMPANY
AND THE UNDERWRITERS TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS
AS TO THE OFFERING OF THE SHARES AND THE DISTRIBUTION OF THIS PROSPECTUS.
------------------------
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 reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, DC
20549, and at the following regional offices of the Commission: 7 World Trade
Center, Suite 1300, New York, NY 10048; and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, IL 60661-2511. Copies of such materials can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, DC 20549, at prescribed rates. The Commission
maintains a Web site on the Internet at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. In addition, copies of
the above reports, proxy statements and other information also may be inspected
at the offices of the NYSE, 20 Broad Street, New York, NY 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the securities offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the securities offered hereby, reference is hereby
made to the Registration Statement and the exhibits and schedules filed
therewith, which may be obtained from the principal office of the Commission in
Washington, DC, upon payment of the fees prescribed by the Commission.
2
<PAGE> 4
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated by reference:
(i) Annual Report on Form 10-K for the fiscal year ended December 31,
1996;
(ii) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997 and June 30, 1997;
(iii) Current Reports on Form 8-K filed on February 18, 1997 and June 5,
1997; and
(iv) description of the Company's capital stock contained in the
Company's Registration Statement on Form 8-A, filed with the
Commission on February 9, 1994, as amended by Form 8-A/A, filed with
the Commission on May 8, 1996, and as further amended by Form 8-A/A,
filed with the Commission on August 26, 1997, including any further
amendment updating such description.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the Offering made hereby shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from their respective dates of filing. Any statement contained herein or
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person (including any
beneficial owner of Shares purchased in the Offering) to whom this Prospectus is
delivered, upon written or oral request, a copy of any or all of the foregoing
documents incorporated herein by reference (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
such documents). Written or telephone requests should be directed to the Company
at 82 Hopmeadow Street, Simsbury, CT 06070, Attention: Mr. Robert V. Deutsch,
Executive Vice President, telephone number (860) 408-2000.
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. This Prospectus and the documents
incorporated by reference herein, or any other written or oral statements made
by or on behalf of the Company, may include forward-looking statements which
reflect the Company's current views with respect to future events and financial
performance. These forward-looking statements are subject to uncertainties and
other factors that could cause actual results to differ materially from such
statements. These uncertainties and other factors (which are described in more
detail elsewhere in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, which is incorporated herein by reference) include, but are
not limited to, uncertainties relating to cyclical industry conditions,
uncertainties relating to government and regulatory policies, the legal
environment, the uncertainties of the reserving process, the competitive
environment in which the Company operates, the uncertainties inherent in
international operations, interest rate fluctuations and uncertainties related
to the Company's possible entrance into new insurance lines and new geographic
markets. The words "believe," "expect," "anticipate," "project," and similar
expressions identify forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
their dates. The Company undertakes no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise.
3
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated financial
statements appearing elsewhere, or incorporated by reference, in this
Prospectus. Except where otherwise indicated, (i) the "Company" or "ERI" refers
to Executive Risk Inc., with respect to any period subsequent to December 31,
1993, and to its wholly-owned subsidiary, Executive Re Inc. ("Executive Re"),
with respect to any period prior to January 1, 1994; (ii) "ERII" refers to
Executive Risk Indemnity Inc. and "ERSIC" refers to Executive Risk Specialty
Insurance Company (ERII and ERSIC are wholly-owned insurance company
subsidiaries of the Company and are sometimes collectively referred to as the
"Insurance Subsidiaries"); (iii) "ERMA" refers to Executive Risk Management
Associates, the Company's wholly-owned underwriting agency which offers
insurance policies issued by ERII and ERSIC, as well as by certain other
insurance companies; and (iv) all financial information in this Prospectus is
presented in accordance with generally accepted accounting principles ("GAAP"),
unless specified as being in accordance with statutory accounting practices
("SAP").
THE COMPANY
ERI is a specialty insurance holding company which, through its
subsidiaries, develops, markets and underwrites directors and officers liability
insurance ("D&O") and errors and omissions liability insurance ("E&O") for
lawyers and other professionals. Based on the most recently available survey of
the domestic D&O market by Watson Wyatt Worldwide, the Company is a leading D&O
underwriter and is the leading underwriter of D&O for not-for-profit health care
organizations based on policy count. The Company's subsidiaries also offer
fiduciary liability insurance and fidelity bonds for corporations, employment
practices liability insurance for corporations and their employees, technology
maintenance and repair coverage for hospitals and clinics and stop-loss
arrangements for providers of medical services. The Company markets its products
primarily through independent agents and brokers throughout the United States.
In recent years, the Company also has been marketing insurance outside the
United States, particularly in Europe. The Company intends to continue the
expansion of its international business.
Both D&O and E&O are designed to protect insureds against lawsuits and
associated legal defense expenses. In connection with D&O coverage of for-profit
corporations, such liabilities can arise from claims by customers, vendors,
competitors and former employees, although the most severe liabilities have
historically arisen from lawsuits by stockholders alleging director or officer
failure to discharge duties to the corporation or violations of federal
securities laws. In the case of not-for-profit organizations, the Company's
coverage is often implicated in employment practices litigation. E&O is most
often sold to professionals, such as attorneys, psychologists and insurance
agents, among others, where the principal sources of potential claims are
dissatisfied clients alleging breaches of professional standards or ethical
violations. Fiduciary liability coverages are intended primarily to protect
those who invest and administer benefit plan trusts, and fidelity insurance
coverages insure against losses associated with employee theft and other types
of employee dishonesty. Employment practices liability insurance, which is
available to cover both the employing organization and its supervisors, insures
against losses associated with employee claims such as sexual harassment,
wrongful termination and discriminatory treatment. The Company's non-liability
related products include a service contract and cost management product for
owners of high-tech diagnostic equipment and related healthcare technology, and
a stop-loss policy for providers of medical services that receive revenues for
their services under the capitation method.
The Company is in the process of exploring entry into certain new insurance
lines. Such entry could be by means of the establishment of new businesses or
the acquisition of existing businesses. Such new insurance lines may or may not
be related to the Company's core D&O and E&O lines. There can be no assurance as
to whether the Company will in fact enter into any such new insurance lines or,
if it does, as to the timing thereof, or as to the results of operations of such
new insurance lines.
4
<PAGE> 6
The following table sets forth the Company's gross premiums written by line
of business for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1996 GROSS 1995 GROSS 1994 GROSS
PREMIUMS PERCENT PREMIUMS PERCENT PREMIUMS PERCENT
WRITTEN OF TOTAL WRITTEN OF TOTAL WRITTEN OF TOTAL
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Domestic D&O............................ $240,680 72% $159,491 76% $104,871 81%
Lawyers E&O............................. 35,679 11 28,744 14 17,964 14
Miscellaneous E&O....................... 32,329 10 11,649 5 5,153 4
International D&O....................... 11,046 3 9,934 5 1,620 1
Other................................... 12,351 4 822 -- 591 --
--------- ----- --------- ----- --------- -----
Total................................. $332,085 100% $210,640 100% $130,199 100%
========= ===== ========= ===== ========= =====
</TABLE>
The table below sets forth statutory combined ratios for the periods
indicated for the Insurance Subsidiaries and the property/casualty industry as a
whole. The Insurance Subsidiaries' specialty products business is not directly
comparable to the business of the property/casualty industry as a whole.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
SAP DATA:
Insurance Subsidiaries' Combined Ratio..... 92.7% 90.7% 97.6% 102.1% 102.8%
Industry Combined Ratio(1)................. 105.9% 106.4% 108.4% 106.9% 115.7%
</TABLE>
- ------------------------------
(1) Source: For 1996, Best Week P/C Supplement, March 24, 1997 edition; for 1992
through 1995, Best's Aggregates & Averages--Property-Casualty.
Approximately 91% of the Company's investment portfolio at June 30, 1997,
on a fair value basis, consisted of cash and investment grade fixed maturity
securities. At that date, the Company's investment portfolio had an amortized
cost and fair value of $783.0 million and $818.3 million, respectively, and the
tax equivalent yield on the fixed maturity portfolio was 8.0%. The Company's
investment philosophy is to seek optimum total return in a manner consistent
with what the Company believes is a generally conservative investment approach.
At June 30, 1997, the Company's total assets were $1.1 billion and stockholders'
equity was $171.2 million.
The Insurance Subsidiaries' current pooled rating from A.M. Best Company,
Inc. ("A.M. Best") is "A (Excellent)" and their current pooled claims-paying
ability rating from Standard & Poor's Corporation ("S&P") is "A+ (Good)." These
ratings are based upon factors of concern to policyholders, including financial
condition and solvency, and are not directed to the protection of investors.
There can be no assurance that such ratings will not change in the future.
ERI employs approximately 400 people, most of whom are located at the
Company-owned headquarters building at 82 Hopmeadow Street, Simsbury,
Connecticut 06070.
5
<PAGE> 7
THE OFFERING
Common Stock offered by the
Company......................... 1,000,000 Shares
Common Stock to be outstanding
after
the Offering (1).............. 10,575,568 shares
Use of proceeds................. The net proceeds to the Company from the
Offering, based on an assumed public offering
price of $58.38 per share and after deducting
underwriting discounts and commissions and
estimated offering expenses, are estimated to
be $55.3 million ($63.6 million if the
Underwriters' over-allotment option is
exercised in full). The Company expects to
use the net proceeds from the Offering to
make surplus contributions to current and
newly-formed insurance company subsidiaries
of the Company in order to support existing
business lines and to finance entry into new
business lines, and for general corporate
purposes. See "Use of Proceeds."
Dividend policy................. The Company intends to continue to pay
quarterly cash dividends of $0.02 per share
of Common Stock ($0.08 annually), subject to
declaration by the Board of Directors and
certain regulatory and other constraints.
NYSE symbol..................... ER
- ------------------------------
(1) Based on 9,575,568 shares of Common Stock outstanding as of August 25, 1997.
Does not include (i) 1,248,834 shares of Common Stock issuable upon exercise
of employee stock options, (ii) 100,000 shares of Common Stock issuable upon
exercise of the option owned by Aetna Inc. (the "Aetna Option"), (iii)
43,117 shares of Common Stock issuable upon exercise of options granted to
directors under the Company's Nonemployee Directors Option Plan, (iv) 35,780
shares of Common Stock issuable upon exercise of options granted to former
directors of Executive Re, (v) any shares of Common Stock issuable pursuant
to the Company's Stock Incentive Plan and Performance Share Plan and (vi)
150,000 shares of Common Stock which may be sold by the Company upon
exercise of the Underwriters' over-allotment option. See "Underwriting."
6
<PAGE> 8
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The following selected consolidated historical financial data as of June
30, 1997 and 1996 and for each of the six-month periods ended June 30, 1997 and
1996 have been derived from unaudited consolidated financial statements and
include all adjustments (consisting only of normal recurring accruals) that the
Company considers necessary for a fair presentation of such financial
information for those periods. The results of operations for the six months
ended June 30, 1997 are not necessarily indicative of the results that may be
expected for any other interim period or for the full year ended December 31,
1997. The selected consolidated historical financial data as of December 31,
1996, 1995, 1994, 1993 and 1992 and for each of the years in the five-year
period ended December 31, 1996 have been derived from the audited consolidated
financial statements of the Company. The data set forth below should be read in
conjunction with the financial and other information included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996 and Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Gross premiums written............. $194,788 $148,039 $332,085 $210,640 $130,199 $ 84,255 $ 82,667
Net premiums written............... 121,978 96,165 210,376 145,121 108,285 70,519 74,605
Net premiums earned................ 96,435 70,338 155,784 116,434 94,961 69,014 71,926
Net investment income.............. 21,360 14,825 32,646 26,706 22,497 20,475 19,702
Net realized capital gains
(losses)......................... 1,341 (354) 1,047 1,588 (455) 1,964 869
Equity in earnings of ERMA......... -- -- -- -- -- 2,707 2,736
Other income (loss)................ 115 287 166 83 82 (364) --
-------- -------- -------- -------- -------- -------- --------
Total revenues................... 119,251 85,096 189,643 144,811 117,085 93,796 95,233
Loss and loss adjustment
expenses......................... 65,110 47,501 105,335 78,530 64,171 46,640 51,427
Policy acquisition costs........... 15,442 12,969 27,803 21,931 18,723 18,613 18,535
General and administrative costs... 12,085 7,080 17,068 10,730 8,890 8,749 6,409
Long-term incentive compensation... -- 187 187 1,458 1,009 1,100 --
Interest expense................... 1,419 1,874 4,511 2,022 1,519 1,421 1,420
Minority interest in Executive Risk
Capital Trust.................... 4,337 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total expenses................... 98,393 69,611 154,904 114,671 94,312 76,523 77,791
-------- -------- -------- -------- -------- -------- --------
Income before income taxes......... 20,858 15,485 34,739 30,140 22,773 17,273 17,442
Income tax expense................. 3,876 2,700 6,634 4,854 3,533 2,360 2,870
-------- -------- -------- -------- -------- -------- --------
Income before cumulative effect of
change in accounting for income
taxes............................ 16,982 12,785 28,105 25,286 19,240 14,913 14,572
Cumulative effect of change in
accounting for income taxes...... -- -- -- -- -- -- 1,387
-------- -------- -------- -------- -------- -------- --------
Net income......................... $ 16,982 $ 12,785 $ 28,105 $ 25,286 $ 19,240 $ 14,913 $ 15,959
======== ======== ======== ======== ======== ======== ========
Earnings per common and common
equivalent share(1).............. $ 1.66 $ 1.17 $ 2.67 $ 2.11 $ 1.80 $ 3.53 $ 3.44
======== ======== ======== ======== ======== ======== ========
Weighted average shares
outstanding...................... 10,217 10,910 10,509 11,956 10,108 3,128 3,120
Earnings per common share--assuming
full dilution(1)................. $ 1.66 $ 1.17 $ 2.67 $ 2.11 $ 1.69 $ 1.69 $ 1.66
======== ======== ======== ======== ======== ======== ========
Weighted average shares
outstanding-- assuming full
dilution ........................ 10,241 10,950 10,542 11,978 11,365 9,238 9,230
</TABLE>
7
<PAGE> 9
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and invested assets....... $ 818,303 $581,056 $690,975 $549,852 $431,849 $371,596 $319,773
Total assets(2)................ 1,147,124 773,375 941,247 705,920(6) 516,747 420,382 361,149
Long-term debt................. -- 70,000 70,000 25,000 25,000 25,000 25,000
Company obligated mandatorily
redeemable preferred
securities................... 125,000 -- -- -- -- -- --
Stockholders' equity(2)........ 171,173 118,528 144,775 177,725 130,854 114,837 92,473
OTHER DATA:
Loss ratio..................... 67.5% 67.5% 67.6% 67.4% 67.6% 67.6% 71.5%
Expense ratio.................. 28.6 28.5 28.8 28.1 29.1 39.6 34.7
---------- -------- -------- -------- -------- -------- --------
Combined ratio................. 96.1% 96.0% 96.4% 95.5% 96.7% 107.2% 106.2%
========== ======== ======== ======== ======== ======== ========
Ratio of net premiums written
to statutory surplus(3)(4)... 1.2x 1.5x 1.5x 1.2x 1.0x 0.7x 0.8x
Statutory surplus (at end of
period)(3)................... $ 200,256 $122,293 $138,405 $121,465 $107,401 $ 94,445 $ 91,689
Operating margin(5)............ 21.4% 20.7% 20.3% 21.3% 21.1% 19.3% 19.3%
</TABLE>
- ------------------------------
(1) Per share information is based on income before cumulative effect of change
in accounting for income taxes. Earnings per common and common equivalent
share and earnings per common share--assuming full dilution based on net
income were $3.88 and $1.81, respectively, for the year ended December 31,
1992.
(2) As of June 30, 1997 and 1996 and as of December 31, 1996, 1995, 1994 and
1993, includes $11.6 million, $7.6 million, $11.7 million, $15.4 million,
($3.3) million and $12.4 million, respectively, net of deferred taxes, in
total assets and stockholders' equity from unrealized gains (losses)
pursuant to Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities."
(3) Statutory data has been derived from the financial statements of the
Insurance Subsidiaries prepared in accordance with SAP.
(4) Ratios of net premiums written to statutory surplus are calculated on a
rolling twelve month basis.
(5) Consists of income before taxes, excluding interest expense, minority
interest in Executive Risk Capital Trust, realized capital gains (losses)
and certain non-recurring expenses, divided by total revenues, excluding
realized capital gains (losses).
(6) Certain 1995 amounts have been reclassified to conform with the 1996
presentation.
8
<PAGE> 10
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors and risks should be considered carefully by potential purchasers in
evaluating the Company, its business and the shares of Common Stock offered
hereby:
CERTAIN BUSINESS CONSIDERATIONS
Factors affecting the sectors of the insurance industry in which the
Company operates may subject the Company to significant fluctuations in
operating results. These factors include competition and general economic
conditions, including interest rate levels, as well as legislative initiatives,
the frequency of litigation, and the size of judgments obtained against
directors and officers. The impact of these factors can dramatically affect
demand for the Company's products, insurance capacity, pricing and claims
experience and, consequently, the Company's results of operations. Due to the
Company's underwriting policy of pricing its insurance products primarily
according to perceived risk exposure rather than according to pricing patterns
in the market, it is possible that the Company will seek to raise prices during
times of excess insurance capacity (or, will not seek to raise prices during
times of limited insurance capacity) with an accompanying adverse impact on the
Company's results of operations, market share or both.
The professional liability insurance sectors of the property/casualty
industry have experienced a prolonged "soft market," characterized by intense
competition and strong downward pricing pressures. The Company's business
strategy for continued growth relies on finding underserved markets, primarily
in the D&O and E&O sectors, where it can create and profitably underwrite
attractive insurance products. The Company's ability to pursue such strategy
entails certain risks, due to the highly competitive nature of the insurance
industry. The Company competes with domestic and foreign insurers and
reinsurers, some of which have greater financial, marketing and management
resources and experience than the Company. The Company may also be required to
compete with new market entrants in the future. Competition is based on many
factors, including the perceived financial strength of the insurer, pricing and
other terms and conditions, levels of customer service (including the speed with
which claims are paid), ratings assigned by independent rating organizations
(including A.M. Best and S&P) and reputation and experience in the business.
This competition could have an adverse effect on the Company's results of
operations. In addition, with respect to the Company's ratings, A.M. Best and
S&P each reviews its ratings of insurance companies from time to time. There can
be no assurance that any particular rating will continue for any given period of
time or that it will not be changed or withdrawn entirely if, in the judgment of
the rating agency, circumstances so warrant. If either the Company's A.M. Best
rating or its claims-paying ability rating from S&P were downgraded from its
current level, the Company's results of operations could be materially and
adversely affected.
The Company offers liability coverage to members of various professions on
a program basis, that is, through wholesale brokers who control regional or
national books of business. These "program administrators" function similarly to
managing general agents. They are authorized to receive insurance applications
and issue Insurance Subsidiary policies, all in accordance with underwriting
criteria specified by the Company. Program administrators generally are not
authorized to handle or pay claims or to bind reinsurance. Distribution through
program administrators entails certain fidelity, credit and underwriting risks
not ordinarily encountered in connection with the Company's other distribution
methods.
REGULATION
The Insurance Subsidiaries are subject to a substantial degree of
regulatory oversight, which generally is designed to protect the interests of
policyholders as opposed to stockholders. Such regulation relates to authorized
lines of business, policy rates and forms, capital and surplus requirements,
investment parameters, underwriting limitations, transactions with affiliates,
dividend limitations, changes in control and a variety of other financial and
nonfinancial components of an insurance company's business. The Company believes
that more, rather than less, regulation is likely in the future. The National
Association of Insurance Commissioners (the "NAIC") has adopted a system of
assessing the financial condition and stability of insurance companies, known as
"IRIS ratios," and a system to test the adequacy of statutory capital, known as
"risk-based capital," each of which applies to the Insurance Subsidiaries. IRIS
ratios consist of 11 ratios that are compiled annually from each insurance
company's statutory financial reports and then compared against the
NAIC-established
9
<PAGE> 11
"usual range" for each ratio. The Insurance Subsidiaries, which are experiencing
rapid premium growth, have fallen outside the usual range for certain IRIS
ratios from time to time. The risk-based capital rules, required for the first
time in regulatory filings for 1994, establish statutory capital requirements
based on levels of risk assumed by an insurance company. The formulas for
determining the amount of risk-based capital specify various weighting factors
that are applied to financial balances or various levels of activity based on
the perceived degree of risk. Regulatory compliance is determined by a ratio of
the insurance company's regulatory total adjusted capital to its authorized
control level risk-based capital, both as defined by the NAIC, calculated as of
the end of each fiscal year. At December 31, 1996, the total adjusted capital
(as defined by the NAIC) of ERII and ERSIC was in excess of the risk-based
capital regulatory action level. The application of the proceeds from the
February 1997 offering of 8.675% Series A Capital Securities by a trust
affiliated with the Company (the "Capital Securities") caused the total adjusted
capital of ERII and ERSIC to exceed the risk-based capital company action level,
which is a higher standard. See Note 16 of the Notes to Consolidated Financial
Statements included in the Company's Annual Report on Form 10-K incorporated
herein by reference. Failure to maintain risk-based capital at the required
levels, or generation of IRIS ratios far outside the NAIC's usual range, could
adversely affect the Insurance Subsidiaries' ability to secure regulatory
approvals as necessary or appropriate in connection with their insurance
businesses.
HOLDING COMPANY STRUCTURE; DIVIDEND RESTRICTIONS
ERI is an insurance holding company. Dividends and other payments from the
Insurance Subsidiaries and ERMA are ERI's primary source of funds to pay
expenses, service debt and pay dividends, if any. The payment of dividends by
ERII and ERSIC is subject to restrictions set forth in the Delaware and the
Connecticut insurance laws, respectively. In general, these restrictions limit
the aggregate amount of dividends or other distributions that the Insurance
Subsidiaries may declare or pay to ERI within any 12-month period without the
permission of the applicable regulatory authority (generally to an amount less
than the greater of statutory net income (excluding realized capital gains in
the case of Delaware) for the preceding year or 10% of statutory surplus), and
require that the statutory surplus of the applicable Insurance Subsidiary
following any such dividend or distribution be reasonable in relation to its
outstanding liabilities and adequate to its financial needs. As of December 31,
1996, the Company's Insurance Subsidiaries had sufficient capital and earnings
to pay up to $13.8 million of dividends to the Company during 1997 without prior
regulatory approval. As of the date hereof, no dividends have been paid to the
Company by the Insurance Subsidiaries during 1997.
In addition, under applicable state insurance laws and regulations, no
person may acquire control of ERII, ERSIC or any corporation controlling either
of them unless such person has filed a statement containing specified
information with appropriate regulatory authorities and approval for such
acquisition has been obtained. Under applicable laws and regulations, any person
acquiring, directly or indirectly, or holding proxies with respect to, 10% or
more of the voting stock of any other person is presumed to have acquired
"control of such person." Accordingly, any purchase resulting in the purchaser
owning 10% or more of the outstanding Common Stock of ERI, in the Offering or
otherwise, would require prior approval by applicable regulatory authorities.
Such prior approval requirement also would apply to an acquisition of proxies to
vote 10% or more of the outstanding Common Stock of ERI and, therefore, in a
proxy contest could delay or prevent a stockholder from acquiring such proxies.
No assurance can be given as to whether or not the Company would seek to invoke
these laws and regulations in the event of a contested solicitation of proxies.
In connection with the issuance of the Capital Securities in February 1997,
the Company issued junior subordinated debentures (the "Junior Subordinated
Debentures") and a guarantee of certain payments (the "Guarantee") with respect
to the Capital Securities. In connection with the Guarantee and the Junior
Subordinated Debentures, the Company has agreed that if an event of default with
respect to the Guarantee or the Junior Subordinated Debentures has occurred, the
Company shall not, in general, declare or pay dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Company's capital stock (which includes common and preferred stock).
10
<PAGE> 12
ADEQUACY OF LOSS RESERVES
The reserves for losses and loss adjustment expenses represent the
Company's estimates of liability on outstanding claims. These estimates involve
actuarial and statistical projections of the expected ultimate cost of
administering and settling these claims based on facts and circumstances then
known, predictions of future events, estimates of future trends in claims
severity and other variable factors such as inflation and new theories of
liability. As estimates, reserves may not accurately reflect amounts that are
ultimately incurred in administering and settling insured losses, particularly
in the instance of companies with relatively short operating histories or
companies that have a heavy reliance on relatively newer product lines, such as
the Company. If the reserve estimates prove to be inadequate, the Company would
be required to augment its reserves, resulting in a charge to earnings in the
period in which such action occurs. Although the Company believes that its
reserves are adequate, there can be no assurance that ultimate loss experience
will not exceed the Company's reserves, resulting in a material adverse effect
on the Company's financial condition and results of operations. Since 1988, the
Company has retained the services of an independent actuarial consulting firm to
provide opinions regarding reserves as required for state regulatory filings.
The Company intends to utilize such services in the future. In addition,
although the Company seeks to spread risk through the use of reinsurance
programs, like other insurance companies, it is subject to the risk of severe or
multiple losses, which could materially and adversely affect its financial
position and results of operations.
REINSURANCE
The Company has historically utilized reinsurance arrangements to limit the
amount of risk retained under policies written or reinsured by the Insurance
Subsidiaries. The Company currently has in place a number of reinsurance
programs pursuant to which it cedes risks. The ceding of risk to reinsurers does
not relieve the Company of liability to its insureds and reinsureds, and
consequently the Company is subject to credit risk with respect to its
reinsurers. While the Company endeavors to reinsure only with financially sound
reinsurers, there can be no assurance that the Company will not experience
difficulties in the future in collecting reinsurance recoverables under these
arrangements should one or more of its reinsurers suffer financial detriment. In
addition, the availability and cost of reinsurance arrangements are subject to
prevailing market conditions, which are beyond the Company's control. The
Company may in the future choose to revise further its reinsurance practices to
increase, decrease or eliminate entirely the amount of risk it cedes to
reinsurers.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS
The Company's Certificate of Incorporation and By-laws, its Stockholder
Rights Plan, as well as the Delaware corporation law and the Delaware and
Connecticut insurance laws, all contain provisions that could have the effect of
discouraging a prospective acquirer from making a tender offer or otherwise
attempting to obtain control of the Company.
11
<PAGE> 13
USE OF PROCEEDS
The net proceeds to the Company from the Offering, based on an assumed
public offering price of $58.38 per share and after deducting underwriting
discounts and commissions and estimated offering expenses, are estimated to be
$55.3 million ($63.6 million if the Underwriters' over-allotment option is
exercised in full). The Company expects to use the net proceeds from the
Offering to make surplus contributions to current and newly-formed insurance
company subsidiaries of the Company in order to support existing business lines
and to finance entry into new business lines, and for general corporate
purposes.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is traded on the NYSE under the symbol "ER". The following
table sets forth the high and low sales prices of the Common Stock on the NYSE
for the period from January 1, 1995 through August 25, 1997 and the cash
dividends paid for the periods indicated.
<TABLE>
<CAPTION>
MARKET PRICE
------------
HIGH LOW DIVIDEND
<S> <C> <C> <C>
1995:
First Quarter.................................................... $17 1/8 $13 5/8 $0.02
Second Quarter................................................... 19 16 5/8 0.02
Third Quarter.................................................... 23 7/8 18 3/8 0.02
Fourth Quarter................................................... 29 22 0.02
1996:
First Quarter.................................................... $33 5/8 $26 1/8 $0.02
Second Quarter................................................... 38 1/4 29 1/4 0.02
Third Quarter.................................................... 38 1/2 33 3/8 0.02
Fourth Quarter................................................... 42 3/8 33 7/8 0.02
1997:
First Quarter.................................................... $49 $35 5/8 $0.02
Second Quarter................................................... 56 3/8 43 1/4 0.02
Third Quarter (through August 25, 1997).......................... 61 49 5/16 --
</TABLE>
The Company intends to continue to pay quarterly cash dividends of $0.02
per share of Common Stock (a rate of $0.08 annually). The payment of dividends
is subject to the discretion of the Board of Directors and will depend upon
general business conditions, legal and contractual restrictions on the payment
of dividends and other factors that the Board of Directors deems relevant.
As an insurance holding company, ERI depends in large part on dividends and
other payments from its subsidiaries for the payment of cash dividends to
stockholders. In the case of the Insurance Subsidiaries, such payments are
restricted by insurance laws, and insurance regulators have authority in certain
circumstances to prohibit payments of dividends and other amounts by the
Insurance Subsidiaries that would otherwise be permitted without regulatory
approval. The Company is a party to a loan agreement that also restricts the
payment of dividends. As of the date hereof, there is no amount outstanding
under the Company's loan agreement. See Note 6 of the Notes to Consolidated
Financial Statements included in the Company's Annual Report on Form 10-K
incorporated herein by reference.
In connection with the issuance of the Capital Securities in February 1997,
as described more fully in Note 16 of the Notes to Consolidated Financial
Statements included in the Company's Annual Report on Form 10-K incorporated
herein by reference, the Company issued the Junior Subordinated Debentures and
the Guarantee. In connection with the Guarantee and the Junior Subordinated
Debentures, the Company has agreed that if an event of default with respect to
the Guarantee or the Junior Subordinated Debentures has occurred, the Company
shall not, in general, declare or pay dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of the
Company's capital stock (which includes common and preferred stock).
12
<PAGE> 14
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of June 30, 1997 and as adjusted to give effect to the sale of
1,000,000 shares of Common Stock offered by the Company based on an assumed
public offering price of $58.38 per share (after deduction of underwriting
discounts and commissions and estimated offering expenses) and the application
of the net proceeds as described in "Use of Proceeds." The data set forth below
should be read in conjunction with the financial and other information included
in the Company's Annual Report on Form 10-K for the year ended December 31, 1996
and the Quarterly Report on Form 10-Q for the quarter ended June 30, 1997
incorporated herein by reference.
<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------
ACTUAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
Company obligated mandatorily redeemable preferred securities
of subsidiary Executive Risk Capital Trust holding solely $125,000,000
aggregate principal amount of 8.675% Series B Junior Subordinated
Deferrable Interest Debentures of the Company due February 1, 2027 and
$3,866,000 aggregate principal amount of 8.675% Series A Junior
Subordinated Deferrable Interest Debentures of the Company due
February 1, 2027...................................................... $125,000 $ 125,000
Stockholders' equity:
Common stock (1)...................................................... 106 116
Additional paid-in capital............................................ 99,223 154,486
Unrealized gains on investments, net of tax........................... 22,971 22,971
Currency translation adjustments...................................... (556) (556)
Retained earnings..................................................... 81,989 81,989
Cost of shares in treasury, at cost--1,114,421 shares................. (32,560) (32,560)
-------- ---------
Total stockholders' equity......................................... 171,173 226,446
-------- ---------
Total capitalization............................................. $296,173 $ 351,446
======== =========
</TABLE>
- ------------------------------
(1) Does not include (i) 1,323,546 shares of Common Stock issuable upon exercise
of employee stock options, (ii) 100,000 shares of Common Stock issuable upon
exercise of the Aetna Option, (iii) 42,900 shares of Common Stock issuable
upon exercise of options granted to directors under the Company's
Nonemployee Directors Option Plan, (iv) 36,280 shares of Common Stock
issuable upon exercise of options granted to former directors of Executive
Re, (v) any shares of Common Stock issuable pursuant to the Company's Stock
Incentive Plan and Performance Share Plan and (vi) 150,000 shares of Common
Stock which may be sold by the Company upon exercise of the Underwriters'
over-allotment option. See "Underwriting."
The Company currently expects to issue up to $75 million aggregate
principal amount of debt securities during the third or fourth calendar quarter
of 1997. There can be no assurance that such debt securities will be issued, or,
if issued, as to the terms thereof, including without limitation the interest
rate and other financial terms.
13
<PAGE> 15
UNDERWRITING
Subject to the terms and conditions contained in the underwriting
agreement, dated September , 1997 (the "Underwriting Agreement"), among the
Company, Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), Conning &
Company ("Conning") and Oppenheimer & Co., Inc., which are acting as
representatives (the "Representatives") for the underwriters named below (the
"Underwriters"), the Company has agreed to sell to the Underwriters and each of
the Underwriters has severally agreed to purchase the number of Shares set forth
opposite its name below.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation..................
Conning & Company....................................................
Oppenheimer & Co., Inc. .............................................
Total...................................................... 1,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Shares offered hereby are
subject to approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all such
Shares, if any are taken.
The Company has been advised by the Representatives that the Underwriters
propose initially to offer the Shares, in part, directly to the public at the
price set forth on the cover page of this Prospectus and, in part, to certain
dealers at such price less a concession not in excess of $ per share. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share to certain other dealers. After the Offering, the offering price
and other selling terms may be changed by the Representatives.
The Company has granted to the Underwriters an option, exercisable within
30 days after the date of this Prospectus, to purchase up to 150,000 additional
shares of Common Stock at the public offering price, less the underwriting
discount and commissions. The Underwriters may exercise such option solely for
the purpose of covering over-allotments, if any, made in connection with the
Offering. To the extent such option is exercised, each Underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number of Shares to be purchased by
said Underwriter shown in the foregoing table bears to the total number of
Shares initially offered by the Underwriters hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities under the Securities Act, or to contribute to payments that the
Underwriters may be required to make in respect thereof.
In connection with the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may over-allot the Offering,
creating a syndicate short position. In addition, the Underwriters may bid for
and purchase shares of Common Stock in the open market to cover such syndicate
short position or to stabilize the price of the Common Stock. These activities
may stabilize or maintain the market price of the Common Stock above independent
market
14
<PAGE> 16
levels. The Underwriters are not required to engage in these activities, and may
end any of these activities at any time.
The Company has agreed, for a period of 90 days after the date of this
Prospectus, without the prior written consent of the Representatives, not to (i)
offer, sell, contract to sell, or grant any option to purchase or otherwise
dispose of any shares of Common Stock other than pursuant to any employee or
director stock-based plans, or (ii) file any registration statement under the
Securities Act with respect to shares of Common Stock other than pursuant to any
employee or director stock-based plans.
From time to time, DLJ and Conning have participated in offerings of
securities issued by the Company or its affiliates. Most recently, in February
1997, DLJ participated in the offering of the Capital Securities. In addition,
both DLJ and Conning participated in an underwritten offering of the Common
Stock in June 1996. In such transactions, DLJ and Conning received customary
compensation. Conning also provides the Company and the Insurance Subsidiaries
with investment advisory, record-keeping and related services pursuant to an
agreement that is annually renewable in June. For services rendered during 1996,
the Company paid Conning approximately $0.6 million
CERTAIN LEGAL MATTERS
Certain legal matters in connection with the offering of the Shares made
hereby will be passed upon for the Company by Dewey Ballantine, 1301 Avenue of
the Americas, New York, New York. James A. FitzPatrick, Jr., Secretary of the
Company, is a member of Dewey Ballantine. From time to time, Dewey Ballantine
represents Donaldson, Lufkin & Jenrette Securities Corporation, one of the
Representatives. Certain legal matters in connection with the offering of the
Shares made hereby will be passed upon for the Underwriters by LeBoeuf, Lamb,
Greene & MacRae, L.L.P., a limited liability partnership including professional
corporations, 125 West 55th Street, New York, New York.
EXPERTS
The consolidated financial statements and schedules of the Company
incorporated by reference or appearing in the Company's Annual Report on Form
10-K for the year ended December 31, 1996, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon incorporated by
reference therein and incorporated herein by reference. Such consolidated
financial statements and schedules are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
With respect to the unaudited consolidated interim financial information
for the three-month periods ended March 31, 1997 and March 31, 1996, and the
six-month periods ended June 30, 1997 and June 30, 1996, incorporated by
reference in this Prospectus, 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 Reports on Form 10-Q for the quarters ended March 31, 1997
and June 30, 1997, 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.
The independent auditors are not subject to the liability provisions of Section
11 of the Securities Act for their reports on the unaudited interim financial
information because those reports are not "reports" or "parts" of the
Registration Statement prepared or certified by the auditors within the meaning
of Sections 7 and 11 of the Securities Act.
15
<PAGE> 17
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.................... 4
Risk Factors.......................... 9
Use of Proceeds....................... 12
Price Range of Common Stock and
Dividends........................... 12
Capitalization........................ 13
Underwriting.......................... 14
Certain Legal Matters................. 15
Experts............................... 15
</TABLE>
======================================================
======================================================
1,000,000 SHARES
LOGO
COMMON STOCK
------------------------------
PROSPECTUS
------------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CONNING & COMPANY
OPPENHEIMER & CO., INC.
SEPTEMBER , 1997
======================================================
<PAGE> 18
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized statement of the estimated amounts (except for
the SEC registration fee and the NASD filing fee, which are actual amounts) of
all expenses payable by the Registrant in connection with the registration of
the Common Stock offered hereby, other than underwriting discounts and
commissions:
<TABLE>
<S> <C>
SEC registration fee..................................................... $19,558.71
NASD filing fee.......................................................... 6,954.00
Blue Sky fees and expenses (including counsel fees)...................... 6,500.00
NYSE listing fee......................................................... 4,025.00
Accountants' fees and expenses........................................... 40,000.00
Legal fees and expenses.................................................. 130,000.00
Printing expenses........................................................ 90,000.00
Miscellaneous............................................................ 2,962.29
--------
Total............................................................... 300,000.00
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145(a) of the General Corporation Law of the State of Delaware
provides that a Delaware corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no cause to believe the person's conduct
was unlawful.
Section 145(b) provides that a Delaware corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by the person in
connection with the defense or settlement of such action or suit if the person
acted under similar standards set forth above, except that no indemnification
may be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall determine that despite the adjudication of liability, such person
is fairly and reasonably entitled to be indemnified for such expenses which the
court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) or in the
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith; that indemnification provided for by Section 145 shall not
be deemed exclusive of any other rights to which the indemnified party may be
entitled; and that the corporation may purchase and maintain insurance on behalf
of a director or officer of the corporation against any liability asserted
against him or incurred by him in any such capacity or
II-1
<PAGE> 19
arising out of his status as such whether or not the corporation would have the
power to indemnify him against such liabilities under such Section 145.
The Company's By-laws provide that the Company shall indemnify officers and
directors, employees and agents of the Company, to the full extent permitted by
and in the manner permissible under the laws of the State of Delaware. The
By-laws also permit the Board of Directors to authorize the Company to purchase
and maintain insurance against any liability asserted against any director,
officer, employee or agent of the Company arising out of his capacity as such.
Section 102(b)(7) of the General Corporation Law provides that a
corporation in its original certificate of incorporation or an amendment thereto
validly approved by stockholders may eliminate or limit personal liability of
members of its board of directors or governing body for monetary damages for
breach of a director's fiduciary duty. However, no such provision may eliminate
or limit the personal liability of a director for breaching his duty of loyalty,
failing to act in good faith, engaging in intentional misconduct or knowingly
violating a law, paying a dividend or approving a stock repurchase which was
illegal, or obtaining an improper personal benefit. A provision of this type has
no effect on the availability of equitable remedies, such as injunction or
rescission, for breach of fiduciary duty. The Company's Certificate of
Incorporation contains such a provision.
Reference is made to Section 7 of the Underwriting Agreement to be filed as
Exhibit 1.1 to this Registration Statement pursuant to which the underwriters
may, under certain circumstances, indemnify the officers and directors of the
Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
(A) EXHIBIT
<S> <C> <C> <C>
1.1 -- Form of Underwriting Agreement.
5.1 -- Opinion of Dewey Ballantine
15.1 -- Acknowledgment Letter of Ernst & Young LLP
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Dewey Ballantine (contained in Exhibit 5.1)
*24.1 -- Power of Attorney (included with the signatures in Part II of this
Registration Statement)
</TABLE>
- ------------------------------
* Previously filed.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes that:
(i) For the purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the registrant
pursuant to
II-2
<PAGE> 20
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this registration statement as of the time it was declared
effective; and
(ii) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-3
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Simsbury, State of Connecticut, on August 25,
1997.
EXECUTIVE RISK INC.
BY: /s/ ROBERT H. KULLAS
-----------------------------------
Robert H. Kullas
Chairman
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below on August 25, 1997 by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<C> <S>
/s/ ROBERT H. KULLAS Chairman
---------------------------------------------
Robert H. Kullas
* Chief Executive Officer and President
--------------------------------------------- (Principal Executive Officer) and Director
Stephen J. Sills
* Executive Vice President, Treasurer,
--------------------------------------------- Chief Financial Officer (Principal Financial
Robert V. Deutsch Officer and Principal Accounting Officer),
Chief Actuary and Director
* Director
---------------------------------------------
Gary G. Benanav
* Director
---------------------------------------------
Barbara G. Cohen
* Director
---------------------------------------------
John G. Crosby
* Director
---------------------------------------------
Patrick A. Gerschel
* Director
---------------------------------------------
Peter Goldberg
* Director
---------------------------------------------
Michael D. Rice
* Director
---------------------------------------------
Joseph D. Sargent
*By /s/ ROBERT H. KULLAS
---------------------------------------------
Robert H. Kullas
Attorney-In-Fact
</TABLE>
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER PAGE
- ------- ------------
<C> <C> <S> <C>
1.1 -- Form of Underwriting Agreement.........................................
5.1 -- Opinion of Dewey Ballantine............................................
15.1 Acknowledgment Letter of Ernst & Young LLP
23.1 -- Consent of Ernst & Young LLP...........................................
23.2 -- Consent of Dewey Ballantine (contained in Exhibit 5.1).................
*24.1 -- Power of Attorney......................................................
</TABLE>
- ------------------------------
* Previously filed.
<PAGE> 1
DRAFT
8/26/97
1,000,000 SHARES
EXECUTIVE RISK INC.
COMMON STOCK
UNDERWRITING AGREEMENT
__________, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CONNING & COMPANY
OPPENHEIMER & CO., INC.
As representatives of the
several Underwriters
named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
Executive Risk Inc., a Delaware corporation (the "Company"),
proposes to issue and sell 1,000,000 shares of its common stock, par value $.01
(the "Firm Shares") to the several underwriters named in Schedule I hereto (the
"Underwriters"). The Company also proposes to issue and sell to the several
Underwriters not more than an additional 150,000 shares of its common stock, par
value $.01 (the "Additional Shares") if requested by the Underwriters as
provided in Section 2 hereof. The Firm Shares and the Additional Shares are
hereinafter referred to collectively as the "Shares." The shares of common stock
of the Company to be outstanding after giving effect to the sales contemplated
hereby are hereinafter referred to as the "Common Stock."
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), Conning
& Company and Oppenheimer & Co., Inc. and shall
<PAGE> 2
act as representatives (the "Representatives") of the several Underwriters.
SECTION 1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Act"), a registration statement on Form S-3 (Registration
No. 333-33395), including a prospectus, relating to the Shares. The registration
statement, as amended at the time it became effective, including any amendment
to the registration statement filed pursuant to Rule 462(b) under the Act
increasing the size of the offering registered under the Act and the information
(if any) deemed to be part of the registration statement at the time of
effectiveness pursuant to Rule 430A under the Act, is hereinafter referred to as
the "Registration Statement"; and the prospectus in the form first used to
confirm sales of Shares is hereinafter referred to as the "Prospectus"
(including, in the case of all references to the Registration Statement or the
Prospectus, documents incorporated therein by reference). The terms "supplement"
and "amendment" or "amend" as used in this Agreement with respect to the
Registration Statement or the Prospectus shall include all documents
subsequently filed by the Company with the Commission pursuant to the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Exchange Act") that are deemed to be
incorporated by reference in the Prospectus.
SECTION 2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations and warranties contained in this Agreement, and subject to its
terms and conditions, the Company agrees to issue and sell, and each Underwriter
hereby agrees, severally and not jointly, to purchase from the Company at a
price per Share of $______ (the "Purchase Price") the number of Firm Shares
(subject to such adjustments to eliminate fractional shares as the
Representatives may determine) set forth opposite the name of such Underwriter
in Schedule I hereto.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company hereby agrees to
issue and sell to the Underwriters, the Additional Shares and the Underwriters
shall have the right to purchase, severally and not jointly, up to an aggregate
of 150,000 Additional Shares from the Company at the Purchase Price. Additional
Shares may be purchased solely for the purpose of covering over-allotments made
in connection with the offering of the Firm Shares. The Underwriters may
exercise their right to purchase Additional Shares in whole or in part from time
to time by giving written notice thereof to the Company
-2-
<PAGE> 3
within 30 days after the date of this Agreement. The Representatives shall give
any such notice on behalf of the Underwriters and such notice shall specify the
aggregate number of Additional Shares to be purchased pursuant to such exercise
and the date for payment and delivery thereof. The date specified in any such
notice shall be a business day (i) no earlier than two business days after such
notice has been given (and, in any event, no earlier than the Closing Date (as
hereinafter defined)) and (ii) no later than ten business days after such notice
has been given. If any Additional Shares are to be purchased, each Underwriter,
severally and not jointly, agrees to purchase from the Company the number of
Additional Shares (subject to such adjustments to eliminate fractional shares as
the Representatives may determine) which bears the same proportion to the total
number of Additional Shares to be purchased from the Company as the number of
Firm Shares set forth opposite the name of such Underwriter in Schedule I bears
to the total number of Firm Shares.
The Company shall, concurrently with the execution of this
Agreement, deliver an agreement executed by each of the directors and executive
officers of the Company pursuant to which each such person agrees not to
directly or indirectly offer, sell, contract to sell, grant any option to
purchase or otherwise dispose of any capital stock of the Company or any
securities convertible into or exercisable or exchangeable for such capital
stock or in any other manner transfer all or a portion of the economic
consequences associated with the ownership of any such capital stock, except to
the Underwriters pursuant to this Agreement, for a period of ____ days after the
date of the Prospectus, without the prior written consent of the Representatives
(the "Lock-up"), and except any transfers of such capital stock pursuant to bona
fide gifts whereby the transferee agrees in writing to be bound by the Lock-up.
SECTION 3. TERMS OF PUBLIC OFFERING. The Company is advised by you
that the Underwriters propose (i) to make a public offering of their respective
portions of the Shares as soon after the execution and delivery of this
Agreement as in your judgment is advisable and (ii) initially to offer the
Shares upon the terms set forth in the Prospectus.
SECTION 4. DELIVERY AND PAYMENT. Delivery to the Underwriters of and
payment for the Firm Shares shall be made at 9:00 A.M., New York City time, on
__________, 1997 (the "Closing Date") at LeBoeuf, Lamb, Greene & MacRae, L.L.P.,
125 West 55th Street, New York, New York 10019 or at such other place as you
shall designate. The Closing Date and the location of delivery of and payment
for the Firm Shares may be varied by agreement between you and the Company.
-3-
<PAGE> 4
Delivery to the Underwriters of and payment for any Additional
Shares to be purchased by the Underwriters shall be made at LeBoeuf, Lamb,
Greene & MacRae, L.L.P., 125 West 55th Street, New York, New York 10019 or at
such other place as you shall designate at 9:00 A.M., New York City time, on the
date specified in the applicable exercise notice given by the Representatives
pursuant to Section 2 (the "Option Closing Date"). Any such Option Closing Date
and the location of delivery of and payment for such Additional Shares may be
varied by agreement between the Representatives and the Company.
Certificates for the Shares and/or the Additional Shares, as the
case may be, shall be registered in such names and issued in such denominations
as you shall request in writing not later than two full business days prior to
the Closing Date or the Option Closing Date, as the case may be. Such
certificates shall be made available to you for inspection not later than 9:30
A.M., New York City time, on the business day next preceding the Closing Date or
the Option Closing Date, as the case may be. Certificates in definitive form
evidencing the Shares shall be delivered to you on the Closing Date or the
Option Closing Date, as the case may be, with any transfer taxes thereon duly
paid by the Company, for the respective accounts of the several Underwriters,
against payment to the Company of the Purchase Price therefor by wire transfer
of Federal or other funds immediately available in New York City.
SECTION 5. AGREEMENTS OF THE COMPANY. The Company agrees with you as
follows:
(a) As soon as practicable after the execution and delivery of this
Agreement, the Company will file (i) if the Registration Statement is not
yet effective, an amendment to the Registration Statement or (ii) if the
Registration Statement is already effective, a post-effective amendment to
the Registration Statement, if necessary, pursuant to Rule 430A under the
Act. The Company will use its best efforts to cause the Registration
Statement or such post-effective amendment to become effective at the
earliest possible time. The Company will comply fully and in a timely
manner with the applicable provisions of Rules 424 and 430A under the Act.
(b) The Company will advise you promptly and, if requested by you,
will confirm such advice in writing, (i) when the Registration Statement
has become effective (if such Registration Statement has not become
effective prior to the execution of this Agreement), if and when any
Prospectus is filed with the Commission pursuant to Rule 424 under the Act
and when any post-effective amendment to the Registration Statement
becomes effective, (ii) of any
-4-
<PAGE> 5
request by the Commission for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional information,
(iii) if and when it becomes aware of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement
or the issuance by any state securities commission or other regulatory
authority of any order suspending the qualification or exemption from
qualification of the Shares for offering or sale in any jurisdiction, or
the initiation of any proceeding for such purposes, (iv) if the Company is
required to file a Rule 462(b) Registration Statement after the
effectiveness of this Agreement, when the Rule 462(b) Registration
Statement has become effective and (v) of the happening of any event
during the period referred to in paragraph (f) below, if and when it
becomes aware of any material change in the business, prospects,
operations, properties, net worth, results of operations or financial
condition of the Company and its subsidiaries (including, for the purposes
of this Agreement, any Subsidiary (as hereinafter defined)), taken as a
whole, or of the happening of any event which makes any statement of a
material fact made in the Registration Statement or the Prospectus untrue
or which requires the making of any additions to or changes in the
Registration Statement or the Prospectus in order to make the statements
therein not misleading in any material respect. If at any time the
Commission shall issue any stop order of which the Company becomes aware
suspending the effectiveness of the Registration Statement or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Shares, the Company will make every reasonable effort to obtain the
withdrawal or lifting of such order at the earliest possible time.
(c) The Company will furnish to you, without charge, four signed
copies of the Registration Statement as first filed with the Commission
and of each amendment to it, including all exhibits filed therewith and
documents incorporated by reference therein, and will furnish to you and
each Underwriter designated by you such number of conformed copies of the
Registration Statement as so filed and of each amendment to it, without
exhibits but including documents incorporated therein by reference, as you
may reasonably request.
(d) The Company will not (i) file any amendment or supplement to the
Registration Statement, whether before or after the time when the
Registration Statement becomes effective, or make any amendment or
supplement to the Prospectus of which you shall not previously have been
advised or to which you shall reasonably and timely object
-5-
<PAGE> 6
or (ii) during such period as, in the judgment of counsel for the
Underwriters, a Prospectus is required to be delivered in connection with
sales by any Underwriter or dealer, file any information, documents or
reports pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), without delivering a copy of such information, documents
or reports to you, as the Representatives, prior to, concurrently with or
immediately after such filing. The Company will prepare and file with the
Commission, promptly upon your reasonable request, any amendment to the
Registration Statement or any amendment or supplement to the Prospectus
that may be necessary or advisable in connection with the distribution of
the Shares as determined by the Company and the Representatives. The
Company will use its best efforts to cause any such amendment or
supplement to become effective as promptly as possible. In the event that
the Company and you, as the Representatives, agree that the Prospectus
should be amended or supplemented, the Company, if requested by you, will
promptly issue a press release announcing or disclosing the matters to be
covered by the proposed amendment or supplement.
(e) Prior to the execution and delivery of this Agreement, the
Company has delivered to you, without charge, in such quantities as you
have reasonably requested, copies of each form of preliminary prospectus.
The Company consents to the use, in accordance with the provisions of the
Act and with the securities, insurance securities or Blue Sky laws of the
jurisdictions in which the Shares are offered by the several Underwriters
and by all dealers to whom the Shares may be sold, prior to the date of
the Prospectus, of each preliminary prospectus.
(f) Promptly after the Registration Statement becomes effective, and
from time to time thereafter during such period as in the judgment of
counsel for the Underwriters a prospectus is required by law to be
delivered in connection with sales by an Underwriter or a dealer, the
Company will furnish without charge in New York City to each Underwriter
and such dealers as you shall specify as many copies of the Prospectus
(and of each amendment or supplement thereto) and any documents
incorporated therein by reference as such Underwriter or dealer may
reasonably request. The Company consents to the use of the Prospectus and
any amendment or supplement thereto by the Underwriters and by all dealers
to whom the Shares may be sold, both at the time of the offering or sale
of the Shares and for such period of time thereafter as the Prospectus is
required by law to be delivered in connection therewith.
-6-
<PAGE> 7
(g) If during the period specified in paragraph (f) any event shall
occur as a result of which, in the judgment of counsel for the
Underwriters, it becomes necessary to amend or supplement the Prospectus
in order to make the statements therein, in the light of the circumstances
when the Prospectus is delivered to a purchaser, not misleading, or if it
is necessary to amend or supplement the Prospectus to comply with any law,
the Company will forthwith prepare and file with the Commission an
appropriate amendment or supplement to the Prospectus so that the
statements in the Prospectus, as so amended or supplemented, will not in
the light of the circumstances when it is so delivered, be misleading, or
so that the Prospectus will comply with law, and to furnish without charge
to each Underwriter and to such dealers as you shall specify, such number
of copies thereof as such Underwriter or dealers may reasonably request.
(h) Prior to any public offering of the Shares, the Company will
cooperate with you and with counsel for the Underwriters in connection
with the registration or qualification of the Shares for offer and sale by
the several Underwriters and by dealers under the state securities, Blue
Sky or insurance laws governing the offer and sale of securities of such
jurisdictions as you may request, will continue such registration or
qualification in effect so long as required for distribution of the Shares
and will file such consents to service of process or other documents as
may be necessary in order to effect such registration or qualification;
provided, however, that the Company shall not be required in connection
therewith to qualify as a foreign corporation in any jurisdiction in which
it is not now so qualified or to take any action that would subject it to
general consent to service of process or taxation other than as to matters
and transactions relating to the Prospectus, the Registration Statement,
any preliminary prospectus or the offering or sale of the Shares, in any
jurisdiction in which it is not now so subject.
(i) The Company will make generally available to its stockholders as
soon as reasonably practicable, but not later than 60 days after the close
of the period covered thereby, an earnings statement covering a period of
at least twelve months beginning not later than the first day of the
Company's fiscal quarter next following the effective date of the
Registration Statement which shall satisfy the provisions of Section 11(a)
of the Act and Rule 158 promulgated thereunder.
-7-
<PAGE> 8
(j) During the period of five years after the date of this
Agreement, the Company will (i) mail as soon as reasonably practicable
after the end of each fiscal year to the record holders of the Common
Stock a financial report of the Company and the Subsidiaries on a
consolidated basis, all such financial reports to include a consolidated
balance sheet, a consolidated statement of operations, a consolidated
statement of cash flows and a consolidated statement of shareholders'
equity as of the end of and for such fiscal year, together with comparable
information as of the end of and for the preceding year, certified by
independent certified public accountants, and (ii) mail and make generally
available as soon as practicable after the end of each quarterly period
(except for the last quarterly period of each fiscal year) to such
holders, an unaudited consolidated balance sheet, an unaudited
consolidated statement of operations and an unaudited consolidated
statement of cash flows as of the end of and for such period, and for the
period from the beginning of such year to the close of such quarterly
period, together with comparable information for the corresponding periods
of the preceding year.
(k) During the five years after the date of this Agreement, the
Company will furnish without charge to you, and, upon request, to each of
the other Underwriters, as soon as available, a copy of each report or
other publicly available information of the Company mailed to the holders
of Common Stock or filed with the Commission and such other
non-confidential information concerning the Company and the Subsidiaries
as you may reasonably request.
(l) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, the Company will pay or
cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including: (i) the fees, disbursements
and expenses of the Company's counsel and the Company's accountants in
connection with the registration and delivery of the Shares under the Act
and all other fees and expenses in connection with the preparation,
printing, filing and distribution of the Registration Statement (including
financial statements and exhibits), any preliminary prospectus, the
Prospectus and all amendments and supplements to any of the foregoing,
including the mailing and delivering of copies thereof to the Underwriters
and dealers in the quantities specified herein, (ii) all costs and
expenses related to the transfer and delivery of the Shares to the
Underwriters, including any transfer or other taxes payable thereon, (iii)
all costs of printing or producing this Agreement and any other agreements
or
-8-
<PAGE> 9
documents in connection with the offering, purchase, sale or delivery of
the Shares, (iv) all expenses in connection with the registration or
qualification of the Shares for offer and sale under the securities or
Blue Sky laws of the several states and all costs of printing or producing
any Preliminary and Supplemental Blue Sky Memoranda in connection
therewith (including the filing fees and fees and disbursements of counsel
for the Underwriters in connection with such registration or qualification
and memoranda relating thereto), (v) the filing fees and disbursements of
counsel for the Underwriters in connection with the review and clearance
of the offering of the Shares by the National Association of Securities
Dealers, Inc., (vi) all costs and expenses incident to the maintenance of
the listing of the Shares on the New York Stock Exchange ("NYSE"), (vii)
the cost of printing certificates representing the Shares, (viii) the
costs and charges of any transfer agent, registrar and/or depositary, and
(ix) all other costs and expenses incident to the performance of the
obligations of the Company hereunder for which provision is not otherwise
made in this Section 5(l).
(m) From the date hereof and for a period of ___ days after the date
of the Prospectus, the Company will not directly or indirectly offer,
sell, contract to sell, grant any option for the sale of, otherwise
dispose of, file with the Commission a registration statement under the
Act to register, or announce the sale or offering of, any additional
shares of its capital stock or any security convertible into or
exchangeable or exercisable for its capital stock without your prior
written consent; provided, however, that the foregoing shall not apply to
(i) the grant of options to purchase shares of Common Stock to employees,
officers or directors of the Company pursuant to any stock option plan of
the Company existing on the date hereof (the "Stock Option Plans"), (ii)
the issuance of shares of Common Stock pursuant to the exercise of options
granted under any of the Stock Option Plans, (iii) the issuance of shares
of Common Stock pursuant to the exercise of options granted to former
directors of ERI prior to the date hereof, (iv) the grant of performance
share units under the Company's Performance Share Plan ("PSP"), (v) the
grant of stock units under the Company's Stock Incentive Plan ("SIP"),
(vi) the issuance of shares of Common Stock pursuant to the PSP or the SIP
or (vii) any registration statement filed under the Act in respect of
securities to be issued pursuant to any of the Company's Stock Option
Plans, the PSP or the SIP.
(n) The Company will use its best efforts to maintain the inclusion
of the Common Stock on the NYSE for a period of three years after the
effective date of the Registration
-9-
<PAGE> 10
Statement; provided that any acquisition of an ownership interest in the
Company resulting in the removal of the Common Stock from the NYSE shall
not constitute a breach of the agreement contained in this Section 5(n).
(o) The Company will apply the net proceeds from the sale of the
Shares and the Additional Shares, if any are issued, in accordance with
the description set forth in the Prospectus under the caption "Use of
Proceeds."
(p) The Company will use its best efforts to satisfy all conditions
precedent to the delivery of the Shares.
(q) If the Registration Statement at the time of the effectiveness
of this Agreement does not cover all of the Shares, the Company will file
a Rule 462(b) Registration Statement with the Commission registering the
Shares not so covered in compliance with Rule 462(b) by 10:00 P.M., New
York City time, on the date of this Agreement and will pay to the
Commission the filing fee for such Rule 462(b) Registration Statement at
the time of the filing thereof or will give irrevocable instructions for
the payment of such fee pursuant to Rule 111(b) under the Act.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective (other than any
Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement); any Rule 462(b) Registration Statement
filed after the effectiveness of this Agreement will become effective no
later than 10:00 P.M., New York City time, on the date of this Agreement;
and no stop order suspending the effectiveness of the Registration
Statement is in effect, and no proceedings for such purpose are pending
before or threatened by the Commission.
(b) (i) The Registration Statement, when it became effective, did
not contain and, as amended or supplemented, if applicable, will 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 not misleading; (ii) the Registration Statement and the
Prospectus comply and, as amended or supplemented, if applicable, will
comply in all material respects with the Act; (iii) if the Company is
required to file a Rule 462(b) Registration Statement after the
effectiveness of this Agreement, such Rule 462(b) Registration Statement
and any
-10-
<PAGE> 11
amendments thereto, when they become effective (A) will 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
not misleading and (B) will comply in all material respects with the Act;
and (iv) the Prospectus does not contain and, as amended or supplemented,
if applicable, will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except that the representations and warranties set forth in this paragraph
(b) do not apply to statements or omissions in the Registration Statement
or the Prospectus based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you
expressly for use therein.
(c) The documents incorporated by reference in the Registration
Statement or the Prospectus pursuant to Item 12 of Form S-3 under the Act,
at the time they were filed or last amended or hereafter are filed or
amended, as the case may be, with the Commission, complied and will comply
in all material respects with the requirements of the Exchange Act and,
when read together and with the other information in the Prospectus, at
the time the Registration Statement became or becomes effective and at the
Closing Date and the Option Closing Date, as the case may be, did not and
will not contain an 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 the light of the circumstances under which they
were or are made, not misleading; and any documents deemed to be
incorporated by reference in the Registration Statement or the Prospectus,
if and when they were or are filed with the Commission, complied with or
will comply in all material respects with the requirements of the Exchange
Act and did not and will not contain an 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 not misleading; provided,
however, that the representations and warranties in this paragraph shall
not apply to statements in or omissions from the Registration Statement or
the Prospectus (or any supplement or amendment to them) made based upon
and conforming with information relating to any Underwriter furnished to
the Company in writing by or on behalf of any Underwriter through you
expressly for use therein.
(d) Each preliminary prospectus filed as part of the Registration
Statement as originally filed or as part of any amendment thereto, or
filed pursuant to Rule 424 under the Act, complied when so filed in all
material respects with
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<PAGE> 12
the Act, and did not contain an 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 the light of the circumstances under
which they were made, not misleading, except that the representations and
warranties set forth in this paragraph (c) do not apply to statements or
omissions in any preliminary prospectus based upon information relating to
any Underwriter furnished to the Company in writing by such Underwriter
through you expressly for use therein. The Commission has not issued any
order preventing or suspending the use of any preliminary prospectus.
(e) Each corporation, partnership or other entity in which the
Company owns beneficially at least 50% of the outstanding ownership
interests is listed on Schedule 2 hereto. With the exception of UAP
Executive Partners, each of such entities is referred to herein as a
"Subsidiary" and all of such entities, collectively, are referred to as
the "Subsidiaries." The Company owns 100% of the outstanding capital stock
of Executive Re Inc., a Delaware corporation ("ERI"), and 70% of the
general partnership interests in Executive Risk Management Associates, a
Connecticut general partnership ("ERMA"), free and clear of all liens,
claims, charges, options, restrictions or other encumbrances of any type
or nature. ERI owns 100% of the outstanding capital stock of Executive Re
Indemnity Inc., a Delaware corporation ("ERII"), 100% of the outstanding
capital stock of Talcott Services Corporation, a Delaware corporation
("Talcott"), 100% of the issued share capital of Executive Risk Limited, a
company incorporated under the laws of the United Kingdom, 100% of the
outstanding capital stock of Executive Risk N.V., a company incorporated
under the laws of the Netherlands, 50% of the outstanding capital stock of
UAP Executive Partners, a French corporation ("UPEX"), and 30% of the
general partnership interests in ERMA, in each case free and clear of all
liens, claims, charges, options, restrictions or other encumbrances of any
type or nature. ERII owns 100% of the outstanding capital stock of
Executive Re Specialty Insurance Company, a Connecticut corporation
("ERSIC"), and 100% of the outstanding capital stock of Vulcan Indemnity
Inc., a Connecticut corporation, free and clear of all liens, claims,
charges, options, restrictions or other encumbrances of any type or
nature. Except as set forth above, neither the Company nor any Subsidiary
(i) owns equity securities of any other corporation representing in excess
of 5% of the outstanding capital stock of such corporation or (ii) is a
partner in any partnership other than ERMA.
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<PAGE> 13
(f) The Company and each Subsidiary (other than ERMA)(i) is a
corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it was organized and has all
requisite power and authority to conduct its business as it is currently
being conducted and to own, lease and operate its properties; (ii) is duly
qualified as a foreign corporation authorized to transact business in, and
is in good standing in, each jurisdiction in which the nature of its
business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have
a material adverse effect on the business, prospects, operations,
properties, net worth, results of operations or condition (financial or
otherwise) of the Company and the Subsidiaries taken as a whole; ERMA is a
duly organized and validly existing general partnership and has all
requisite power and authority to conduct its business as it is currently
being conducted and to own, lease and operate its properties. The only
partners in ERMA are the Company and ERI.
(g) The Company and each of the Subsidiaries (i) holds such
licenses, consents, certificates, permits, exemptions, franchises and
authorizations from insurance departments and other governmental or
regulatory authorities ("permits") (including, without limitation,
insurance licenses from the insurance regulatory agencies of the various
states where it conducts business (the "Insurance Licenses")) and has made
all filings with and notices to, all governmental or regulatory
authorities and self-regulatory organizations and all courts and other
tribunals, including, without limitation, under any applicable
Environmental Laws (as defined below), which are necessary to own, lease,
license and operate its respective properties and to conduct its
businesses as described in the Prospectus (or in the documents
incorporated therein by reference), except to the extent the failure to
hold any such permits or Insurance Licenses or to make any such filing or
notice (either singularly or in the aggregate) would not have a material
adverse effect on the business, prospects, operations, properties, net
worth, results of operations or condition (financial or otherwise) of the
Company and the Subsidiaries taken as a whole and (ii) to the Company's
knowledge, have fulfilled and performed all material obligations necessary
to maintain such permits and the Insurance Licenses. There has been, and
there is, no pending or, to the knowledge of the Company, threatened
action, suit, proceeding, investigation or event that may reasonably be
expected to lead to the revocation, termination, suspension or any other
material impairment of the rights of the holder of any such permit or
license (including, without limitation, the
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<PAGE> 14
Insurance Licenses); and except as disclosed in the Prospectus (or in the
documents incorporated therein by reference), the Company is not aware of
any order or decree of an insurance regulatory agency or body impairing,
restricting or prohibiting the payment of dividends by any of the
Subsidiaries of the Company to its parent.
(h) All of the outstanding shares of capital stock of, or other
ownership interests in, each Subsidiary of the Company have been, as
applicable, duly authorized and validly issued and, in the case of shares
of capital stock, are fully paid and non-assessable, and all such shares
and other ownership interests owned of record by the Company or by a
Subsidiary of the Company are owned free and clear of any security
interest, lien, claim, encumbrance or adverse interest of any nature. None
of such shares of capital stock or other ownership interests are subject
to any preemptive or similar rights.
(i) The partnership agreement of ERMA has been duly executed and
delivered by each of the parties thereto and is a valid and binding
agreement enforceable in accordance with its terms except as (i) rights to
indemnity and contribution hereunder may be limited by applicable law or
principles of public policy, (ii) the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (iii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and
to the discretion of the court before which any proceeding therefor may be
brought. Other than as described in the Prospectus, there are no
outstanding warrants, rights or options to acquire, or instruments
convertible into or exchangeable for, any shares of capital stock or other
equity interest in the Company or any of the Subsidiaries.
(j) All the outstanding shares of capital stock of the Company have
been duly authorized, validly issued, and are fully paid and
non-assessable; the Shares and the Additional Shares, if any, to be issued
and sold by the Company hereunder have been duly authorized and, when
issued and delivered to the Underwriters against payment therefor as
provided by this Agreement, will be validly issued, fully paid and
non-assessable; no holder of the Shares and/or the Additional Shares will
be subject to personal liability by reason of being such a holder; and
such Shares and/or Additional Shares are not subject to any preemptive or
similar rights.
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<PAGE> 15
(k) The Common Stock conforms in all material respects to the
description thereof incorporated by reference in the Prospectus.
(l) Except as described in the Prospectus (or in the documents
incorporated therein by reference) and except to the extent that any of
the following would not have a material adverse effect on the business,
prospects, operations, properties, net worth, results of operations or
financial condition of the Company and the Subsidiaries, taken as a whole,
neither the Company nor any of the Subsidiaries is (i) in violation of its
respective charter or by-laws, or other organizational documents, (ii) in
violation of any law, ordinance, administrative or governmental rule or
regulation applicable to the Company or any of the Subsidiaries or any of
their respective properties, (iii) in violation of any judgment,
injunction, order or decree of any court, governmental agency or body
(including, without limitation, any insurance regulatory agency or body)
or arbitrator having jurisdiction over the Company or any of the
Subsidiaries, or (iv) in default in the performance of any obligation,
agreement or condition contained in any bond, debenture, note or any other
evidence of indebtedness or in any other agreement, indenture, lease or
instrument to which the Company or any of the Subsidiaries is a party or
by which it or any of the Subsidiaries or their respective property is
bound.
(m) No consent, approval, waiver, license, authorization, order,
filing, registration, qualification or other action of or with any court,
regulatory body, arbitrator, administrative agency or other governmental
agency or body (including, without limitation, any insurance regulatory
agency or body) is required for the issuance and sale of the Shares or the
Additional Shares, if any, being sold by the Company or the execution,
delivery and performance of this Agreement, compliance by the Company with
all the provisions hereof or the consummation of the other transactions
contemplated hereby or by the Registration Statement or for the use of the
proceeds received by the Company, if any, from such sale in the manner
described under the caption "Use of Proceeds" contained in the Prospectus,
except such as have been obtained and made under the Act and the Exchange
Act, all of which have been or will be obtained in accordance with this
Agreement and as may be required under the insurance securities laws or
securities or Blue Sky laws of various jurisdictions, and except to the
extent that the failure to obtain such would not have a material adverse
effect on the business, prospects, operations, properties, net worth,
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<PAGE> 16
results of operations or financial condition of the Company and the
Subsidiaries, taken as a whole.
(n) The issuance and sale of the Shares and the Additional Shares,
if any, to be sold by the Company under this Agreement and the application
of the net proceeds therefrom as described under the caption "Use of
Proceeds" contained in the Prospectus and the execution, delivery and
performance of this Agreement, compliance by the Company with all the
provisions hereof and the consummation of the transactions herein
contemplated, (i) will not result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or
any of the Subsidiaries pursuant to the terms of any agreement or
instrument to which any of them is a party or by which any of them may be
bound or to which any of the property or assets of any of them is subject,
and (ii) will not conflict with or result in a breach or violation of any
of the terms and provisions of, or constitute a default (with notice or
the passage of time or both) under, (A) any statute, rule, regulation,
judgment, order or decree of any governmental agency or body (including,
without limitation, any insurance regulatory agency or body) or any court
or arbitrator, which is applicable to the Company or any Subsidiary or any
of their respective properties, (B) any bond, debenture, note, other
evidence of indebtedness, agreement, indenture, lease or other instrument
to which the Company or any such Subsidiary is a party or by which the
Company or any such Subsidiary is bound or to which any of the properties
of the Company or any such Subsidiary is subject, or (C) the
organizational documents of the Company or any such Subsidiary except, in
the case of clauses (i) and (ii), to the extent that any such creation or
imposition or any such breach, violation or default would not have a
material adverse effect on the business, prospects, operations,
properties, net worth, results of operations or financial condition of the
Company and the Subsidiaries, taken as a whole.
(o) The Company is not (a) an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "Investment Company Act"),
or (b) a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended (the "1935 Act").
(p) There are no contracts, agreements or understandings between the
Company and any person granting
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<PAGE> 17
such person the right to require the Company to file a registration
statement under the Act with respect to any securities of the Company
owned or to be owned by such person or to require the Company to include
such securities in the securities registered pursuant to the Registration
Statement.
(q) Other than as contemplated by this Agreement, there is no
broker, finder or other party that is entitled to receive from the Company
or any of the Subsidiaries any brokerage or finder's fee or other similar
fee or commission as a result of any of the transactions contemplated by
this Agreement.
(r) This Agreement has been duly authorized, executed and delivered
by the Company and is a valid and binding agreement of the Company
enforceable in accordance with its terms except as (i) rights to indemnity
and contribution hereunder may be limited by applicable law or principles
of public policy, (ii) the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally and
(iii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought.
(s) Except as described in the Prospectus (or in the documents
incorporated therein by reference), there are no outstanding: (i)
securities or obligations of the Company convertible into or exchangeable
for any capital stock of the Company, (ii) warrants, rights or options to
subscribe for or purchase from the Company any such capital stock or any
such convertible or exchangeable securities or obligations, or (iii)
obligations for the Company to issue such shares, any such convertible or
exchangeable securities or obligations, or any such warrants, rights or
obligations.
(t) To the Company's knowledge, neither A.M. Best Company, Inc. nor
Standard & Poor's Corporation has pending, or has overtly threatened, as
applicable: (i) any downgrading in the ratings of the Subsidiaries or (ii)
any public announcement that its ratings of any of the Subsidiaries are
under surveillance or review.
(u) Subsequent to the dates as of which information is given in the
Registration Statement and the Prospectus, except as disclosed therein:
(i) neither the Company nor any of the Subsidiaries has incurred any
liability or obligation, direct or contingent, or entered into any
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<PAGE> 18
transaction, not in the ordinary course of business, that is material to
the Company and the Subsidiaries taken as a whole, (ii) there has not been
any change in the capital stock of the Company or any payment of or
declaration to pay any dividends other than regular quarterly dividends on
the Common Stock or any other distribution with respect to the Company's
capital stock, and (iii) there has not been any material adverse change in
the financial condition, business, properties, prospects, net worth or
results of operations or material increase in the loss and loss adjustment
expense reserves or any material decrease in statutory surplus of the
Company and the Subsidiaries, taken as a whole.
(v) The Shares have been duly authorized for listing on the NYSE,
subject to official notice of issuance.
(w) Except as otherwise set forth in the Prospectus (or in the
documents incorporated therein by reference), there are no material
pending legal or governmental actions, suits or proceedings to which the
Company or any of the Subsidiaries is a party or of which any of their
respective property is the subject, and, to the best of the Company's
knowledge, no such actions, suits or proceedings are threatened or
contemplated. No statute, regulation, contract or document of a character
required to be described in the Registration Statement or the Prospectus
or to be filed as an exhibit to the Registration Statement or incorporated
by reference therein is not so described, filed or incorporated by
reference therein as required. The descriptions of the terms of any such
contracts, documents, statutes or regulations contained in the
Registration Statement or the Prospectus (or with the documents
incorporated therein by reference) are correct in all material respects.
(x) Neither the Company nor any of the Subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), or any federal or state law relating to discrimination in the
hiring, promotion or pay of employees, or any applicable federal or state
wages and hours laws, or any provisions of the United States Employee
Retirement Income Security Act of 1974 and the regulations and published
interpretations thereunder ("ERISA"), which in either case might result in
any material adverse change in the business, prospects, financial
condition or results of operations of the Company and the Subsidiaries,
taken as a whole.
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<PAGE> 19
(y) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, any related constraints on operating
activities and any potential liabilities to third parties) which would
have a material adverse effect on the business, prospects, operations,
properties, net worth, results of operations or financial condition of the
Company and its Subsidiaries, taken as a whole.
(z) Except as otherwise set forth in the Prospectus (or in the
documents incorporated therein by reference) or such as are not material
to the business, prospects, operations, properties, net worth, results of
operations or financial condition of the Company and the Subsidiaries,
taken as a whole, the Company and each of the Subsidiaries has good and
marketable title, free and clear of all liens, claims, security interests,
encumbrances and restrictions except liens for taxes not yet due and
payable, to all property and assets described in the Registration
Statement as being owned by it. All material leases to which the Company
or any of the Subsidiaries is a party are binding on and enforceable
against the Company or any such Subsidiary, as the case may be, in all
material respects and no default on the part of the Company or any such
Subsidiary, as the case may be, or, to the Company's knowledge, the other
party thereto, has occurred or is continuing thereunder, which might
result in any material adverse change in the business, prospects,
financial condition or results of operations of the Company and the
Subsidiaries taken as a whole, and the Company and the Subsidiaries enjoy
peaceful and undisturbed possession under all such leases to which any of
them is a party as lessee with such exceptions as do not materially
interfere with the use made by the Company or such Subsidiary.
(aa) Ernst & Young has informed the Company that they are
independent public accountants with respect to the Company, as required by
the Act.
(bb) The consolidated financial statements, together with related
schedules and notes, forming part of the Registration Statement and the
Prospectus (and any amendment or supplement thereto) or incorporated
therein by reference, present fairly the consolidated financial position,
results of operations, cash flows and changes in financial position of the
Company and the Subsidiaries on the basis stated in the Registration
Statement at the respective dates or for the respective periods to which
they apply; such statements and related schedules and notes have been
prepared in
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<PAGE> 20
accordance with generally accepted accounting principles consistently
applied throughout the periods involved, except as disclosed therein and
except that quarterly financial statements contained in the Registration
Statement are subject to year-end adjustments; and the other financial and
statistical information and data set forth in the Registration Statement
and the Prospectus (and any amendment or supplement thereto) is, in all
material respects, accurately presented and prepared on a basis consistent
with such financial statements and the books and records of the Company.
The statutory financial statements of ERII and ERSIC required or permitted
to be prepared in accordance with the insurance laws of the States of
Delaware and Connecticut, respectively (the "Insurance Laws") and the
rules and regulations promulgated thereunder, from which certain ratios
and other statistical data contained in the Registration Statement and the
Prospectus have been derived, have for each relevant period been prepared
in conformity in all material respects with the requirements of the
Insurance Laws and such rules and regulations and present fairly the
information purported to be shown.
(cc) The Company has corporate power and authority to enter into
this Agreement and to issue, sell and deliver the Shares and the
Additional Shares, if any, to be sold by it to the Underwriters as
provided herein. The execution and delivery by the Company of this
Agreement, and the performance by the Company of its obligations hereunder
(including without limitation the issuance and sale by the Company of the
Shares and the Additional Shares), have been duly authorized by all
necessary corporate action on the part of the Company.
(dd) The form of certificate for the Shares conforms in all material
respects to the requirements of the Delaware General Corporation Law and
the NYSE.
(ee) The Company has not taken and will not take, directly or
indirectly, any action designed to, or which might reasonably be expected
to, cause or result in the stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Shares
pursuant to the distribution contemplated by this Agreement, and other
than as permitted by the Act, the Company has not distributed and will not
distribute, prior to the later to occur of (i) the Closing Date or the
Option Closing Date and (ii) completion of the distribution of the Shares,
any prospectus or other offering material in connection with the offering
and sale of the Shares.
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<PAGE> 21
(ff) Each of the Company and the Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in all material respects in accordance
with management's general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles or statutory
accounting principles, as the case may be, and to maintain accountability
for assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(gg) Each of the Company and the Subsidiaries owns or has valid and
adequate rights to use all patents, trademarks, trademark registration,
service marks, service mark registrations, trade names, copyrights,
licenses, inventions, trade secrets and rights described in the Prospectus
as being owned by it or necessary for the conduct of its respective
business, free and clear of all liens, claims, security interests
encumbrances and restrictions that may materially interfere with the
conduct of its business, and neither the Company nor any of the
Subsidiaries is aware of any claim to the contrary or any challenge by any
other person to the rights of the Company and any of the Subsidiaries with
respect to the foregoing which would have a material adverse effect on the
business, prospects, operations, properties, net worth, results of
operations or financial condition of the Company and the Subsidiaries
taken as a whole.
(hh) Except as disclosed in the Registration Statement all
reinsurance treaties, contracts and agreements to which the Company or any
of the Subsidiaries is a party (including without limitation the Agency
and Insurance Services Agreement dated as of January 1, 1997 (the "1997
Agency Agreement"), between The Aetna Casualty and Surety Company
("Aetna") and ERMA, and the Quota Share Reinsurance Agreement dated as of
January 1, 1997 (the "1997 Reinsurance Agreement"), between Aetna and ERII
are in full force and effect and neither the Company nor any of the
Subsidiaries is in violation of, or in default in the performance,
observance or fulfillment of, any obligation, agreement, covenant or
condition contained therein, except where the failure to be in full force
and effect and except where any such violation or default would not have a
material adverse effect on the business, prospects, operations,
properties, net worth, results of operations or financial condition of
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<PAGE> 22
the Company and the Subsidiaries taken as a whole; neither the Company nor
any of the Subsidiaries has received any notice from any of the other
parties to such treaties, contracts or agreements which are material to
its business that such other party intends not to perform in any material
respect such treaty, contract or agreement, and the Company and the
Subsidiaries have no reason to believe that any of the other parties to
such treaties, contracts or agreements will be unable to perform such
treaty, contract, agreement or arrangement, except where any such
non-performance would not have a material adverse effect on the business,
prospects, operations, properties, net worth, results of operations or
financial condition of the Company and the Subsidiaries taken as a whole.
(ii) No relationship, direct or indirect, or agreement, arrangement
or understanding (including, without limitation, any voting agreement),
exists between or among the Company or any of the Subsidiaries and any
other party, which is required by the Act to be described or incorporated
by reference in the Registration Statement or the Prospectus or to be
filed as an exhibit to the Registration Statement which is not described,
filed or incorporated by reference as required.
(jj) Except to the extent that the failure with respect to the
following would not result in a material adverse effect on the business,
prospects, operations, properties, net worth, results of operations, or
financial condition of the Company and the Subsidiaries taken as a whole,
each of the Company and the Subsidiaries has fulfilled its obligations, if
any, under the minimum funding standards of Section 302 of ERISA with
respect to each "plan" (as defined in ERISA and its regulations and
published interpretations) in which employees of the Company or the
Subsidiaries are eligible to participate and each such plan is in
compliance in all material respects with the presently applicable
provisions of ERISA and such regulations and published interpretations,
and has not incurred any unpaid liability to the Pension Benefit Guaranty
Corporation (other than for the payment of premiums in the ordinary
course) or to any such plan under Title IV of ERISA.
(kk) All United States federal income tax returns of, and
assessments to, the Company and the Subsidiaries required by law to be
filed have been filed and have not been audited and all taxes shown by
such returns or otherwise assessed, which are due and payable, have been
paid, except assessments against which appeals have been or will be
promptly taken or which are being contested in good faith and as to which
adequate reserves have been provided.
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<PAGE> 23
Each of the Company and the Subsidiaries has filed all other tax returns
that are required to have been filed by it pursuant to applicable foreign,
state, local or other laws, except insofar as the failure to file such
returns would not have a material adverse effect on the business,
prospects, operations, properties, net worth, results of operations, or
financial condition of the Company and the Subsidiaries taken as a whole,
and has paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Company or any Subsidiary, except for such
taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided. The charges, accruals and reserves
on the books of the Company and the Subsidiaries in respect of any income
and corporation tax liability for any years not finally determined are
adequate in the Company's reasonable judgment to meet any assessments or
reassessments for additional income tax for any years not finally
determined, except to the extent of any inadequacy that would not have a
material adverse effect on the business, prospects, operations,
properties, net worth, results of operations, or financial condition of
the Company and the Subsidiaries taken as a whole.
(ll) To the best knowledge of the Company, no labor problem exists
with its employees or with employees of the Subsidiaries or is imminent
that could reasonably be expected to have a material adverse affect on the
Company and the Subsidiaries taken as a whole.
(mm) No part of the proceeds of the sale of the Shares or the
Additional Shares, if any such Additional Shares are issued, will be used
for any purpose that violates the provisions of any of Regulation G, T or
X of the Board of Governors of the Federal Reserve System or any other
regulation of such Board of Governors.
(nn) Except as disclosed in the Prospectus or the documents
incorporated by reference therein, the Subsidiaries have made no material
changes in their insurance reserving practices during the last two years.
(oo) Any certificate signed by any officer of the Company or any
Subsidiary and delivered at any closing contemplated by Section 4 hereof
to the Underwriters or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company to the Underwriters as to the
matters covered thereby.
SECTION 7. INDEMNIFICATION AND CONTRIBUTION. (a) The Company will
indemnify and hold harmless each Underwriter, its directors, its officers and
each person, if any, who controls any
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<PAGE> 24
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages, judgments,
or liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, only insofar as such losses, claims, damages,
judgments or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus or any amendment or
supplement thereto, or any preliminary prospectus, or arise out of or are based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such loss, claim, damage, judgment, liability or action as such expenses are
incurred; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage, judgment or liability
arises out of or is based upon an untrue statement or alleged untrue statement
in or omission or alleged omission from any of such documents in reliance upon
and in conformity with written information furnished to the Company by any
Underwriter relating to the Underwriter through you expressly for use therein;
provided, however, that the foregoing indemnity with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any such losses, claims, damages or liabilities purchased
Shares, or any person controlling such Underwriter, if a copy of the Prospectus
(as then amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), other than the documents incorporated by
reference therein, was timely made available by the Company to such Underwriter
and was not delivered by or on behalf of such Underwriter to such person, if
required by the Act so to have been delivered, at or prior to the written
confirmation of the sale of the Shares to such person, and if the Prospectus (as
so amended or supplemented) would have cured the defect contained in such
preliminary prospectus giving rise to such losses, claims, damages or
liabilities.
(b) Each Underwriter, severally and not jointly, will indemnify and
hold harmless the Company, each officer of the Company who signs the
Registration Statement, each director of the Company and each person, if any,
who controls the Company within the meaning of Section 15 of the Act or Section
20 of the Exchange Act from and against any and all losses, claims, damages,
judgments or liabilities to which the Company, such officers and directors may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material
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fact contained or incorporated by reference in the Registration Statement, the
Prospectus or any amendment or supplement thereto, or any preliminary
prospectus, or arise out of or are based upon any omission or alleged omission
to state or incorporate by reference therein a material fact required to be
stated therein or incorporated by reference therein or necessary to make the
statements therein or incorporated by reference therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Underwriter, or by such Underwriter through you, expressly for use in the
preparation thereof, and will reimburse the Company, such officers and directors
or any such control person for any legal or other expenses reasonably incurred
by the Company, such officers and directors or any such control person in
connection with investigating or defending any such loss, claim, damage,
judgment, liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
under subsection (a) or (b) above, notify the indemnifying party in writing of
the commencement thereof and the indemnifying party shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to such
indemnified party and payment of all fees and expenses of such counsel, as
incurred (except that in the case of any action in respect of which indemnity
may be sought pursuant to both Sections 7(a) and 7(b), the Underwriter shall not
be required to assume the defense of such action pursuant to this Section 7(c),
but may employ separate counsel and participate in the defense thereof, but the
fees and expenses of such counsel, except as provided below, shall be at the
expense of such Underwriter); and the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under subsection (a) or (b) above. An
indemnified party shall have the right to employ separate counsel in any such
action or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying parties, (ii) the indemnifying parties have failed
promptly to assume the defense or employ counsel reasonably satisfactory to the
indemnified party (which payment of fees and expenses of separate counsel by the
indemnifying parties shall cease upon such assumption of defense by the
indemnifying parties) or (iii) the named parties to any such action or
proceeding (including any impleaded parties) include both the indemnified party
and the
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indemnifying parties, and the indemnified party shall have been advised by such
counsel that there may be one or more legal defenses available to it which are
different from or additional to those available to the indemnifying party (in
which case the indemnifying parties shall not have the right to assume the
defense of such action on behalf of such indemnified party), it being
understood, however, that the indemnifying party shall not, in connection with
any one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified
parties, which firm shall be designated in writing by Donaldson, Lufkin &
Jenrette Securities Corporation in the case of parties indemnified pursuant to
Section 7 and by the Company, in the case of parties indemnified pursuant to
Section 7(b), and that all such fees and expenses shall be reimbursed as they
are incurred. The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i) effected
with its written consent or (ii) effected without its written consent if the
settlement is entered into more than twenty business days after the indemnifying
party shall have received a request from the indemnified party for reimbursement
for the fees and expenses of counsel (in any case where such fees and expenses
are at the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with such
reimbursement request. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
action in respect of which the indemnified party is or could have been a party
and indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages, judgments or
liabilities referred to in subsection (a), (b) or (c) above (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the offering
of the Shares or (ii) if the
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allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and the Underwriters on the other hand in connection with the
statements or omissions which resulted in such losses, claims, damages,
judgments or liabilities as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Underwriters on the other hand shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received by
the Company and the total underwriting discounts and commissions received by the
Underwriters, bear to the total price to the public of the Shares, in each case
as set forth in the table on the cover page of the Prospectus. The relative
fault of the Company on the one hand and the Underwriters on the other hand
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, judgments or liabilities referred to in the first paragraph of
this subsection (d) shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action, that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Shares underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this Section 7(d)
to contribute are several in proportion to
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the respective number of Shares purchased by each of the Underwriters hereunder
and not joint.
(e) The obligations of the Company under this Section shall be in
addition to any liability which the Company otherwise may have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section shall be in addition to any liability which the
respective Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Company, to each person who has
consented to become a director of the Company, to each officer of the Company
who has signed the Registration Statement and to each person, if any, who
controls the Company within the meaning of the Act.
SECTION 8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several
obligations of (i) the Underwriters to purchase the Firm Shares and (ii) the
Underwriters pursuant to their option to purchase the Additional Shares under
this Agreement are subject to the satisfaction of each of the following
conditions:
(a) All the representations and warranties of the Company contained
in this Agreement shall be true and correct on the Closing Date (with
respect to the Firm Shares) and the Option Closing Date (with respect to
the Additional Shares) with the same force and effect as if made on and as
of the Closing Date or the Option Closing Date, as the case may be. The
Company shall have performed or complied with all agreements and satisfied
all conditions on its part to be performed or complied with by the Company
at or prior to the Closing Date or the Option Closing Date, as the case
may be.
(b) (i) The Registration Statement shall have become effective not
later than 5:00 P.M. (and in the case of a Registration Statement filed
under Rule 462(b) of the Act, not later than 10:00 P.M.), New York City
time, on the date of this Agreement or at such later date and time as you
may approve in writing, (ii) all filings, if any, required by Rules 424
and 430A under the Act shall have been timely made, (iii) at the Closing
Date and the Option Closing Date no stop order suspending the
effectiveness of the Registration Statement, any post-effective amendment
to the Registration Statement or any Rule 462(b) Registration Statement
shall have been issued and no proceedings for that purpose shall have been
commenced or shall be pending before or contemplated by the Commission and
(iv) any request of the Commission for additional information (to be
included in the Registration Statement or the Prospectus or otherwise)
shall have been complied with to your reasonable
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satisfaction. No stop order suspending the sale of the Shares in any
jurisdiction shall have been issued and no proceedings for that purpose
shall have been commenced or shall be pending or contemplated.
(c) (i) Since the date of the latest balance sheet included in the
Registration Statement and the Prospectus (or in the documents
incorporated therein by reference), there shall not have been any material
adverse change in, or affecting the affairs, business, prospects,
operations, properties, net worth, results of operations or financial
condition, whether or not arising in the ordinary course of business, of
the Company or any of the Subsidiaries, (ii) since the date of the latest
balance sheet included in the Registration Statement and the Prospectus
(or in the documents incorporated therein by reference), there shall not
have been any material decrease in stockholders' equity or any material
increase in the long-term debt of the Company from that set forth in the
Registration Statement and the Prospectus (or in the documents
incorporated therein by reference), (iii) since the date of the latest
balance sheet included in the Registration Statement and Prospectus (or in
the documents incorporated therein by reference), and except as disclosed
therein, none of the Company or any of the Subsidiaries shall have
incurred any liabilities or obligations, direct or contingent (whether or
not in the ordinary course of business), or entered into any transactions,
not in the ordinary course of business, that are material, individually or
in the aggregate, to the business of the Company and the Subsidiaries
taken as a whole and (iv) on the Closing Date and the Option Closing Date,
you shall have received a certificate dated the Closing Date or the Option
Closing Date, as the case may be, signed by two of: Robert H. Kullas,
Stephen J. Sills and Robert V. Deutsch, solely in their respective
capacities as the Chairman, President and Chief Executive Officer, and
Executive Vice President and Chief Financial Officer of the Company,
respectively, confirming the matters set forth in paragraphs (a), (b), and
(c) of this Section 8.
(d) You shall have received an opinion (reasonably satisfactory to
you and counsel for the Underwriters), dated the Closing Date or the
Option Closing Date, as the case may be, of Dewey Ballantine, counsel for
the Company, to the effect that:
(i) The Company and each of ERI, ERII and Talcott
(collectively, the "Delaware Subsidiaries") is a corporation duly
organized, validly existing and in good standing under the laws of
Delaware and has all requisite power and authority to conduct its
business
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as it is currently being conducted and to own, lease and operate its
properties. The Company and each of the Delaware Subsidiaries is
duly qualified as a foreign corporation authorized to transact
business in and is in good standing in each jurisdiction in which
the nature of its business or its ownership or leasing of property
requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the business,
prospects, operations, properties, net worth, results of operations
or financial condition of the Company and the Subsidiaries
considered as a whole. The partnership agreement of ERMA has been
duly executed and delivered by the Company and ERI. To the best of
such counsel's knowledge, the only partners of ERMA are the Company
and ERI.
(ii) All of the outstanding shares of capital stock of, or
other ownership interests in, each Delaware Subsidiary of the
Company have been, as applicable, duly authorized and validly issued
and, in the case of shares of capital stock, are fully paid and
non-assessable, and all such shares and other ownership interests
owned of record by the Company or by a Delaware Subsidiary are owned
free and clear of any perfected security interest and, to the best
of such counsel's knowledge, any lien, claim, encumbrance or adverse
interest of any nature.
(iii) Other than as described in the Prospectus (or in the
documents incorporated therein by reference), to the best of such
counsel's knowledge, there are no outstanding warrants, rights or
options to acquire, or instruments convertible into or exchangeable
for, or any obligation of the Company to issue, any shares of
capital stock or other equity interests in the Company or any of the
Subsidiaries.
(iv) All the outstanding shares of capital stock of the
Company have been duly authorized, validly issued, and are fully
paid and non-assessable; and the Shares and the Additional Shares,
if any, to be issued and sold by the Company hereunder have been
duly authorized and, when issued and delivered to the Underwriters
against payment therefor as provided by this Agreement, will be
validly issued, fully paid and non-assessable; no holder of the
Shares and/or the Additional Shares will be subject to personal
liability by reason of being such a holder; and such Shares and/or
Additional Shares are not subject to any preemptive or similar
rights of any stockholder of the
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Company under the Delaware General Corporation Law except as
described in the Prospectus.
(v) To the best of such counsel's knowledge, there are no
contracts or agreements between the Company and any person granting
such person the right to require the Company to file a registration
statement under the Act with respect to any securities of the
Company owned or to be owned by such person or to require the
Company to include such securities in the securities registered
pursuant to the Registration Statement or in any securities being
registered pursuant to any other registration statement filed by the
Company under the Act.
(vi) No consent, approval, waiver, license, authorization,
order, filing, registration, qualification or other action of or
with any court, regulatory body, arbitrator, administrative agency
or other governmental agency or body (including, without limitation,
any insurance regulatory agency or body) is required for the
issuance and sale of the Shares or the Additional Shares or the
execution, delivery and performance of this Agreement by the
Company, compliance by the Company with all the provisions hereof or
the consummation of the other transactions contemplated hereby or by
the Registration Statement, except such as have been obtained and
made under the Act and the Exchange Act, all of which have been or
will be obtained in accordance with this Agreement, and as may be
required under the insurance securities laws or securities or Blue
Sky laws of various jurisdictions.
(vii) To the best of such counsel's knowledge, the issuance
and sale of the Shares and the Additional Shares, if any, to be sold
by the Company under this Agreement and the execution, delivery and
performance of this Agreement by the Company, compliance by the
Company with all the provisions hereof and the consummation by the
Company of the transactions herein contemplated, (A) will not result
in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of the
Subsidiaries pursuant to the terms of any agreement or instrument to
which any of the Company and its Subsidiaries is a party or by which
any of them may be bound or to which any of the property or assets
of any of them is subject except, in all instances to the extent
that any such creation or imposition would not have a material
adverse effect on the business,
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prospects, operations, properties, net worth, results of operations
or financial condition of the Company and its Subsidiaries, taken as
a whole, and (B) will not conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a
default (with notice or the passage of time) under, (i) any statute,
rule, regulation, judgment, order or decree, of any governmental
agency or body (including, without limitation, any insurance
regulatory agency or body) or any court or arbitrator, which is
applicable to the Company or any Subsidiary or any of their
respective properties, (ii) any bond, debenture, note, other
evidence of indebtedness, agreement, indenture, lease or other
instrument to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary is bound or to which any of the
properties of the Company or any Subsidiary is subject or (iii) the
organizational documents of the Company or any such Subsidiary
except, in the case of clauses (A) and (B), to the extent that any
such breach, violation or default would not have a material adverse
effect on the business, prospects, operations, properties, net
worth, results of operations or financial condition of the Company
and the Subsidiaries, taken as a whole.
(viii) Such counsel has been informed by the staff of the
Commission that the Registration Statement and all post-effective
amendments, if any, have become effective under the Act, the
Prospectus either was filed with the Commission pursuant to the
subparagraph of Rule 424(b) specified in such opinion on the date
specified therein or was included in the Registration Statement (as
the case may be), and to such counsel's knowledge no stop order
suspending the effectiveness of the Registration Statement or any
part thereof has been issued and to such counsel's knowledge no
proceedings for that purpose have been instituted or are pending or
are contemplated under the Act.
(ix) Each document filed pursuant to the Exchange Act and
incorporated by reference in the Prospectus, at the time it was
filed or last amended (other than financial statements or other
financial information or statistical data included therein, as to
which no opinion need be rendered), complied as to form in all
material respects to the requirements of the Exchange Act and the
regulations adopted in connection therewith.
(x) To the best of such counsel's knowledge, except as
otherwise set forth in the Prospectus (or in
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the documents incorporated therein by reference), there are no
pending legal or governmental actions, suits or proceedings to which
the Company or any of the Subsidiaries is a party or of which any of
their respective property is the subject and which are required to
be described or incorporated by reference in the Registration
Statement or the Prospectus, and, to the best of such counsel's
knowledge, no such actions, suits or proceedings are threatened or
contemplated, and no contract, document, statute or regulation of a
character required to be described or incorporated by reference in
the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement is not so described or filed
or incorporated by reference as required, and the descriptions of
the terms of any such contracts, documents, statutes or regulations
contained or incorporated by reference in the Registration Statement
or the Prospectus are correct in all material respects.
(xi) This Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the
Company, enforceable in accordance with its terms except as (i)
rights to indemnity and contribution hereunder may be limited by
applicable law or principles of public policy, (ii) the
enforceability hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (iii) the remedy
of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
(xii) The Common Stock conforms in all material respects to
the description thereof contained or incorporated by reference in
the Prospectus.
(xiii) The statements under the captions "Risk Factors,"
"Capitalization" and "Underwriting" in the Prospectus and Items 14
and 15 of Part II of the Registration Statement insofar as such
statements constitute a description of legal matters, documents or
proceedings or refer to statements of regulation, law or legal
conclusions, are accurate in all material respects.
(xiv) Neither the Company nor any of the Subsidiaries is (A)
in violation of its respective charter or by-laws, or other
organizational documents,
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or, to the best of such counsel's knowledge, except as described in
the Prospectus (or in the documents incorporated therein by
reference), and except to the extent that any of the following would
not have a material adverse effect on the business, prospects,
operations, properties, net worth, results of operations or
financial condition of the Company and the Subsidiaries, taken as a
whole, (B) in violation of any judgment, injunction, order or decree
of any court, governmental agency or body (including, without
limitation, any insurance regulatory agency or body) or arbitrator
having jurisdiction over the Company or any of the Subsidiaries, or
(C) in default in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other
evidence of indebtedness or in any other agreement, indenture, lease
or instrument that is an exhibit to the Registration Statement.
(xv) To the best of such counsel's knowledge, all leases to
which the Company or any of the Delaware Subsidiaries is a party
that are listed as an Exhibit to the Registration Statement are
valid and binding on the Company or such Subsidiary, as the case may
be, and no default has occurred or is continuing thereunder, which
might result in any material adverse change in the business,
prospects, financial condition or results of operation of the
Company and the Subsidiaries taken as a whole.
(xvi) To such counsel's knowledge, each of the Company and
its Delaware Subsidiaries holds such licenses, certificates,
permits, franchises and authorizations from insurance departments
and other governmental or regulatory authorities ("permits")
(including, without limitation, Insurance Licenses) which are
necessary to own, lease and operate its properties and to conduct
its business as described in the Prospectus, except to the extent
the failure to hold any such permits or Insurance Licenses (either
singularly or in the aggregate) would not have a material adverse
effect on the business, prospects, operations, properties, net
worth, results of operations or financial condition of the Company
and the Subsidiaries taken as a whole; to the best of such counsel's
knowledge, all such permits and the Insurance Licenses are in full
force and effect. Except as disclosed in the Prospectus, to the best
of such counsel's knowledge, there has been, and there is, no
pending or threatened action, suit, proceeding, investigation or
event that may reasonably be expected
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to lead to the revocation, termination, suspension or any other
material impairment of the rights of the holder of any such permit
(including, without limitation, the Insurance Licenses); to the best
of such counsel's knowledge, such permits and Insurance Licenses do
not materially restrict the conduct of business of the Company or
any of the Delaware Subsidiaries except as described in the
Prospectus and except for any restrictions customarily found in
insurance licenses generally; and except as disclosed or
incorporated by reference in the Prospectus, to the best of such
counsel's knowledge, no insurance regulatory agency or body has
issued any order or decree impairing, restricting or prohibiting the
payment of dividends by any of the Delaware Subsidiaries of the
Company to its parent.
(xvii) The Company is not an "investment company" or a
company "controlled" by an "investment company" within the meaning
of the Investment Company Act.
(xviii) (i) The Registration Statement and any post-effective
amendment thereto, at the time such Registration Statement or such
post-effective amendment became or becomes effective, complied or
will comply in all material respects with the provisions of the Act;
and (ii) the Prospectus, and any supplement or amendment thereto, on
the date of filing thereof with the Commission and on the Closing
Date and the Option Closing Date, complied and will comply in all
material respects with the provisions of the Act; provided that such
counsel need express no view on the financial statements and the
notes thereto and the schedules and other financial, statistical and
accounting data included therein (or in the documents incorporated
therein by reference).
(xix) The Company has corporate power and authority to enter
into this Agreement and to issue, sell and deliver the Shares and
the Additional Shares, if any, to be sold by it to the Underwriters
as provided herein. The performance by the Company of its
obligations hereunder (including without limitation the issuance and
sale of the Shares and the Additional Shares, if any), has been duly
authorized by all necessary corporate action on the part of the
Company.
(xx) The form of certificate for the Shares conforms in all
material respects to the requirements of the Delaware General
Corporation Law and the NYSE.
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(xxi) To the best of such counsel's knowledge, after due
inquiry, no relationship, direct or indirect, or agreement,
(including, without limitation, any voting agreement), exists
between or among the Company or any of the Subsidiaries and any
other party or any of their respective affiliates, which is required
by the Act to be described or a description of which is required to
be incorporated by reference in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration
Statement which is not described or incorporated by reference or
filed as required.
Such counsel shall also state that although such counsel has not
undertaken to determine independently, and therefore does not assume any
responsibility explicitly or implicitly for, the accuracy, completeness or
fairness of the statements contained in the Registration Statement and in the
Prospectus, such counsel has participated in the preparation of the Registration
Statement and the Prospectus, including review and discussion of the contents
thereof, and that based upon and subject to the foregoing, nothing came to such
counsel's attention that caused them to believe that the Registration Statement,
at the time it became effective, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or that the Prospectus,
as of its date and as of the date of such opinion, contained or contains an
untrue statement of a material fact or omitted or omits 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 (except in
each case as to the financial statements and the notes thereto and the schedules
and other financial and statistical data included therein (or in the documents
incorporated therein by reference), as to which such counsel need express no
belief).
As to factual matters, such counsel may rely on certificates
obtained from officers of the Company and the Subsidiaries and from public
officials and on such other authority as such counsel deems reasonable. In
rendering such opinion counsel may rely upon an opinion or opinions, each dated
the Closing Date or the Option Closing Date, as the case may be, of other
counsel retained by them or the Company as to laws of any jurisdiction other
than the United States or the State of New York and the General Corporation Law
of the State of Delaware, provided that (1) each such local counsel is
reasonably acceptable to the Representatives and their counsel, (2) such
reliance is expressly authorized by each opinion so relied upon and a copy of
each such opinion is delivered to the
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Representatives and is in form and substance reasonably satisfactory to the
Representatives and their counsel.
(e) You shall have received an opinion (reasonably satisfactory to
you and counsel for the Underwriters), dated the Closing Date or the
Option Closing Date, as the case may be, of Timothy Curry, counsel to the
Company on behalf of ERMA and ERSIC, to the effect that:
(i) ERSIC is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in
which it was organized and has all requisite power and authority to
conduct its business as it is currently being conducted and to own,
lease and operate its properties. ERMA is a partnership duly
organized, validly existing and in good standing under the laws of
the jurisdiction in which it was organized and has all requisite
power and authority to conduct its business as it is currently being
conducted and to own, lease and operate its properties. ERSIC is
duly qualified as a foreign corporation authorized to transact
business in and is in good standing in each jurisdiction in which
the nature of its business or its ownership or leasing of property
requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the business,
prospects, operations, properties, net worth, results of operations
or financial condition of the Company and the Subsidiaries
considered as a whole.
(ii) All of the outstanding shares of capital stock of, or
other ownership interests in, each of ERSIC and ERMA have been duly
authorized and validly issued and, in the case of shares of capital
stock, are fully paid and non-assessable, and all such shares and
other ownership interests owned of record by the Company or by a
Subsidiary of the Company are owned free and clear of any perfected
security interest and any lien, claim, encumbrance or adverse
interest of any nature.
(iii) Except as otherwise set forth in the Prospectus, there
are no pending legal or governmental actions, suits or proceedings
to which ERSIC or ERMA is a party or of which any of their
respective property is the subject and which are required to be
described in the Registration Statement or the Prospectus, and, to
the best of such counsel's knowledge, no such actions, suits or
proceedings are threatened or contemplated, and no contract or
document of a character required to be described in the Registration
Statement or the
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Prospectus or to be filed as an exhibit to the Registration
Statement is not so described or filed as required, and the
descriptions of the terms of any such contracts or documents
contained in the Registration Statement or the Prospectus are
correct in all material respects.
(iv) Neither ERSIC nor ERMA is (A) in violation of its
respective charter or by-laws, or other organizational documents, or
(B) in violation of any judgment, injunction, order or decree of any
court, governmental agency or body (including, without limitation,
any insurance regulatory agency or body) or arbitrator having
jurisdiction over ERSIC or ERMA, or (C) in default in the
performance of any obligation, agreement or condition contained in
any bond, debenture, note or any other evidence of indebtedness or
in any other agreement, indenture, lease or instrument that, in the
case of either (B) or (C), is material to the business of the
Company and the Subsidiaries taken as a whole.
(v) All material leases to which either of ERSIC or ERMA
is a party are valid and binding on each such subsidiary, as the
case may be, and no default has occurred or is continuing
thereunder, which might result in any material adverse change in the
business, prospects, financial condition or results of operation of
the Company and the Subsidiaries taken as a whole.
(vi) Each of ERSIC and ERMA holds such licenses,
certificates, permits, franchises and authorizations from insurance
departments and other governmental or regulatory authorities
("permits") (including, without limitation, Insurance Licenses)
which are necessary to own, lease and operate its properties and to
conduct its business as described in the Prospectus, except to the
extent the failure to hold any such permits or Insurance Licenses
(either singularly or in the aggregate) would not have a material
adverse effect on the business, prospects, operations, properties,
net worth, results of operations or financial condition of the
Company and the Subsidiaries taken as a whole; and all such permits
and the Insurance Licenses are in full force and effect. Except as
disclosed in the Prospectus there has been, and there is, no pending
or, to the best of such counsel's knowledge, threatened action,
suit, proceeding, investigation or event that could reasonably be
expected to lead to the revocation, termination, suspension or any
other material
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<PAGE> 39
impairment of the rights of the holder of any such permit
(including, without limitation, the Insurance Licenses); such
permits and Insurance Licenses do not materially restrict the
conduct of business of the Other Subsidiaries except as described in
the Prospectus and except for any restrictions customarily found in
insurance licenses generally; and except as disclosed in the
Prospectus no insurance regulatory agency or body has issued any
order or decree impairing, restricting or prohibiting the payment of
dividends by any of the Subsidiaries of the Company to its parent.
(vii) No relationship, direct or indirect, or agreement,
(including, without limitation, any voting agreement), exists
between or among any of ERSIC or ERMA and any other party or any of
their respective affiliates, which is required by the Act to be
described in or a description of which is required to be
incorporated by reference in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration
Statement which is not described or incorporated by reference or
filed as required.
(f) You shall have received on the Closing Date and the Option
Closing Date, as the case may be, an opinion, dated as of such date, of
LeBoeuf, Lamb, Greene & MacRae, L.L.P., a limited liability partnership
including professional corporations, as counsel for the Underwriters, with
respect to the incorporation of the Company, the validity of the Shares,
the Registration Statement, the Prospectus and other related matters as
you may require, and the Company shall have furnished to such counsel such
documents as they reasonably request for the purpose of enabling them to
pass upon such matters.
The opinions of Dewey Ballantine, counsel to the Company, of Timothy
Curry, counsel to the Company on behalf of ERMA and ERSIC, and of LeBoeuf, Lamb,
Greene & MacRae, L.L.P., counsel to the Underwriters, described in paragraphs
(d), (e) and (f), respectively, above shall be rendered to you at the request
and direction and instruction of the Company and shall so state therein.
(g) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental
agency as of such Closing Date or Option Closing Date, as the case may be,
that would prevent the issuance of the Shares. No injunction, restraining
order or order of any nature by a federal or
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<PAGE> 40
state court of competent jurisdiction shall have been issued as of such
Closing Date or Option Closing Date, as the case may be, that would
prevent the issuance of the Shares.
(h) You shall have received a letter, dated the date of this
Agreement, of Ernst & Young confirming that they are independent public
accountants with respect to the Company within the meaning of the Act and
the applicable published rules and regulations promulgated thereunder and
stating in effect the information contained in Annex I.
(i) You shall have received a letter on and as of the Closing Date
and the Option Closing Date from Ernst & Young substantially in the form
and substance of, or confirming the statements contained in, the letter
delivered to you by Ernst & Young on the date of this Agreement.
(j) The several obligations of the Underwriters to purchase
Additional Shares hereunder are subject to the delivery to the
Representatives on the Option Closing Date of such documents as you may
reasonably request with respect to the good standing of the Company, the
due authorization and issuance of the Additional Shares and other matters
related to the issuance of the Additional Shares.
(k) All of the transactions contemplated by this Agreement and by
the Registration Statement shall have been consummated at or prior to the
time that the Shares are delivered and paid for pursuant to Section 4 of
this Agreement.
(l) The Shares shall have been listed or approved for listing upon
official notice of issuance on the New York Stock Exchange.
(m) The Company shall have furnished or caused to be furnished to
you such further certificates and documents as you shall have reasonably
requested.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to you and your counsel.
SECTION 9. EFFECTIVE DATE OF AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective upon the later of (i)
execution of this Agreement and (ii) when
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<PAGE> 41
notification of the effectiveness of the Registration Statement has been
released by the Commission.
(b) This Agreement may be terminated at any time prior to the
Closing Date or the Option Closing Date, as the case may be, by you by
written notice to the Company if any of the following has occurred: (i)
since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or
development involving a prospective material adverse change in or
affecting particularly the business, prospects, operations, properties,
net worth, results of operations or financial condition of the Company or
any Subsidiary other than Talcott Services Corporation, Executive Risk
N.V. or Executive Risk Limited, whether or not arising in the ordinary
course of business, which would, in your judgment, make it impracticable
to market the Shares on the terms and in the manner contemplated in the
Prospectus, (ii) any outbreak or escalation of hostilities or other
national or international calamity or crisis or change in economic
conditions or in the financial markets of the United States or elsewhere
that, in your judgment, is material and adverse and would, in your
judgment, make it impracticable to market the Shares on the terms and in
the manner contemplated in the Prospectus, (iii) the suspension or
material limitation of trading in securities on the NYSE, the American
Stock Exchange, the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange, the Chicago Board of Trade or the NASDAQ National
Market System or limitation on prices for securities on any such exchange
or the National Market System, (iv) the suspension of trading of any
securities of the Company on any exchange or in the over-the-counter
market, (v) the enactment, publication, decree or other promulgation of
any federal or state statute, regulation, rule or order of any court or
other governmental authority which in your opinion materially and
adversely affects, or will materially and adversely affect, the business
or operations of the Company or any Subsidiary other than Talcott Services
Corporation, Executive Risk N.V. or Executive Risk Limited, (vi) the
declaration of a banking moratorium by either federal or New York State
authorities or (vii) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs
which in your opinion has a material adverse effect on the financial
markets in the United States.
(c) If on the Closing Date or on the Option Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase the Firm Shares or Additional Shares, as the case may be, which
it or they have agreed to purchase hereunder on such date and the
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<PAGE> 42
aggregate number of Firm Shares or Additional Shares, as the case may be,
which such defaulting Underwriter or Underwriters, as the case may be,
agreed but failed or refused to purchase is not more than one-tenth of the
total number of Shares to be purchased on such date by all Underwriters,
each non-defaulting Underwriter shall be obligated severally, in the
proportion which the number of Firm Shares set forth opposite its name in
Schedule I bears to the total number of Firm Shares which all the
non-defaulting Underwriters, as the case may be, have agreed to purchase,
or in such other proportion as you may specify, to purchase the Firm
Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters, as the case may be, agreed but failed or
refused to purchase on such date; provided that in no event shall the
number of Firm Shares or Additional Shares, as the case may be, which any
Underwriter has agreed to purchase pursuant to Section 2 hereof be
increased pursuant to this Section 9 by an amount in excess of one-ninth
of such number of Firm Shares or Additional Shares, as the case may be,
without the written consent of such Underwriter. If on the Closing Date,
any Underwriter or Underwriters shall fail or refuse to purchase Firm
Shares and the aggregate number of Firm Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Shares to
be purchased on such date by all Underwriters and arrangements
satisfactory to you and the Company for purchase of such Shares are not
made within 48 hours after such default, this Agreement will terminate
without liability on the part of any non-defaulting Underwriter and the
Company. In any such case which does not result in termination of this
Agreement, either you or the Company shall have the right to postpone the
Closing Date or the applicable Option Closing Date, as the case may be,
but in no event for longer than seven days, in order that the required
changes, if any, in the Registration Statement and the Prospectus or any
other documents or arrangements may be effected. If, on an Option Closing
Date, any Underwriter or Underwriters shall fail or refuse to purchase
Additional Shares and the aggregate number of Additional Shares with
respect to which such default occurs is more than one-tenth of the
aggregate number of Additional Shares to be purchased on such date, the
non-defaulting Underwriters shall have the option to (i) terminate their
obligation hereunder to purchase such Additional Shares or (ii) purchase
not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase on such date in the
absence of such default. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any
default of any such Underwriter under this Agreement.
-42-
<PAGE> 43
SECTION 10. MISCELLANEOUS. Notices given pursuant to any provision
of this Agreement shall be addressed as follows: (i) if to the Company, to
Executive Risk Inc., 82 Hopmeadow Street, Simsbury, CT 06070, Attention:
President, and (ii) if to any Underwriter or to you, to you c/o Donaldson,
Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New York, New York
10172, Attention: Syndicate Department, or in any case to such other address as
the person to be notified may have requested in writing.
The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company, its officers
and directors and of the several Underwriters set forth in or made pursuant to
this Agreement shall remain operative and in full force and effect, and will
survive delivery of and payment for the Shares, and the Additional Shares, if
any, regardless of (a) any investigation, or statement as to the results
thereof, made by or on behalf of any Underwriter, the officers or directors of
any Underwriter, any person controlling any Underwriter, the Company, the
officers or directors of the Company or any person controlling the Company, (b)
acceptance of the Shares and payment for them hereunder and (c) termination of
this Agreement, and shall be binding upon and inure to the benefit of the
successors, assigns, heirs and personal representatives of each Underwriter and
the Company.
If this Agreement is terminated pursuant to Section 10(c) or if for
any reason the purchase of the Shares by the Underwriters is not consummated,
the Company shall remain responsible for the expenses to be paid or reimbursed
by it pursuant to Section 5(l) and the respective obligations of the Company,
Aetna and the Underwriters pursuant to Section 8 shall remain in effect. If the
purchase of the Shares by the Underwriters is not consummated for any reason
other than solely because of the termination of this Agreement pursuant to
Section 10(b) or 10(c), the Company will reimburse the Underwriters for all
out-of-pocket expenses (including fees and disbursements of counsel) reasonably
incurred by them in connection with the offering of the Shares.
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the
Underwriters, the Underwriters' directors and officers, any controlling persons
referred to herein, the Company's directors and the Company's officers who sign
the Registration Statement and their respective successors and assigns, all as
and to the extent provided in this Agreement, and no other person shall acquire
or have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include a purchaser of any of the Shares or Additional
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<PAGE> 44
Shares, if any, from any of the several Underwriters merely because of such
purchase.
THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAWS
PROVISIONS THEREOF.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
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<PAGE> 45
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
EXECUTIVE RISK INC.
By:_______________________________
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CONNING & COMPANY
OPPENHEIMER & CO., INC.
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:_____________________________
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<PAGE> 46
SCHEDULE I
Number of Firm
Shares
Underwriters to be Purchased
- ------------ ---------------
Donaldson, Lufkin & Jenrette
Securities Corporation
Conning & Company
Oppenheimer & Co., Inc.
-------------------
Total 1,000,000
<PAGE> 47
SCHEDULE II
SUBSIDIARIES
Executive Re Inc.
Executive Re Indemnity Inc.
Executive Re Specialty Insurance Company
Executive Risk Limited
Executive Risk Management Associates
Executive Risk N.V.
Talcott Services Corporation
Vulcan Indemnity Inc.
-2-
<PAGE> 1
August 26, 1997
Executive Risk Inc.
82 Hopmeadow Street
Simsbury, CT 06070
Ladies and Gentlemen:
We refer to the Registration Statement on Form S-3 (Registration
No.333-33395) (the "Registration Statement") filed by Executive Risk Inc. (the
"Company") with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "Act"), for the purpose of registering
under the Act the sale of the Company of 1,150,000 shares (which includes
150,000 shares issuable upon the exercise in full of the over-allotment option
granted to the underwriters) of the Company's common stock, par value $.01 per
share (the "Shares"). The Shares will be issued and sold pursuant to an
underwriting agreement (the "Underwriting Agreement") to be entered into between
the Company and Donaldson, Lufkin & Jenrette Securities Corporation, Conning &
Company and Oppenheimer & Co., Inc., as representatives of the several
underwriters (the "Underwriters").
We have examined and are familiar with originals or copies,
certified or otherwise identified to our satisfaction, of the Registration
Statement, such corporate records of the Company, certificates of officers of
the Company and of public officials and such other documents as we have deemed
appropriate as a basis for the opinions expressed below. In such examination, we
have assumed the authenticity of all documents presented to us as originals, the
conformity to the originals of all documents presented to us as copies, and the
authenticity of the originals of such latter documents.
Based upon the foregoing, we are of the opinion that:
1. the Company is duly incorporated and existing under the laws of
the State of Delaware; and
2. the Shares are duly authorized and, if issued and delivered to
the Underwriters against payment therefor in accordance with
the terms of the Underwriting Agreement and as provided in the
Registration Statement, the Shares will be validly issued,
fully paid and non-assessable.
<PAGE> 2
Executive Risk Inc.
August 26, 1997
Page 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Certain Legal Matters" in the Prospectus constituting a part of such
Registration Statement. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Act or the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
---------------------
/s/ Dewey Ballantine
<PAGE> 1
EXHIBIT 15.1
ACKNOWLEDGMENT LETTER
To the Stockholders and Board of Directors
Executive Risk Inc.
We are aware of the incorporation by reference in the Registration
Statement (Form S-3 No. 333-33395) of Executive Risk Inc. for the registration
of 1,150,000 shares of its common stock of our reports dated May 2, 1997 and
August 1, 1997 relating to the unaudited consolidated interim financial
statements of Executive Risk Inc. that are included in its Forms 10-Q for the
quarters ended March 31, 1997 and June 30, 1997.
/s/ ERNST & YOUNG LLP
Stamford, Connecticut
August 22, 1997
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 No. 333-33395) and related Prospectus of
Executive Risk Inc. for the registration of 1,150,000 shares of its common stock
and to the incorporation by reference therein of our report dated February 7,
1997, with respect to the consolidated financial statements of Executive Risk
Inc. incorporated by reference in its Annual Report (Form 10-K) for the year
ended December 31, 1996 and the related financial statement schedule included
therein, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Stamford, Connecticut
August 22, 1997
