Fil | ed by the Registrant x |
Fil | ed by a Party other than the Registrant ¨ |
Ch | eck the appropriate box: |
¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
¨ | Definitive Proxy Statement |
¨ | Definitive Additional Materials |
¨ | Soliciting Material under Rule 14a-12 |
Pay | ment of Filing Fee (Check the appropriate box): |
¨ | No fee required |
x | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
1. | Title of each class of securities to which transaction applies: Ordinary Shares |
2. | Aggregate number of securities to which transaction applies: 5,176,473 Shares |
3. | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): The per share price of $15.07 was computed by dividing $78,000,000, which is the aggregate value of the transaction, by 5,176,473, which is the maximum number of shares to be issued in the transaction. |
4. | Proposed maximum aggregate value of transaction: $78,000,000 |
5. | Total fee paid: $15,600 |
¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of the filing. |
1. | Amount previously paid: |
2. | Form, Schedule or Registration Statement No.: |
3. | Filing Party: |
4. | Date Filed: |
De | ar Shareholder: |
Sin | cerely, |
Mi | chael C. French |
Chairman of the Board |
and Chief Executive Officer |
1. | To consider and vote upon an ordinary resolution to approve the Share Purchase Agreement and related transaction documents by and between Scottish Holdings and Pacific Life Insurance Company; |
2. | To consider and vote upon a special resolution to amend the Memorandum of Association of Scottish Holdings, attached as Annex A to this Notice; |
3. | To consider and vote upon a special resolution to amend the Articles of Association of Scottish Holdings, attached as Annex B to this Notice; |
4. | To consider and vote upon an ordinary resolution to adopt the 2001 Stock Option Plan of Scottish Holdings; and |
5. | To transact such other business as may properly be brought before the Extraordinary General Meeting. |
By order of the Board of Directors, |
SCOTT E. WILLKOMM |
President |
Dated [ ], 2001 |
3. The objects for which the Company is established are, subject to section (i) of this Clause 3, unrestricted and shall include, but without limitation, the following: |
(i) (a) To own, hold, purchase or otherwise acquire equity or debt securities in companies, firms or other persons engaged in all or any forms of insurance or reinsurance business and to promote the establishment of such entities. |
4. Except as prohibited or limited by the Companies Law (2001 Revision), the Company shall have full power and authority to carry out any object and shall have and be capable of, from time to time and at all times, exercising any and all of the powers at any time or from time to time exercisable by a natural person or body corporate in doing in any part of the world whether as principal, agent, contractor or otherwise whatever may be considered by it necessary for the attainment of its objects and whatever else may be considered by it as incidental or conducive thereto or consequential thereon, including, but without in any way restricting the generality of the foregoing, the power to make any alterations or amendments to this Memorandum of Association and the Articles of Association of the Company considered necessary or convenient in the manner set out in the Articles of Association of the Company, and the power to do any of the following acts or things, viz: |
to pay all expenses of and incidental to the promotion, formation and incorporation of the Company; to register the Company to do business in any other jurisdiction; to sell, lease or dispose of any property of the Company; to draw, make, accept, endorse, discount, execute and issue promissory notes, debentures, bills of exchange, bills of lading, warrants and other negotiable or transferable instruments; to lend money or other assets and to acts as guarantors; to borrow or raise money on the security of the undertaking or transferable instruments; to lend money or other assets and to act as guarantors; to borrow or raise money on the security of the undertaking or on all or any of the assets of the Company including uncalled capital or without security; to invest monies of the Company in such manner as the Directors determine; to promote other companies; to sell the undertaking of the Company for cash or any other consideration; to distribute assets in specie to Members of the Company; to make charitable or benevolent donations; to pay pensions or gratuities or provide other benefits in cash or kind to Directors, officers, employees, past or present and their families; to purchase Directors and officers liability insurance and to carry on any trade or business and generally to do all acts and things which, in the opinion of the Company or the Directors, may be conveniently or profitably or usefully acquired and dealt with, carried on, executed or done by the Company in connection with the business aforesaid. |
6. (b) Notwithstanding Article 6(a) of these Articles, the Company shall not issue any shares in a manner that the Board of Directors of the Company believes would cause, by reason of such issuance, the total Controlled Shares of any Person to equal or exceed 10% of a class of the Company’s shares; provided, however, that this provision shall not apply to (i) the issuance of shares to Pacific Life Insurance Company in such amount so that Pacific Life Insurance Company’s Controlled Shares do not exceed 24.9% of the Company’s shares and (ii) any issuance of shares to a person acting as an underwriter in the ordinary course of its business, purchasing such shares pursuant to a purchase agreement to which the company is a party, for resale. |
9. (b) Except with respect to transfers of the Company’s shares executed on the NASDAQ National Market, the Directors shall decline to register a transfer of shares if the Directors have reason to believe that the effect of such transfer would be to increase the number of total Controlled Shares of any Person to ten percent (10%) or any higher percentage of the Company’s shares on an Unadjusted Basis. Notwithstanding the foregoing, Pacific Life Insurance Company, Pacific Mutual Holding Company, Pacific LifeCorp and/or any direct or indirect wholly-owned subsidiary of Pacific Mutual Holding Company (each, a “Pacific Life Entity”, provided however, that any Pacific Life Entity shall cease to be a Pacific Life Entity in the event it is no longer a 100% direct or indirect subsidiary of Pacific Mutual Holding Company), shall each be permitted to transfer shares of the Company to another Pacific Life Entity, provided that the Controlled Shares of the Pacific Life Entities in the aggregate do not exceed 24.9% of the Company’s shares. |
47. (a) Subject to Article 6, every Member of record present in person or by proxy shall have one vote for each issued and outstanding Ordinary Share registered in his name in the register; PROVIDED THAT, subject to the following provisions of this Article 47, if and for so long as the number of Controlled Shares of any Person other than a Pacific Life Entity would constitute 10% or more of the total combined voting rights attaching to the issued shares of the Company (calculated after giving effect to any prior reductions in voting rights attaching to Controlled Shares of other persons as provided in this Article 47), or the total number of Controlled Shares of the Pacific Life Entities would constitute 25% or more of the total combined voting rights attaching to the issued Shares of the Company (calculated after giving effect to any prior reductions in voting rights attaching to Controlled Shares of other persons as provided in this Article 47), each such issued Controlled Share, regardless of the identity of the registered holder thereof, shall confer only a fraction of a vote as determined by the following formula (the “Formula”) (PROVIDED, HOWEVER, that nothing in the Formula shall cause the voting rights attaching to the Pacific Life Entities’ Controlled Shares to be less than 24.9% of the total combined voting rights attaching to the issued shares of the Company (calculated after giving effect to any prior reductions in voting rights attaching to Controlled Shares of other persons as provided in this Article 47): |
47. (d) The Formula shall be applied successively as many times as may be necessary to ensure that no Person other than a Pacific Life Entity shall be a 10% Shareholder at any time, and that the voting rights attached to the Controlled Shares of the Pacific Life Entities shall not exceed 24.9% at any time. For the purposes of determining the votes exercisable by Members as at any date, the Formula shall be applied first to the votes of Controlled Shares attributable to the Person to whom the greatest number of Controlled Shares are attributed and successively to the Controlled Shares attributable to them, in each case |
calculations being made on the basis of the aggregate number of votes conferred by the issued shares as at such date as reduced by the application of the Formula to any larger number of Controlled Shares as at such date. |
47. (e) Notwithstanding the provisions of Articles 47(a) and (d) above, having applied the provisions thereof as best as they consider reasonably practicable, the Directors may make such final adjustments to the aggregate number of votes attaching to the shares of any Member that they consider fair and reasonable in all the circumstances to ensure that no Person other than a Pacific Life Entity shall be a 10% Shareholder at any time, and that the voting rights attached to the Controlled Shares of the Pacific Life Entities shall not exceed 24.9% at any time. |
Page | ||||
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS AND THE MEETING | 1 | |||
SUMMARY OF THE PROXY STATEMENT | 4 | |||
The Companies | 4 | |||
Date, Time and Place of Extraordinary General Meeting | 5 | |||
Purpose of the Extraordinary General Meeting | 5 | |||
The Transaction | 5 | |||
The Amendments to the Memorandum of Association | 7 | |||
The Amendments to the Articles of Association | 8 | |||
The 2001 Stock Option Plan | 8 | |||
Additional Information | 8 | |||
SELECTED CONSOLIDATED FINANCIAL DATA OF SCOTTISH HOLDINGS | 9 | |||
SELECTED CONSOLIDATED FINANCIAL DATA OF WORLDWIDE HOLDINGS | 10 | |||
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA | 13 | |||
SCOTTISH HOLDINGS COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA | 14 | |||
MARKET PRICE AND DIVIDENDS | 15 | |||
FORWARD LOOKING STATEMENTS | 16 | |||
RISKS RELATING TO THE TRANSACTION | 17 | |||
THE EXTRAORDINARY GENERAL MEETING | 19 | |||
Time, Date and Purpose of the Extraordinary General Meeting | 19 | |||
Record Date for the Extraordinary General Meeting and Who is Entitled to Vote at the Extraordinary General Meeting | 19 | |||
Voting by Proxy and How to Revoke Your Proxy | 20 | |||
Solicitation of Proxies | 21 | |||
Recommendation of the Board of Directors | 21 | |||
THE TRANSACTION | 22 | |||
General | 22 | |||
“Walk-Away” Rights | 22 | |||
Background of the Transaction | 23 | |||
Reasons for the Transaction | 26 | |||
Recommendation of the Scottish Holdings Board of Directors | 26 | |||
Opinion of the Financial Advisor of Scottish Holdings | 27 | |||
No Appraisal Rights | 32 | |||
Accounting Treatment of the Transaction | 32 | |||
Important U.S. Federal Income Tax Consequences | 32 | |||
Interests of Directors and Officers in the Transaction | 35 | |||
Regulatory Approvals Required to Complete the Transaction | 35 | |||
THE SHARE PURCHASE AGREEMENT | 37 | |||
General | 37 | |||
Determination of Consideration for the Shares in World-Wide Holdings | 37 | |||
Representations and Warranties of Scottish Holdings and Pacific Life | 38 | |||
Covenants Relating to the Conduct of Business Before the Closing Date | 39 | |||
Indemnification | 41 | |||
Directors’ and Officers’ Indemnification and Insurance | 41 | |||
Additional Agreements | 42 | |||
Conditions to the Transaction | 42 | |||
Conditions to the Obligations of Scottish Holdings | 43 | |||
Conditions to Pacific Life’s Obligations. | 43 | |||
Termination | 44 |
Page | ||||
Amendment and Waiver | 45 |
Material Terms of the Stockholder Agreement | 46 | |
Registration Rights Agreement | 46 | |
Vote Required | 47 | |
Dividends | 47 | |
Recommendation of the Scottish Holdings Board | 47 | |
AMENDMENTS TO THE MEMORANDUM OF ASSOCIATION | 48 | |
General | 48 | |
Amendment to the Memorandum of Association | 48 | |
Vote Required | 48 | |
Recommendation of the Board of Directors | 48 | |
AMENDMENTS TO THE ARTICLES OF ASSOCIATION | 49 | |
General | 49 | |
Amendment to the Articles of Association | 49 | |
Vote Required | 49 | |
Recommendation of the Board of Directors | 49 | |
THE 2001 STOCK OPTION PLAN | 50 | |
General | 50 | |
Summary Description of the 2001 Stock Option Plan | 50 | |
U.S. Federal Income Tax Treatment of Options Under the 2001 Stock Option Plan | 52 | |
Specific Benefits | 52 | |
Vote Required | 52 | |
Recommendation of the Board of Directors | 52 | |
INFORMATION ABOUT SCOTTISH HOLDINGS | 53 | |
SHARE OWNERSHIP BY THE PRINCIPAL SHAREHOLDERS, MANAGEMENT AND DIRECTORS OF SCOTTISH HOLDINGS | 54 | |
INFORMATION ABOUT WORLD-WIDE HOLDINGS | 55 | |
INFORMATION ABOUT PACIFIC LIFE | 56 | |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF WORLD-WIDE HOLDINGS | 57 | |
SHAREHOLDERS PROPOSALS | 65 | |
EXPERTS | 66 | |
OTHER MATTERS | 67 | |
WHERE YOU CAN FIND MORE INFORMATION | 68 | |
INDEX TO FINANCIAL STATEMENTS | F-1 |
Annex A Share Purchase Agreement, dated as of August 6, 2001, by and between Scottish Holdings and Pacific Life (including the forms of Registration Rights Agreement, Stockholder Agreement and Tax Deed of Covenant, which are to be entered into between Scottish Life and Annuity Holdings, Ltd. and Pacific Life Insurance Company, attached respectively as Exhibits A, B and C thereto) | A-1 | |
Annex B Text of the Amendments to the Memorandum of Association of Scottish Holdings | B-1 | |
Annex C Text of the Amendments to the Articles of Association of Scottish Holdings | C-1 | |
Annex D Form of 2001 Stock Option Plan | D-1 | |
Annex E Opinion of the Financial Advisor of Scottish Holdings | E-1 |
• | the Share Purchase Agreement and related transaction documents; |
• | amendments to the Memorandum of Association of Scottish Holdings; |
• | amendments to the Articles of Association of Scottish Holdings; and |
• | the 2001 Stock Option Plan. |
Old | Bank House |
Th | ames Street |
Wi | ndsor, Berks, United Kingdom SL4 1PZ |
700 | Newport Center Drive |
Ne | wport Beach, CA 92660-6397 |
(80 | 0) 800-7646/(949) 219-3011switchboard |
gaining access to “niche” markets of the life reinsurance sector in developed and developing countries; | |||
obtaining significant management expertise and client franchise in markets and businesses in which Scottish Holdings has previously not operated; | |||
acquiring a company with significant growth potential; | |||
gaining short-term business which is complementary to Scottish Holdings’ long-term risk profile; and | |||
having Pacific Life as a strategic investor. | |||
Year ended December 31, 2000 | Year ended December 31, 1999 | Period ended December 31, 1998* | Six Months ended June 30, 2001 | Six Months ended June 30, 2000 | |||||||||||||||||
(Expressed in Thousands of United States Dollars, except per share amounts) | |||||||||||||||||||||
Income Statement Data: | |||||||||||||||||||||
Total revenues | $83,934 | $22,465 | $1,338 | $46,135 | $25,561 | ||||||||||||||||
Total benefits and expenses | 68,073 | 13,632 | 902 | 38,255 | 21,520 | ||||||||||||||||
Net income before income taxes and minority interest | 15,861 | 8,833 | 436 | 7,880 | 4,041 | ||||||||||||||||
Income before cumulative effect of change in accounting principle | 15,971 | 8,875 | 436 | 8,008 | 4,411 | ||||||||||||||||
Cumulative effect of change in accounting principle | — | — | — | (406 | ) | — | |||||||||||||||
Net income | 15,971 | 8,875 | 436 | 7,602 | 4,411 | ||||||||||||||||
Per Share Data: | |||||||||||||||||||||
Basic earnings per share: | |||||||||||||||||||||
Income before cumulative effect of change in accounting principle | $1.01 | $0.50 | $0.12 | $0.51 | $0.28 | ||||||||||||||||
Cumulative effect of change in accounting principle | — | — | — | (0.02 | ) | — | |||||||||||||||
Net income | $1.01 | $0.50 | $0.12 | $0.49 | $0.28 | ||||||||||||||||
Diluted earnings per share: | |||||||||||||||||||||
Income before cumulative effect of change in accounting principle | $1.00 | $0.50 | $0.12 | $0.49 | $0.28 | ||||||||||||||||
Cumulative effect of change in accounting principle | — | — | — | (0.02 | ) | — | |||||||||||||||
Net income | $1.00 | $0.50 | $0.12 | $0.47 | $0.28 | ||||||||||||||||
Cash dividends per share | $0.20 | $0.15 | — | $0.10 | $0.10 | ||||||||||||||||
Weighted average number of shares outstanding: | |||||||||||||||||||||
Basic | 15,849,657 | 17,919,683 | 3,586,788 | 15,636,250 | 16,016,388 | ||||||||||||||||
Diluted | 15,960,542 | 17,919,683 | 3,586,788 | 16,191,632 | 16,029,149 | ||||||||||||||||
December 31, 2000 | December 31, 1999 | December 31, 1998 | June 30, 2001 | June 30, 2000 | |||||||||||||||||
Balance Sheet Data: | |||||||||||||||||||||
Total fixed maturity investments | $581,020 | $546,807 | $178,521 | $463,888 | $515,385 | ||||||||||||||||
Total assets | 1,178,496 | 856,634 | 254,346 | 1,249,852 | 993,825 | ||||||||||||||||
Borrowings | — | — | — | 40,153 | — | ||||||||||||||||
Total liabilities | 936,112 | 637,973 | 2,286 | 998,502 | 772,367 | ||||||||||||||||
Minority interest | 2,820 | — | — | 2,749 | 2,753 | ||||||||||||||||
Total shareholders’ equity | 239,564 | 218,661 | 252,060 | 248,601 | 218,705 | ||||||||||||||||
Actual number of ordinary shares outstanding | 15,614,240 | 16,046,740 | 18,568,440 | 15,712,576 | 15,803,340 | ||||||||||||||||
Book value per share | $15.34 | $13.63 | $13.57 | $15.82 | $13.84 | ||||||||||||||||
Closing market price per share | 11.98 | 8.19 | 13.75 | 17.00 | 8.38 |
* | the period from May 12, 1998 (date of incorporation) to December 31, 1998. |
• | Valuation of Investments – Under UK GAAP, World-Wide Holdings records fixed income and equity securities at fair value with both realized and unrealized gains and losses included in the consolidated statement of income. Under US GAAP, investments in debt and equity securities are classified as held to maturity, available for sale or trading. Investments in debt securities classified as held to maturity are measured at amortized cost with the related amortization of the premium or discount as well as the interest income included in the consolidated statement of income. Investments in debt securities which are not classified as held to maturity and equity securities are classified as trading securities or available for sale securities. Trading securities are recorded at fair value and unrealized gains and losses are included in earnings. Unrealized gains and losses on available for sale securities are reported as a separate component of shareholder’s equity. World-Wide Holdings classifies all fixed maturity securities as available for sale and all equity securities as trading. |
• | Valuation of Policyholder Liabilities – Under UK GAAP, World-Wide Holdings records all activity on life insurance contracts in its Technical Account – Long Term Business (which we refer to as the Technical Account). The appointed actuary of World-Wide Holdings determines the policyholder reserves required at the balance sheet date, based upon UK insurance regulations and actuarial standards, and the movement in opening and closing reserves is reflected in the Technical Account. The balance of the Technical Account is carried forward to the “Non-Technical Account,” which is effectively a shareholder’s profit and loss account. Under US GAAP, all activity is recorded directly in the consolidated statement of income and the policyholder liabilities are based upon actual experience and the actuarial calculation of the expected liability. |
• | Deferred Income Taxes – Under UK GAAP, deferred income taxes are accounted for using the liability method to the extent that is considered probable that a liability or asset will crystallize in the forseeable future. Under US GAAP, World-Wide Holdings accounts for income taxes under the provisions of Statement of Financial Accounting Standards (SFAS) No. 109,Accounting for Income Taxes (SFAS 109). SFAS 109 requires recognition of deferred tax assets for the estimated future tax consequences of events attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards, if any. Deferred tax assets are reduced through the establishment of a valuation allowance at such time as, based on available evidence, it is more likely than not that the deferred tax assets will not be realized. |
• | Revenues – Under UK GAAP, World-Wide Holdings records all premium receipts in revenues as premium income. Under US GAAP, premium receipts are classified by the type of insurance contract as defined by SFAS No. 60Accounting and Reporting by Insurance Enterprises and SFAS No. 97Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments. For SFAS 60 contracts, all premium receipts are recorded in revenues as premiums earned. For SFAS 97 contracts, premium receipts are not reported as revenues. Premium receipts are recorded as deposit liabilities and revenues recorded from SFAS 97 contracts are the amounts assessed against policyholders. |
• | Deferred Acquisition Costs – Under UK GAAP, recognition of an intangible asset, within the Technical Account, representing the amount equal to the excess of the fair value of the reserves and other liabilities assumed over the assets assumed in an assumption transaction, is not required. Under US GAAP, an intangible asset is recorded for this amount (deferred acquisition costs) that is amortized over the estimated gross profits of the business assumed. |
Year Ended September 30, | Nine Months Ended June 30, | |||||||
2000 | 1999 | 2001 | 2000 | |||||
Consolidated Statement of Income Data: | ||||||||
Total revenues | $37,674 | $22,948 | $24,069 | $26,388 | ||||
Total benefits and expenses | 31,341 | 16,563 | 19,416 | 22,105 | ||||
Income before income taxes | 6,333 | 6,385 | 4,653 | 4,283 | ||||
Net income | 4,503 | 4,536 | 3,257 | 3,068 | ||||
September 30, | June 30, | |||||||
2000 | 1999 | 2001 | ||||||
Consolidated Balance Sheet Data: | ||||||||
Total investments | $118,989 | $84,663 | $118,078 | |||||
Total assets | 204,423 | 167,068 | 189,704 | |||||
Total liabilities | 150,534 | 114,331 | 134,125 | |||||
Total shareholder’s equity | 53,889 | 52,737 | 55,579 | |||||
Year Ended | Year Ended | Year Ended | ||||||||||
September 30, 1998 | September 30, 1997 | September 30, 1996 | ||||||||||
GBP | USD | GBP | USD | GBP | USD | |||||||
Consolidated Statement of Income Data | ||||||||||||
Total revenues | £25,143 | $41,707 | £31,192 | $51,027 | £27,492 | $42,536 | ||||||
Total benefits and expenses | 20,901 | 34,670 | 28,147 | 46,046 | 24,230 | 37,489 | ||||||
Income before income taxes | 4,242 | 7,037 | 3,045 | 4,981 | 3,262 | 5,047 | ||||||
Net income | 2,945 | 4,885 | 2,160 | 3,534 | 2,178 | 3,370 | ||||||
September 30, 1998 | September 30, 1997 | September 30, 1996 | ||||||||||
GBP | USD | GBP | USD | GBP | USD | |||||||
Consolidated Balance Sheet Data: | ||||||||||||
Total investments and deposits | £82,182 | $139,709 | £109,219 | $176,771 | £133,500 | $208,928 | ||||||
Total assets | 129,512 | 220,170 | 167,197 | 270,608 | 205,057 | 320,914 | ||||||
Total liabilities | 100,089 | 170,151 | 140,719 | 227,753 | 180,739 | 282,856 | ||||||
Total shareholder’s funds—equity interests | 29,423 | 50,019 | 26,478 | 42,855 | 24,318 | 38,058 |
Six Months Ended June 30, 2001 | Year Ended December 31, 2000 | |||||||||||||||||||||||||
Scottish Holdings | World-Wide Holdings | Scottish Holdings Combined | Scottish Holdings | World-Wide Holdings | Scottish Holdings Combined | |||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||||
Total revenues | $46,135 | $16,177 | $61,857 | $83,934 | $37,674 | $120,698 | ||||||||||||||||||||
Total benefits and expenses | 38,255 | 13,076 | 51,331 | 68,073 | 31,341 | 99,414 | ||||||||||||||||||||
Net income before income tax and minority interest | 7,880 | 3,101 | 10,526 | 15,861 | 6,333 | 21,284 | ||||||||||||||||||||
Income tax expense | (57 | ) | 931 | 737 | (49 | ) | 1,830 | 1,508 | ||||||||||||||||||
Net income before minority interest | 7,937 | 2,170 | 9,789 | 15,910 | 4,503 | 19,776 | ||||||||||||||||||||
Minority interest | (71 | ) | — | (71 | ) | (61 | ) | — | (61 | ) | ||||||||||||||||
Net income before cumulative effect of change in accounting principle | 8,008 | 2,170 | 9,860 | 15,971 | 4,503 | 19,837 | ||||||||||||||||||||
Cumulative effect of change in accounting principle | (406 | ) | — | (406 | ) | — | — | — | ||||||||||||||||||
Net income | $7,602 | $2,170 | $9,454 | $15,971 | $4,503 | $19,837 | ||||||||||||||||||||
Per Share Data: | ||||||||||||||||||||||||||
Basic earnings per share | ||||||||||||||||||||||||||
Income before cumulative effect of change in accounting principle | $0.51 | $0.47 | $1.01 | $0.94 | ||||||||||||||||||||||
Cumulative effect of change in accounting principle | (0.02 | ) | (0.02 | ) | — | — | ||||||||||||||||||||
Net income | $0.49 | $0.45 | $1.01 | $0.94 | ||||||||||||||||||||||
Diluted | ||||||||||||||||||||||||||
Income before cumulative effect of change in accounting principle | $0.49 | $0.46 | $1.00 | $0.94 | ||||||||||||||||||||||
Cumulative effect of change in accounting principle | (0.02 | ) | (0.02 | ) | — | — | ||||||||||||||||||||
Net income | $0.47 | $0.44 | $1.00 | $0.94 | ||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||
Total assets | $1,249,852 | $189,704 | $1,463,774 | |||||||||||||||||||||||
Total liabilities | 998,502 | 134,125 | 1,134,777 | |||||||||||||||||||||||
Minority interest | 2,749 | — | 2,749 | |||||||||||||||||||||||
Total shareholders’ equity | 248,601 | 55,579 | 326,248 |
Six Months Ended June 30, 2001 | Year Ended December 31, 2000 | ||||||||
HISTORICAL PER SHARE DATA: | |||||||||
Net income per share: | |||||||||
Basic | |||||||||
Income before cumulative effect of change in accounting principle | $ 0.51 | $ 1.01 | |||||||
Cumulative effect of change in accounting principle | (0.02 | ) | — | ||||||
Net income | $ 0.49 | $ 1.01 | |||||||
Diluted | |||||||||
Income before cumulative effect of change in accounting principle | $ 0.49 | $ 1.00 | |||||||
Cumulative effect of change in accounting principle | (0.02 | ) | — | ||||||
Net income | $ 0.47 | $ 1.00 | |||||||
Book value per share(1) | $15.82 | $15.34 | |||||||
COMBINED PRO FORMA PER SHARE DATA: | |||||||||
Net income per share: | |||||||||
Basic | |||||||||
Income before cumulative effect of change in accounting principle | $ 0.47 | $ 0.94 | |||||||
Cumulative effect of change in accounting principle | (0.02 | ) | — | ||||||
Net income | $ 0.45 | $ 0.94 | |||||||
Diluted | |||||||||
Income before cumulative effect of change in accounting principle | $ 0.46 | $ 0.94 | |||||||
Cumulative effect of change in accounting principle | (0.02 | ) | — | ||||||
Net income | $ 0.44 | $ 0.94 | |||||||
Book value per share(1) | $15.62 |
(1) | The historical book value per share is computed by dividing shareholders’ equity by the number of ordinary shares outstanding on such date. The combined pro forma book value per share is computed by dividing pro forma shareholders’ equity by the pro forma number of shares outstanding at June 30, 2001. |
High | Low | Per Share Dividend | |||||||||
PERIOD ENDED DECEMBER 31, 1998 | |||||||||||
November 24-December 31, 1998* | $14.500 | $12.000 | $.00 | ||||||||
YEAR ENDED DECEMBER 31, 1999 | |||||||||||
First Quarter | $14.063 | $8.750 | $.00 | ||||||||
Second Quarter | 10.875 | 9.250 | .05 | ||||||||
Third Quarter | 12.375 | 9.625 | .05 | ||||||||
Fourth Quarter | 10.125 | 7.813 | .05 | ||||||||
YEAR ENDED DECEMBER 31, 2000 | |||||||||||
First Quarter | $9.000 | $7.563 | $.05 | ||||||||
Second Quarter | 9.125 | 6.781 | .05 | ||||||||
Third Quarter | 9.875 | 8.375 | .05 | ||||||||
Fourth Quarter | 12.063 | 8.000 | .05 | ||||||||
YEAR ENDED DECEMBER 31, 2001 | |||||||||||
First Quarter | $16.625 | $10.750 | $.05 | ||||||||
Second Quarter | 18.00 | 12.953 | .05 | ||||||||
Third Quarter | 18.90 | 13.90 | .05 | ||||||||
October 1-[ ], 2001 | [ | ] | [ | ] | [ | ] |
* | The Scottish Holdings ordinary shares began trading on November 24, 1998. |
August 3, 2001 | [ ], 2001 | ||||||
Scottish Holdings ordinary shares | $18.453 | $[ | ] |
— | uncertainties relating to government and regulatory policies (such as subjecting Scottish Holdings to insurance regulation or taxation in additional jurisdictions); |
— | the occurrence of catastrophic events or other insured or reinsured events with a frequency or severity exceeding the estimates of Scottish Holdings; |
— | legal, regulatory and legislative developments; |
— | the uncertainties of the insurance reserving process; |
— | changes in capital needs; |
— | the impact of the transaction, including the ability to successfully integrate acquired businesses, the competing demands for the capital of Scottish Holdings and the risk of undisclosed liabilities; |
— | loss of the services of any of Scottish Holdings’ or World-Wide Holdings’ executive officers; |
— | changing rates of inflation and other economic conditions; |
— | the recent terrorist attacks on the United States and the impact of such events on the economy in general and on the businesses of Scottish Holdings or World-Wide Holdings in particular; |
— | losses due to foreign currency exchange rate fluctuations; |
— | ability to collect reinsurance recoverables; |
— | the competitive environment in which Scottish Holdings operates and associated pricing pressures; |
— | developments in global financial markets that could affect the investment portfolio of Scottish Holdings; and |
— | risks associated with the introduction of new products and services. |
— | gaining access to “niche” markets of the life reinsurance sector in developed countries, especially in the United Kingdom and Europe, and broader life reinsurance markets in developing countries, particularly in the Middle East and Japan; |
— | obtaining significant management expertise and client franchise in markets and businesses in which Scottish Holdings has previously not operated; |
— | acquiring a company with significant growth potential; |
— | gaining short-term business which is complimentary to the long-term risk profile of Scottish Holdings; and |
— | having Pacific Life as a strategic investor. |
(1) | reviewed certain publicly available financial statements and other business and financial information with respect to World-Wide Holdings and Scottish Holdings, including their respective consolidated financial statements for recent years and interim periods to March 31, 2001 and certain other relevant financial and operating data relating to World-Wide Holdings and Scottish Holdings made available to us from published sources and from the internal records of World-Wide Holdings and Scottish Holdings; |
(2) | reviewed certain unaudited internal financial statements and other financial and operating data concerning World-Wide Holdings and Scottish Holdings prepared by the managements of World-Wide Holdings and Scottish Holdings, respectively; |
(3) | discussed with representatives of the management of World-Wide Holdings, Pacific Life and Scottish Holdings certain information of a business and financial nature regarding World-Wide Holdings and Scottish Holdings, furnished to Putnam Lovell by World-Wide Holdings, Pacific Life and Scottish Holdings, including financial forecasts and related assumptions; |
(4) | reviewed analysts’ forecasts for Scottish Holdings; |
(5) | reviewed the financial terms and conditions of the August 6, 2001 Share Purchase Agreement and other documents related to the transaction; |
(6) | compared the financial performance of World-Wide Holdings with that of certain other publicly-traded companies in the reinsurance industry which Putnam Lovell deemed to be relevant; | ||
(7) | reviewed the pro forma impact of the transaction on the financial results of Scottish Holdings; | ||
(8) | reviewed certain publicly available information concerning the trading of, and the trading market for, the Scottish Holdings ordinary shares; | ||
(9) | considered the financial terms, to the extent publicly available, of selected recent business combinations of companies in the reinsurance industry which Putnam Lovell deemed to be comparable, in whole or in part, to the transaction; | ||
(10) | participated in discussions and negotiations regarding the transaction among representatives of World-Wide Holdings, Scottish Holdings and Pacific Life and their legal advisors; | ||
(11) | made inquiries regarding and discussed the transaction and the Share Purchase Agreement and other matters related thereto with the legal advisor and public accountants of Scottish Holdings; and | ||
(12) | performed such other analyses and examinations, as Putnam Lovell deemed appropriate. |
In connection with its review, Putnam Lovell has not assumed any obligation independently to verify the foregoing information and has relied on its being accurate and complete in all material respects. With respect to the unaudited financial statements derived from the books and records of World-Wide Holdings and World-Wide Reassurance as well as financial forecasts for World-Wide Holdings, provided to Putnam Lovell by World-Wide Holdings’ management and prepared in order to accommodate the consolidated financial reporting requirements of Pacific Life and its subsidiaries under US GAAP, upon the advice of the management of Scottish Holdings, Putnam Lovell has assumed for purposes of the Putnam Lovell opinion that such financial statements have been reasonably prepared on bases reflecting the best available estimates and judgments of World-Wide Holdings’ management at the time of preparation as to the reconciliation to US GAAP. With respect to the future financial performance of World-Wide Holdings, Putnam Lovell has relied, with the consent of the management of Scottish Holdings, on World-Wide Holdings’ management forecasts and assumed that they were reasonably prepared. Putnam Lovell has relied on advice of counsel to Scottish Holdings as to all legal matters with respect to Scottish Holdings, the transaction and the Share Purchase Agreement. Putnam Lovell has assumed that the transaction will be consummated in a manner that complies in all respects with the applicable provisions of (i) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder, (ii) the insurance regulatory authorities in the jurisdictions in which Scottish Holdings operates its insurance business, (iii) the Securities Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, as amended, and all other applicable securities laws or applicable insurance company stock issuance laws, and (iv) the Financial Services Authority in the United Kingdom. In addition, Putnam Lovell has not assumed responsibility for making an independent evaluation, appraisal or physical inspection of any of the assets or liabilities (contingent or otherwise) of World-Wide Holdings or Scottish Holdings, nor has Putnam Lovell been furnished with any such appraisals. Scottish Holdings has informed Putnam Lovell, and Putnam Lovell has assumed, that the transaction will be recorded as a “purchase” under US GAAP and the transaction will be treated as a tax-free reorganization, pursuant to Section 368 of the Code. No opinion is expressed as to the prices at which the Scottish Holdings ordinary shares will trade at any time. Finally, the Putnam Lovell opinion is based on economic, monetary and market and other conditions as in effect on, and the information made available to Putnam Lovell as of, the date of the Putnam Lovell opinion. Accordingly, although subsequent developments may affect this opinion, Putnam Lovell has not assumed any obligation to update, revise or reaffirm the Putnam Lovell opinion.
• | Three life reinsurers: |
— | Annuity and Life Re (Holdings), Ltd. |
— | Reinsurance Group of America, Incorporated |
— | Scottish Annuity & Life Holdings, Ltd. |
• | Eight property and casualty reinsurers: |
— | Everest Re Group, Ltd. |
— | IPC Holdings, Ltd. |
— | Odyssey Re Holdings Corp. |
— | PartnerRe Ltd. |
— | PXRE Group Ltd. |
— | RenaissanceRe Holdings Ltd. |
— | Transatlantic Holdings, Inc. |
— | Trenwick Group Ltd. |
• | 2001 and 2002 estimated earnings per share, based on mean estimates issued by I/B/E/S International, Inc. as of August 3, 2001; |
• | March 31, 2001, book value per share, based on the information published in the 10-Q filings with the Securities Exchange Commission, which includes the effects of Statement of Financial Accounting Standards No. 115. |
• | 7.1x – 19.2x for the 2001 Price to Earnings multiple; |
• | 5.6x – 16.8x for the 2002 Price to Earnings multiple; |
• | 0.8x – 2.2x for the multiple of Price to March 31, 2001 Book Value. |
(i) | management estimates for 2001 operating earnings, pro forma for the dividend to be paid to Pacific Life estimated to equal US $13 million before tax and including certain adjustments regarding expected additional revenues and expenses not included in the business plan prepared by the management of World-Wide Holdings (which we refer to as 2001 pro forma adjusted operating earnings); |
(ii) | management estimates for 2002 operating earnings, including certain adjustments regarding the dividend to be paid to Pacific Life in 2001, and expected additional revenues and expenses not included in the business plan prepared by the management of World-Wide Holdings; and |
(iii) | March 31, 2001, book value, pro forma for the dividend estimated to equal US $13 million before tax (which we refer to as March 31, 2001 pro forma book value). |
• | Four acquisitions of life reinsurers: |
Announcement Date | Target | Acquirer | Transaction Amount (US$ millions) | |||||
Jul-01 | Lincoln Re | Swiss Reinsurance Co. | $2,500.0 | |||||
Apr-00 | PartnerRe Life Insurance Co. of the U.S. | SCOR | $ 145.0 | |||||
Dec-99 | Phoenix American Life Insurance Co. | General Electric Co. | $ 282.0 | |||||
Jul-98 | Life Re Corp. | Swiss Reinsurance Co. | $1,955.9 |
• | Ten acquisitions of property and casualty reinsurers: |
Announcement Date | Target | Acquirer | Transaction Amount (US$ millions) | |||||
Dec-99 | La Salle Re Holdings Limited | Trenwick Group Inc. | $ 343.1 | |||||
Jun-99 | Chartwell Re Corp. | Trenwick Group Inc. | $ 226.3 | |||||
Feb-99 | Executive Risk Inc. | Chubb Corp. | $ 870.7 | |||||
Feb-99 | NAC Re Corp. | XL Capital Limited | $ 1,191.4 | |||||
Jun-98 | General Re Corp. | Berkshire Hathaway Inc. | $22,339.7 | |||||
Jul-98 | Kemper Reinsurance Co. | General Electric Co. | $ 463.5 | |||||
Mar-98 | Mid Ocean Limited | XL Capital Limited | $ 2,271.2 | |||||
Mar-98 | CAT Limited | ACE Limited | $ 644.1 | |||||
Oct-97 | Mercantile and General Reinsurance Co. of America | Toa Fire & Marine Reinsurance Co. | $ 193.8 | |||||
Mar-97 | Societe Anonyme Francaise de Reassurances | PartnerRe Ltd. | $ 938.5 |
• | last twelve months operating earnings prior to the transaction; |
• | US GAAP equity as of the last available quarterly or yearly financial statements for the target company prior to the transaction; |
• | statutory capital and surplus as of the last available quarterly or yearly financial statements for the target company prior to the transaction. |
• | 9.9x – 38.4x for the multiple of Price to Last Twelve Months Operating Earnings; |
• | 0.8x – 2.7x for the multiple of Price to US GAAP Equity; |
• | 0.9x – 3.9x for the multiple of Price to Statutory Capital and Surplus. |
(1) | 2001 pro forma adjusted operating earnings; |
(2) | March 31, 2001, pro forma book value; and |
(3) | September 30, 2000, statutory capital and surplus, pro forma for the dividend to be paid to Pacific Life. |
• | financial projections provided by World-Wide Holdings’ management; |
• | the mean earnings per share estimate provided by I/B/E/S for Scottish Holdings for 2001, which is composed of only two estimates published by Prudential Securities Inc. (US $1.30) and Putnam Lovell Securities Inc. (US $1.25); and |
• | the only earnings per share estimate available for Scottish Holdings for 2002, provided by Putnam Lovell Securities Inc. (US$1.55). |
.59 X (US $13 million–(amount of dividend + amount of taxes payable as a result of a release of investment reserves by World-Wide Reassurance in connection with World-Wide Reassurance’s payment of a dividend to World-Wide Holdings)). |
— | the existence and good standing of the parties, the subsidiaries of Scottish Holdings, World-Wide Holdings, World-Wide Reassurance and similar corporate matters; | ||
— | the capital structures of Scottish Holdings, World-Wide Holdings and World-Wide Reassurance; | ||
— | authorization, execution, delivery, performance and enforceability of the Share Purchase Agreement and related matters; | ||
— | absence of breach or conflict and compliance with applicable laws, regulations, organizational documents, agreements and other existing obligations; | ||
— | absence of certain changes or events; | ||
— | regulatory approvals, licenses and permits; | ||
— | the contracts affecting Scottish Holdings, World-Wide Holdings and World-Wide Reassurance; | ||
— | reports and financial statements of Scottish Holdings filed with the SEC and the accuracy of the information contained therein; | ||
— | reports, financial statements and annual returns of the parties and the accuracy of the information contained therein; | ||
— | absence of certain adverse changes and the non-occurrence of certain events; | ||
— | the vote required for the holders of Scottish Holdings ordinary shares to adopt the Share Purchase Agreement, the amendments to the Memorandum and Articles of Association and the 2001 Stock Option Plan; | ||
— | brokers’ and finders’ fees incurred in connection with the transaction; | ||
— | tax matters; | ||
— | assets; | ||
— | pensions and other employee benefit plans; | ||
— | litigation; | ||
— | liabilities and reserves; | ||
— | environmental compliance and liability; | ||
— | intellectual property; | ||
— | directors, officers and employees; | ||
— | with respect to World-Wide Holdings and World-Wide Reassurance, bank and brokerage accounts and powers of attorney; | ||
38
— | derivatives; | ||
— | delivery of documents; | ||
— | takeover statutes; | ||
— | investment advisory and investment company matters; | ||
— | insurance; and | ||
— | money laundering. |
— | investment policies; | ||
— | issuance of securities; | ||
— | organizational documents; | ||
— | dividends and distributions; | ||
— | acquisitions; | ||
— | dispositions of assets; | ||
— | litigation; | ||
— | payments to affiliates; | ||
— | actions that would reasonably be expected to result in the breach of a representation or warranty or a closing conditions not being satisfied; | ||
— | accounting matters; | ||
— | judgments and permits; | ||
— | maintenance of material assets; | ||
— | material contracts; and | ||
— | maintenance of business organization, services of senior management and relationships with agents, policyholders, customers and suppliers. |
— | incurrence of indebtedness; |
— | liens; |
— | investment policies; |
— | salary increases; |
— | issuance of securities; |
— | organizational documents; |
— | dividends and distributions; |
— | acquisitions; |
— | dispositions of assets; |
— | capital expenditures; |
— | cancellation of debts; |
— | litigation; |
— | capital gains; |
— | investments in real property, stocks and bonds; |
— | payments to affiliates; �� |
— | actions that would reasonably be expected to result in the breach of a representation or warranty or a closing condition not being satisfied; |
— | maintenance of insurance coverage; |
— | accounting matters; |
— | judgments and permits; |
— | maintenance of material assets; |
— | material contracts; and |
— | maintenance of business organization, services of senior management and relationships with agents, policyholders, customers and suppliers. |
— | giving notice to the other party regarding significant events and material adverse changes; |
— | cooperating on tax matters and the taking of certain steps to allow for favorable tax treatment; |
— | providing access to certain information; |
— | Pacific Life not soliciting inquiries or proposals relating to acquisitions of substantial portions of the securities or assets of World-Wide Holdings or World-Wide Reassurance; |
— | promptly submitting all required regulatory filings; |
— | maintaining confidentiality; |
— | Scottish Holdings filing a proxy statement with the SEC; |
— | calling an Extraordinary General Meeting of shareholders of Scottish Holdings to vote upon the Share Purchase Agreement, the amendments to the Memorandum of Association and the Articles of Association and approval of the 2001 Stock Option Plan; and |
— | World-Wide Holdings and World-Wide Reassurance implementing disaster recovery plans relating to their business and operations. |
— | by mutual written consent; |
— | if the transaction has not been completed by March 31, 2002, so long as the delay has not been caused by an intentional breach of the Share Purchase Agreement by the party seeking termination; |
— | if a condition to either party’s obligations cannot be fulfilled, so long as such inability to fulfill a condition has not been caused by an intentional failure of the party seeking termination to fulfill any other of its obligations under the Share Purchase Agreement; |
— | if the shareholders of Scottish Holdings do not adopt the Share Purchase Agreement and related transactions and the amendments to the Memorandum and Articles of Association at their duly held Extraordinary Meeting of shareholders; and |
— | if any governmental entity has issued an order, decree or ruling or has taken any other action permanently restraining, enjoining or otherwise prohibiting the transaction; |
— | if there has been a material breach by Pacific Life of any representation, warranty, covenant or agreement set forth in the Share Purchase Agreement, and such breach, if capable of being cured, has not been corrected or cured to the reasonable satisfaction of Scottish Holdings within twenty (20) business days after Scottish Holdings has provided written notice thereof to Pacific Life; and |
— | if the Average Final Price is greater than US $21.00. |
— | if there has been a material breach by Scottish Holdings of any representation, warranty, covenant or agreement set forth in the Share Purchase Agreement, and such breach, if capable of being cured, has not been corrected or cured to the reasonable satisfaction of Pacific Life within twenty (20) business days after Pacific Life has provided written notice thereof to Scottish Holdings; |
— | if the Scottish Holdings Board of Directors, in the course of exercising its fiduciary duties or otherwise, chooses not to recommend to the shareholders of Scottish Holdings approval of the amendments to the Memorandum and Articles of Association or of the consummation of the transactions contemplated in the Share Purchase Agreement or withdraws its recommendation with respect thereto; |
— | if the Average Final Price is less than US $13.00; and |
— | if (i) the sum of (A) the cash consideration to be paid Pacific Life, if applicable plus (B) the amount of all liabilities of World-Wide Holdings immediately prior to the closing date would exceed (ii) 20% of the value of the aggregate consideration payable by Scottish Holdings to Pacific Life hereunder, inclusive of the value of the share consideration and any cash consideration. |
— | extend the time for the performance of any of the obligations or other acts of the other parties; |
— | waive any inaccuracies in the representations and warranties of the other parties; and |
— | waive compliance with any of the agreements or conditions contained in the Share Purchase Agreement. |
Name and Address of Beneficial Owners (1) | Shares of Class | Percent of Class | |||||||
Michael C. French (2)(3)(4) | 581,311 | 3.65 | % | ||||||
Scott E. Willkomm (4) | 162,906 | 1.03 | % | ||||||
Oscar R. Scofield (4) | 29,367 | * | |||||||
Thomas A. McAvity, Jr. (4) | 27,600 | * | |||||||
Larry N. Stern (4) | 27,581 | * | |||||||
G.William Caulfeild-Browne (4) | 18,667 | * | |||||||
Robert M. Chmely (4) | 16,567 | * | |||||||
Hazel R. O’Leary (4) | 13,500 | * | |||||||
Michael Austin (4) | 12,667 | * | |||||||
Artisan Partners, Ltd. (5) | 1,365,900 | 8.69 | % | ||||||
Aundyr Trust Company Limited (6) | 1,484,146 | 9.45 | % | ||||||
Boston Partners Asset Management, L.P. (7) | 988,245 | 6.29 | % | ||||||
Neuberger Berman, Inc. (8) | 1,388,882 | 8.84 | % | ||||||
Orbis Holdings Limited (9) | 981,000 | 6.24 | % | ||||||
Wellington Management Co. (10) | 804,000 | 5.12 | % | ||||||
All directors, director nominees and executive officers as a group (nine persons) | 890,166 | 5.50 | % |
* | Less than 1% | |
(1) | Except as otherwise indicated, the address for each beneficial owner is c/o Scottish Annuity & Life Holdings, Ltd., Crown House, 3rd Floor, 4 Par-la-Ville Road, Hamilton, Bermuda HM12. |
(2) | Includes 227,000 Ordinary Shares and 133,333 Ordinary Shares issuable upon the exercise of Class A Warrants beneficially owned by an irrevocable trust of which Mr. French and certain family members are beneficiaries. Includes 177,778 Ordinary Shares issuable upon the exercise of options beneficially owned by an irrevocable trust of which Mr. French and certain family members are beneficiaries. Mr. French disclaims beneficial ownership of such Ordinary Shares. |
(3) | Does not include Ordinary Shares issuable upon exercise of the Class A Warrants not exercisable within 60 days. |
(4) | Does not include Ordinary Shares issuable upon exercise of stock options not exercisable within 60 days. |
(5) | Based on a Schedule 13F-NT filed by Artisan Partners, Ltd. with the Securities and Exchange Commission on August 14, 2001. The address of Artisan Partners, Ltd. is 1000 North Water Street, Suite 1770, Milwaukee, WI 53202. |
(6) | Based on a Schedule 13G filed by Aundyr Trust Company Limited with the Securities and Exchange Commission on February 20, 2001. The address for Aundyr Trust Company Limited is International House, Victoria Road, Castle Hill, Douglas, Isle of Man, British Isles. |
(7) | Based on a Schedule 13F filed by Boston Partners Asset Management, L.P. with the Securities and Exchange Commission on August 13, 2001. The address for Boston Partners Asset Management, L.P. is 28 State Street, 20th Floor, Boston, MA 02109. |
(8) | Based on a Schedule 13G filed by Neuberger Berman, Inc. with the Securities and Exchange Commission on February 2, 2001. The address of Neuberger Berman, Inc. is 605 Third Avenue, New York, NY 10158. |
(9) | Based on Schedule 13F filed by Orbis Holdings Limited with the Securities and Exchange Commission on July 27, 2001. The address of Orbis Holdings Limited is 34 Bermudiana Road, Hamilton HM11 Bermuda. | |
(10) | Based on a Schedule 13F filed by Wellington Management Co. with the Securities Exchange Commission on August 15, 2001. The address of Wellington Management Co. is 75 State Street, Boston, MA 02109. |
1 | Data compiled by Pacific Life using the 2000 FORTUNE 500® list. |
For the Year Ended September 30, 2000 Compared to the Year Ended September 30, 1999. |
Year Ended September 30, 2000 | Year Ended September 30, 1999 | |||||||
Premiums earned | $25,906 | $16,948 | ||||||
Net investment income | 8,628 | 5,583 | ||||||
Change in unrealized gain on trading securities | 3,047 | 0 | ||||||
Other income | 93 | 417 | ||||||
Total revenues | $37,674 | $22,948 | ||||||
Year Ended September 30, 2000 | Year Ended September 30, 1999 | |||||||
Claims and other policy benefits | $24,353 | $12,225 | ||||||
Acquisition costs and other insurance expenses | 3,300 | 1,367 | ||||||
Operating expenses | 3,688 | 2,971 | ||||||
Total benefits & expenses | $31,341 | $16,563 | ||||||
Nine Months Ended June 30, 2001 | Nine Months Ended June 30, 2000 | |||||||||
Premiums earned | $21,122 | $16,730 | ||||||||
Net investment income | 5,540 | 6,804 | ||||||||
Change in unrealized gain on trading securities | (2,857 | ) | 2,939 | |||||||
Other income (loss) | 264 | (85 | ) | |||||||
Total revenues | $24,069 | $26,388 | ||||||||
Nine Months Ended June 30, 2001 | Nine Months Ended June 30, 2000 | |||||||
Claims and other policy benefits | $13,878 | $17,014 | ||||||
Acquisition costs and other insurance expenses | 2,848 | 2,539 | ||||||
Operating expenses | 2,690 | 2,552 | ||||||
Total benefits & expenses | $19,416 | $22,105 | ||||||
Scottish Holdings Securities and Exchange Commission Filings (File No. ) | Period/As of Date | |
Annual Report on Form 10-K | December 31, 2000 | |
Quarterly Report on Form 10-Q | March 31, 2001 | |
Quarterly Report on Form 10-Q | June 30, 2001 | |
Current Report on Form 8-K | August 9, 2001 | |
Proxy Statement on Schedule 14A | April 23, 2001 |
Page | ||
Scottish Annuity & Life Holdings, Ltd. Pro Forma Financial Statements | ||
Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2001 | F-2 | |
Unaudited Pro Forma Condensed Combined Statement of Income for the six months ended June 30, 2001 | F-3 | |
Unaudited Pro Forma Condensed Combined Statement of Income for the year ended December 31, 2000 | F-4 | |
Notes to Unaudited Pro Forma Condensed Combined Financial Statements | F-5 | |
World-Wide Holdings Limited Consolidated Financial Statements | ||
Report of Independent Auditors | F-8 | |
Consolidated Balance Sheets as of September 30, 2000 and 1999 (unaudited) | F-9 | |
Consolidated Statements of Income for the years ended September 30, 2000 and 1999 (unaudited) | F-10 | |
Consolidated Statements of Comprehensive Income for the years ended September 30, 2000 and 1999 (unaudited) | F-11 | |
Consolidated Statements of Shareholder’s Equity for the years ended September 30, 2000 and 1999 (unaudited) | F-12 | |
Consolidated Statements of Cash Flows for the years ended September 30, 2000 and 1999 (unaudited) | F-13 | |
Notes to Consolidated Financial Statements | F-14 | |
Consolidated Balance Sheets as of June 30, 2001 (unaudited) and September 30, 2000 | F-23 | |
Unaudited Consolidated Statements of Income for the nine months ended June 30, 2001 and 2000 | F-24 | |
Unaudited Consolidated Statements of Comprehensive Income for the nine months ended June 30, 2001 and 2000 | F-25 | |
Unaudited Consolidated Statements of Shareholder’s Equity for the nine months ended June 30, 2001 and 2000 | F-26 | |
Unaudited Consolidated Statements of Cash Flows for the nine months ended June 30, 2001 and 2000 | F-27 | |
Notes to Unaudited Consolidated Financial Statements | F-28 |
Scottish Holdings (A) | World-Wide Holdings (B) | Pro Forma Adjustments | Scottish Holdings Combined | ||||||||
ASSETS | |||||||||||
Investments: | |||||||||||
Fixed maturity investments, available for sale at fair value | $463,888 | $87,245 | $(13,000 | )(F) | $538,133 | ||||||
Trading equity securities at fair value | — | 22,183 | — | 22,183 | |||||||
Cash and cash equivalents | 61,806 | 8,650 | (353 | )(N) | 70,103 | ||||||
Other investments | 12,119 | — | — | 12,119 | |||||||
Funds withheld at interest | 77,378 | — | — | 77,378 | |||||||
Total investments | 615,191 | 118,078 | (13,353 | ) | 719,916 | ||||||
Receivables: | |||||||||||
Reinsurance | 23,858 | 60,823 | — | 84,681 | |||||||
Other | 8,209 | 2,934 | — | 11,143 | |||||||
Deferred policy acquisition costs | 56,500 | 6,775 | (6,775 | )(I) | 56,500 | ||||||
Intangible assets | 18,027 | — | 44,346 | (I) | 62,373 | ||||||
Other assets | 7,497 | 1,094 | — | 8,591 | |||||||
Segregated assets | 520,570 | — | — | 520,570 | |||||||
Total assets | $1,249,852 | $189,704 | $24,218 | $1,463,774 | |||||||
LIABILITIES | |||||||||||
Reserves for future policy benefits | $251,954 | $63,147 | $ — | $ 315,101 | |||||||
Interest sensitive contract liabilities | 175,671 | — | — | 175,671 | |||||||
Investment-type products | — | 33,514 | — | 33,514 | |||||||
Borrowings | 40,153 | — | — | 40,153 | |||||||
Other | 10,154 | 37,464 | 2,150 | (J) | 49,768 | ||||||
Segregated liabilities | 520,570 | — | — | 520,570 | |||||||
Total liabilities | 998,502 | 134,125 | 2,150 | 1,134,777 | |||||||
MINORITY INTEREST | 2,749 | — | — | 2,749 | |||||||
TOTAL SHAREHOLDERS’ EQUITY | 248,601 | 55,579 | 22,068 | (K) | 326,248 | ||||||
Total liabilities and shareholders’ equity | $1,249,852 | $189,704 | $24,218 | $1,463,774 | |||||||
Scottish Holdings (C) | World-Wide Holdings (D) | Pro Forma Adjustments | Scottish Holdings Combined | |||||||||||
REVENUES | ||||||||||||||
Premiums earned | $20,830 | $14,081 | $— | $34,911 | ||||||||||
Fee income | 2,585 | — | — | 2,585 | ||||||||||
Investment income, net | 22,262 | 3,693 | (455 | )(F) | 25,500 | |||||||||
Change in unrealized gain on trading securities | — | (1,773 | ) | — | (1,773 | ) | ||||||||
Realized gains | 458 | 176 | — | 634 | ||||||||||
Total revenues | 46,135 | 16,177 | (455 | ) | 61,857 | |||||||||
BENEFITS AND EXPENSES | ||||||||||||||
Claims and other policy benefits | 17,626 | 9,384 | — | 27,010 | ||||||||||
Interest credited to interest sensitive contract liabilities | 7,038 | — | — | 7,038 | ||||||||||
Acquisition costs and other insurance expenses, net | 8,234 | 1,899 | — | 10,133 | ||||||||||
Operating expenses | 5,043 | 1,793 | — | (G) | 6,836 | |||||||||
Interest expense | 314 | — | — | 314 | ||||||||||
Total benefits and expenses | 38,255 | 13,076 | — | 51,331 | ||||||||||
Net income before income tax expense and minority interest | 7,880 | 3,101 | (455 | ) | 10,526 | |||||||||
Income tax expense | (57 | ) | 931 | (137 | )(H) | 737 | ||||||||
Net income before minority interest | 7,937 | 2,170 | (318 | ) | 9,789 | |||||||||
Minority interest | (71 | ) | — | — | (71 | ) | ||||||||
Net income before cumulative effect of change in accounting principle | 8,008 | 2,170 | (318 | ) | 9,860 | |||||||||
Cumulative effect of change in accounting principle | (406 | ) | — | — | (406 | ) | ||||||||
NET INCOME | $7,602 | $2,170 | $(318 | ) | $9,454 | |||||||||
EARNINGS PER SHARE | ||||||||||||||
Basic | ||||||||||||||
Income before cumulative effect of change in accounting principle | $0.51 | $0.47 | ||||||||||||
Cumulative effect of change in accounting principle | (0.02 | ) | (0.02 | ) | ||||||||||
Net income | $0.49 | $0.45 | (M) | |||||||||||
Diluted | ||||||||||||||
Income before cumulative effect of change in accounting principle | $0.49 | $0.46 | ||||||||||||
Cumulative effect of change in accounting principle | (0.02 | ) | (0.02 | ) | ||||||||||
Net income | $0.47 | $0.44 | (M) | |||||||||||
DIVIDENDS PER SHARE | $0.10 | $0.10 | ||||||||||||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: | ||||||||||||||
Basic | 15,636,250 | (L) | 5,176,473 | (O) | 20,812,723 | |||||||||
Diluted | 16,191,632 | (L) | 5,176,473 | (O) | 21,368,105 | |||||||||
Scottish Holdings (C) | World-Wide Holdings (E) | Pro Forma Adjustments | Scottish Holdings Combined | ||||||||||
REVENUES | |||||||||||||
Premiums earned | $37,086 | $25,906 | $— | $62,992 | |||||||||
Fee income | 2,246 | — | — | 2,246 | |||||||||
Investment income, net | 44,793 | 8,628 | (910 | )(F) | 52,511 | �� | |||||||
Change in unrealized gain on trading securities | — | 3,047 | — | 3,047 | |||||||||
Realized gains (losses) | (191 | ) | 93 | — | (98 | ) | |||||||
Total revenues | 83,934 | 37,674 | (910 | ) | 120,698 | ||||||||
BENEFITS AND EXPENSES | |||||||||||||
Claims and other policy benefits | 23,606 | 24,353 | — | 47,959 | |||||||||
Interest credited to interest sensitive contract liabilities | 17,390 | — | — | 17,390 | |||||||||
Acquisition costs and other insurance expenses, net | 17,152 | 3,300 | — | 20,452 | |||||||||
Operating expenses | 9,925 | 3,688 | — | (G) | 13,613 | ||||||||
Total benefits and expenses | 68,073 | 31,341 | — | 99,414 | |||||||||
Net income before income tax expense and minority interest | 15,861 | 6,333 | (910 | ) | 21,284 | ||||||||
Income tax expense | (49 | ) | 1,830 | (273 | )(H) | 1,508 | |||||||
Net income before minority interest | 15,910 | 4,503 | (637 | ) | 19,776 | ||||||||
Minority interest | (61 | ) | — | — | (61 | ) | |||||||
NET INCOME | $15,971 | $4,503 | $(637 | ) | $19,837 | ||||||||
EARNINGS PER SHARE | |||||||||||||
Basic | $1.01 | $0.94 | (M) | ||||||||||
Diluted | $1.00 | $0.94 | (M) | ||||||||||
DIVIDENDS PER SHARE | $0.20 | $0.20 | |||||||||||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: | |||||||||||||
Basic | 15,849,657 | (L) | 5,176,473 | (O) | 21,026,130 | ||||||||
Diluted | 15,960,542 | (L) | 5,176,473 | (O) | 21,137,015 | ||||||||
A) | Represents the Scottish Holdings historical balance sheet at June 30, 2001. |
B) | Represents the World-Wide Holdings historical balance sheet at June 30, 2001. |
C) | Represents the historical operations of Scottish Holdings for the period presented. |
D) | Represents the estimated World-Wide Holdings operations for the period from January 1, 2001 through June 30, 2001, based on World-Wide Holdings’ historical statement of income for the nine months ended June 30, 2001, adjusted to eliminate the estimated results for one fiscal quarter. |
E) | Represents the historical World-Wide Holdings operations for the period from October 1, 1999 through September 30, 2000. |
F) | Represents an estimated dividend to Pacific Life and estimated taxes to be due in connection with the payment of the dividend. |
The pro forma adjustment has been made to reduce investments by $13 million to reflect the payment of an estimated $11.5 million dividend to Pacific Life by World-Wide Holdings prior to closing, and to reflect the payment of an estimated $1.5 million in taxes in the United Kingdom that are estimated to be due in connection with this dividend. Investment income of $455 thousand and $910 thousand has also been reversed from the unaudited pro forma condensed combined statements of income for the six months ended June 30, 2001 and for the year ended December 31, 2000, respectively. A 7.0% interest rate was used in the determination of the reduction of investment income. |
G) | In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142,Goodwill and Other Intangible Assets. The provisions of this Statement are required to be applied starting with fiscal years beginning after December 15, 2001 with respect to existing goodwill, and with respect to transactions that are consummated after July 1, 2001. As a result, there is no incremental goodwill amortization created by the Transaction. The effect of this Statement will be to eliminate the amortization of existing goodwill and require Scottish Holdings to test for impairment of goodwill. |
H) | Represents income tax effect of pre-tax income statement adjustments computed assuming a 30% effective. tax rate for the investment income pro forma adjustment for World-Wide Holdings. |
Historically, World-Wide Holdings has recorded deferred income taxes for timing differences in the recognition of revenues and expenses for financial reporting and income tax purposes. The current U.K. tax rate is 30%. Income tax expense adjustments of $(137) thousand and $(273) thousand for the six months ended June 30, 2001 and the year ended December 31, 2000, respectively, have been made to the unaudited pro forma condensed combined statements of income to correspond with the pre-tax income statement adjustments as described in Note F. |
I) | Represents adjustments to intangible assets. |
The acquisition of World-Wide Holdings by Scottish Holdings will be accounted for by Scottish Holdings under the “purchase method” of accounting in accordance with US GAAP. Therefore, the aggregate consideration paid by Scottish Holdings in the acquisition of World-Wide Holdings, together with the direct cost of acquisition, will be allocated to the assets and liabilities of World-Wide Holdings based on their fair market values, with any excess being treated as an intangible asset or goodwill. |
Intangible assets of $44.3 million represent the excess of the purchase price over the fair value of the net tangible assets of World-Wide Holdings deemed acquired. |
The table below presents the summary calculation of how goodwill was calculated: |
Purchase price | $78,000 | ||||
Adjustment for transaction costs | 3,650 | ||||
Total purchase price and transaction costs | 81,650 | ||||
Equity of World-Wide at 6-30-01 | $55,579 | ||||
Less deferred acquisition costs | (6,775 | ) | |||
Less estimated dividend | (11,500 | ) | |||
Adjusted equity of World-Wide at 6-30-01 | $37,304 | 37,304 | |||
Excess purchase price or goodwill | $44,346 | ||||
The expenses incurred with this transaction in the amount of $3.65 million consist of direct costs of the transaction, primarily professional fees for investment bankers, attorneys and accountants and proxy solicitation costs. These costs are also accrued on the June 30, 2001 unaudited pro forma condensed combined balance sheet, as an other liability, as described in Note J. |
J) | Represents adjustments to other liabilities. |
The net increase in other liabilities of $2.15 million represents an increase in the amount of $3.65 million for transaction costs described in Note I less the reduction of taxes payable in the estimated amount of $1.5 million related to payment of taxes due in connection with the payment of the dividend described in Note F. |
K) | Reflects the increase to equity calculated as follows: |
Incremental intangible assets | $37,571 | ||||
Add: | Decrease in liabilities for payment of estimated taxes | 1,500 | |||
Less: | Decrease in cash for payment of estimated dividend | (11,500 | ) | ||
Decrease in cash for payment of estimated taxes | (1,500 | ) | |||
Decrease in cash for difference in maximum number of shares to be issued and purchase price of $78 million | (353 | ) | |||
Increase in liabilities related to transaction costs | (3,650 | ) | |||
Total increase in equity | $22,068 | ||||
L) | Represents the historical weighted average number of shares on a basic and diluted basis for Scottish Holdings for the period presented. |
M) | Represents adjusted earnings per share on a basic and diluted basis for Scottish Holdings for the period presented, based on the adjustment to the weighted average number of shares outstanding as described in Note L. |
N) | Reflects the cash to be paid for the difference in the purchase price less the current value of the number of shares to be issued based upon an assumed closing price per Scottish Holdings ordinary share of $15. |
The cash to be paid was calculated as follows: |
Purchase price | $78,000,000 | |
Value of shares to be issued 5,176,473 x $15 per share | 77,647,095 | |
Difference to be paid in cash | $ 352,905 | |
O) | A pro forma adjustment has been made to reflect the issuance of 5,176,473 Scottish Holdings ordinary shares to Pacific Life in exchange for Pacific Life’s ownership interest in World-Wide Holdings in connection with the Share Purchase Agreement described in this proxy. The terms of the Share Purchase Agreement provide that the maximum aggregate value of the transaction is $78 million, subject to a possible increase related to the dividend described in Note F, and the maximum number of ordinary shares to be issued in the transaction is 5,176,473. |
Th | e Board of Directors and Shareholder |
Wo | rld-Wide Holdings Limited |
E | RNST & YOUNG LLP |
Lo | ndon, England |
Sep | tember 24, 2001 |
September 30, | ||||||||
2000 | 1999 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Investments: | ||||||||
Fixed maturity securities available for sale at fair value | $ 79,027 | $ 72,263 | ||||||
Trading equity securities at fair value | 26,035 | |||||||
Cash and cash equivalents | 13,927 | 12,400 | ||||||
TOTAL INVESTMENTS | 118,989 | 84,663 | ||||||
Accrued investment income | 2,541 | 2,749 | ||||||
Reinsurance receivables | 69,143 | 77,069 | ||||||
Deferred acquisition costs | 7,465 | 764 | ||||||
Other assets | 6,285 | 1,823 | ||||||
TOTAL ASSETS | $204,423 | $167,068 | ||||||
LIABILITIES AND SHAREHOLDER’S EQUITY | ||||||||
Liabilities: | ||||||||
Reserves for future policy benefits | $ 62,412 | $ 21,022 | ||||||
Investment-type products | 48,702 | 32,526 | ||||||
Due to reinsurers | 22,716 | 43,104 | ||||||
Benefits payable | 963 | 308 | ||||||
Accounts payable and accrued expenses | 3,228 | 2,831 | ||||||
Deferred tax liability | 12,513 | 14,540 | ||||||
TOTAL LIABILITIES | 150,534 | 114,331 | ||||||
Shareholder’s Equity: | ||||||||
Common stock, par value $1.692 per share; 5,000,000 shares authorized, issued, and outstanding | 8,458 | 8,458 | ||||||
Additional paid in capital | 21,444 | 21,444 | ||||||
Accumulated other comprehensive income (loss): | ||||||||
Unrealized gain (loss) on investments, net | 61 | (397 | ) | |||||
Foreign currency translation adjustments, net | (2,426 | ) | 1,383 | |||||
Retained earnings | 26,352 | 21,849 | ||||||
TOTAL SHAREHOLDER’S EQUITY | 53,889 | 52,737 | ||||||
TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY | $204,423 | $167,068 | ||||||
Years Ended September 30, | ||||||
2000 | 1999 | |||||
(Unaudited) | ||||||
REVENUES | ||||||
Premiums earned | $25,906 | $16,948 | ||||
Net investment income | 8,628 | 5,583 | ||||
Change in unrealized gain on trading securities | 3,047 | |||||
Other income | 93 | 417 | ||||
TOTAL REVENUES | 37,674 | 22,948 | ||||
BENEFITS AND EXPENSES | ||||||
Claims and other policy benefits | 24,353 | 12,225 | ||||
Acquisition costs and other insurance expenses | 3,300 | 1,367 | ||||
Operating expenses | 3,688 | 2,971 | ||||
TOTAL BENEFITS AND EXPENSES | 31,341 | 16,563 | ||||
INCOME BEFORE INCOME TAX EXPENSE | 6,333 | 6,385 | ||||
Income tax expense | 1,830 | 1,849 | ||||
NET INCOME | $ 4,503 | $ 4,536 | ||||
Years Ended September 30, | ||||||||
2000 | 1999 | |||||||
(Unaudited) | ||||||||
NET INCOME | $4,503 | $4,536 | ||||||
OTHER COMPREHENSIVE LOSS | ||||||||
Unrealized gain (loss) on investments, net | 458 | (1,152 | ) | |||||
Foreign currency translation adjustments, net | (3,809 | ) | (796 | ) | ||||
TOTAL OTHER COMPREHENSIVE LOSS | (3,351 | ) | (1,948 | ) | ||||
COMPREHENSIVE INCOME | $1,152 | $2,588 | ||||||
Years Ended September 30, | ||||||
2000 | 1999 | |||||
(Unaudited) | ||||||
ORDINARY SHARES | 5,000,000 | 5,000,000 | ||||
COMMON STOCK | $ 8,458 | $ 8,458 | ||||
ADDITIONAL PAID IN CAPITAL | 21,444 | 21,444 | ||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS): | ||||||
Beginning of period | 986 | 2,934 | ||||
Unrealized gain (loss) on investments, net | 458 | (1,152 | ) | |||
Foreign currency translation adjustments, net | (3,809 | ) | (796 | ) | ||
End of period | (2,365 | ) | 986 | |||
RETAINED EARNINGS: | ||||||
Beginning of period | 21,849 | 17,313 | ||||
Net income | 4,503 | 4,536 | ||||
End of period | 26,352 | 21,849 | ||||
TOTAL SHAREHOLDER’S EQUITY | $53,889 | $52,737 | ||||
Years Ended September 30, | ||||||||
2000 | 1999 | |||||||
(Unaudited) | ||||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ 4,503 | $ 4,536 | ||||||
Items not affecting cash: | ||||||||
Amortization of investments | (495 | ) | (399 | ) | ||||
Amortization of deferred acquisition cost, net | 879 | 8 | ||||||
Deferred income taxes | 1,449 | 1,537 | ||||||
Change in unrealized gain on trading securities | (3,047 | ) | ||||||
Income credits on investment-type products | 2,671 | (1,277 | ) | |||||
Changes in assets and liabilities: | ||||||||
Accrued investment income | 35 | 874 | ||||||
Reinsurance receivables | 21,535 | 11,006 | ||||||
Other assets | (4,532 | ) | (243 | ) | ||||
Reserve for future policy benefits | 2,428 | (6,255 | ) | |||||
Due to reinsurers | (17,454 | ) | (3,327 | ) | ||||
Benefits payable | (290 | ) | 394 | |||||
Accounts payable and accrued expenses | 456 | (2,622 | ) | |||||
Net cash provided by operating activities | 8,138 | 4,232 | ||||||
INVESTING ACTIVITIES | ||||||||
Purchase of investments | (62,100 | ) | (17,868 | ) | ||||
Proceeds from sales and maturities of investments | 48,652 | 39,370 | ||||||
Cash received from assumption of reinsurance block of business | 21,572 | |||||||
Net cash provided by investing activities | 8,124 | 21,502 | ||||||
FINANCING ACTIVITIES | ||||||||
Withdrawals from investment-type product liabilities | (11,629 | ) | (31,079 | ) | ||||
Net cash used in financing activities | (11,629 | ) | (31,079 | ) | ||||
OTHER | ||||||||
Effect of exchange rate changes on cash and cash equivalents | (3,106 | ) | (494 | ) | ||||
Net change in cash and cash equivalents | 1,527 | (5,839 | ) | |||||
Cash and cash equivalents, beginning of period | 12,400 | 18,239 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $13,927 | $12,400 | ||||||
SUPPLEMENTAL SCHEDULE OF INVESTING AND FINANCING ACTIVITIES | ||||||||
Inconnection with the assumption of a reinsurance block of business, as discussed in Note 1, the following assets and liabilities were assumed: | ||||||||
Trading equity securities | $25,861 | |||||||
Cash and cash equivalents | 21,572 | |||||||
Reinsurance receivables | 4,350 | |||||||
Deferred acquisition costs | 8,417 | |||||||
Total assets assumed | $60,200 | |||||||
Reserves for future policy benefits | $26,231 | |||||||
Investment-type products | 31,381 | |||||||
Benefits payable | 1,043 | |||||||
Due to reinsurers | 1,545 | |||||||
Total liabilities assumed | $60,200 | |||||||
September 30, 2000 | ||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||
(In thousands) | ||||||||||||||
Foreign governments | $ 6,404 | $159 | $ 6,563 | |||||||||||
Corporate securities | 72,536 | 371 | $443 | 72,464 | ||||||||||
Total | $78,940 | $530 | $443 | $79,027 | ||||||||||
September 30, 1999 | ||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||
(In thousands) | ||||||||
Foreign governments | $ 6,192 | $ 80 | $ 15 | $ 6,257 | ||||
Corporate securities | 66,638 | 161 | 793 | 66,006 | ||||
Total | $72,830 | $241 | $808 | $72,263 | ||||
Amortized Cost | Fair Value | |||
(In thousands) | ||||
Due in one year or less | $14,308 | $14,345 | ||
Due in one year through five years | 64,632 | 64,682 | ||
Due in five years through ten years | ||||
Due after ten years | ||||
Total | $78,940 | $79,027 | ||
Years Ended September 30, | ||||
2000 | 1999 | |||
(In thousands) | ||||
Fixed maturity securities | $7,779 | $4,730 | ||
Equity securities | 268 | |||
Cash and cash equivalents | 581 | 853 | ||
Net investment income | $8,628 | $5,583 | ||
Year Ended September 30, 2000 | |||||||||
Before Tax | Tax | Net of Tax | |||||||
(In thousands) | |||||||||
Unrealized gain, net, on available for sale securities arising during the year | $ 662 | $ (198 | ) | $ 464 | |||||
Less reclassification adjustment for gains realized in net income | (8 | ) | 2 | (6 | ) | ||||
Foreign currency translation adjustments | (6,647 | ) | 2,838 | (3,809 | ) | ||||
Other comprehensive income (loss) | $(5,993 | ) | $2,642 | $(3,351 | ) | ||||
Year Ended September 30, 1999 | ||||||||
Before Tax | Tax | Net of Tax | ||||||
(In thousands) | ||||||||
Unrealized loss, net, on available for sale securities arising during the year | $(1,627 | ) | $ 488 | $(1,139 | ) | |||
Less reclassification adjustment for gains realized in net income | (19 | ) | 6 | (13 | ) | |||
Foreign currency translation adjustments | (1,465 | ) | 669 | (796 | ) | |||
Other comprehensive income (loss) | $(3,111 | ) | $1,163 | $(1,948 | ) | |||
Years Ended September 30, | ||||
2000 | 1999 | |||
(In thousands) | ||||
Current tax expense | $ 381 | $ 312 | ||
Deferred tax expense | 1,449 | 1,537 | ||
Total income tax expense | $1,830 | $1,849 | ||
September 30, | ||||||
2000 | 1999 | |||||
(In thousands) | ||||||
Undistributed earnings of World-Wide Reassurance | $ 6,194 | $ 7,535 | ||||
Reserves for future policy benefits | 4,728 | 4,772 | ||||
Deferred acquisition costs | 2,150 | 233 | ||||
Amortization on bonds | 427 | 589 | ||||
Pension liability | (176 | ) | (207 | ) | ||
Other | 1,197 | 982 | ||||
Net deferred tax liability from operations | 14,520 | 13,904 | ||||
Other comprehensive income | (2,007 | ) | 636 | |||
Total deferred tax liability | $12,513 | $14,540 | ||||
Years Ended September 30, | ||||
2000 | 1999 | |||
(In thousands) | ||||
Premiums assumed | $30,035 | $19,341 | ||
Premiums retroceded | 4,129 | 2,393 | ||
Net premiums earned | $25,906 | $16,948 | ||
Years Ended September 30, | ||||||
2000 | 1999 | |||||
(In thousands) | ||||||
Service cost—benefits earned during the year | $268 | $266 | ||||
Interest cost on projected benefit obligation | 214 | 202 | ||||
Expected return on plan assets | (200 | ) | (165 | ) | ||
Amortization of transition obligation | 66 | 68 | ||||
Net periodic pension expense | $348 | $371 | ||||
September 30, | ||||||
2000 | 1999 | |||||
(In thousands) | ||||||
Change in Benefit Obligation: | ||||||
Benefit obligation, beginning of year | $3,402 | $3,176 | ||||
Service cost | 268 | 266 | ||||
Interest cost | 214 | 202 | ||||
Benefits paid | (140 | ) | (147 | ) | ||
Translation adjustment | (377 | ) | (95 | ) | ||
Benefit obligation, end of year | $3,367 | $3,402 | ||||
September 30, | ||||||
2000 | 1999 | |||||
(In thousands) | ||||||
Change in Plan Assets: | ||||||
Fair value of plan assets, beginning of year | $2,364 | $2,072 | ||||
Actual return on plan assets | 393 | 165 | ||||
Employer contributions | 382 | 334 | ||||
Benefits paid | (140 | ) | (147 | ) | ||
Translation adjustment | (283 | ) | (60 | ) | ||
Fair value of plan assets, end of year | $2,716 | $2,364 | ||||
September 30, | ||||||
2000 | 1999 | |||||
(In thousands) | ||||||
Funded Status Reconciliation: | ||||||
Funded status | $(651 | ) | $(1,038 | ) | ||
Unrecognized transition asset | 248 | 346 | ||||
Unrecognized actuarial gain | (183 | ) | ||||
Accrued pension cost | $(586 | ) | $ (692 | ) | ||
June 30, 2001 | September 30, 2000 | |||||||||
(Unaudited) | ||||||||||
ASSETS | ||||||||||
Investments: | ||||||||||
Fixed maturity securities available for sale at fair value | $ 87,245 | $ 79,027 | ||||||||
Trading equity securities at fair value | 22,183 | 26,035 | ||||||||
Cash and cash equivalents | 8,650 | 13,927 | ||||||||
TOTAL INVESTMENTS | 118,078 | 118,989 | ||||||||
Accrued investment income | 2,934 | 2,541 | ||||||||
Reinsurance receivables | 60,823 | 69,143 | ||||||||
Deferred acquisition costs | 6,775 | 7,465 | ||||||||
Other assets | 1,094 | 6,285 | ||||||||
TOTAL ASSETS | $189,704 | $204,423 | ||||||||
LIABILITIES AND SHAREHOLDER’S EQUITY | ||||||||||
Liabilities: | ||||||||||
Reserves for future policy benefits | $ 63,147 | $ 62,412 | ||||||||
Investment-type products | 33,514 | 48,702 | ||||||||
Due to reinsurers | 21,466 | 22,716 | ||||||||
Benefits payable | 559 | 963 | ||||||||
Accounts payable and accrued expenses | 2,734 | 3,228 | ||||||||
Deferred tax liability | 12,705 | 12,513 | ||||||||
TOTAL LIABILITIES | 134,125 | 150,534 | ||||||||
Shareholder’s Equity: | ||||||||||
Common stock, par value $1.692 per share; 5,000,000 shares authorized, issued, and outstanding | 8,458 | 8,458 | ||||||||
Additional paid in capital | 21,444 | 21,444 | ||||||||
Accumulated other comprehensive income (loss): | ||||||||||
Unrealized gain on investments, net | 343 | 61 | ||||||||
Foreign currency translation adjustments, net | (4,275 | ) | (2,426 | ) | ||||||
Retained earnings | 29,609 | 26,352 | ||||||||
TOTAL SHAREHOLDER’S EQUITY | 55,579 | 53,889 | ||||||||
TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY | $189,704 | $204,423 | ||||||||
Nine Months Ended June 30, | ||||||
2001 | 2000 | |||||
REVENUES | ||||||
Premiums earned | $21,122 | $16,730 | ||||
Net investment income | 5,540 | 6,804 | ||||
Change in unrealized gain on trading securities | (2,857 | ) | 2,939 | |||
Other income (loss) | 264 | (85 | ) | |||
TOTAL REVENUES | 24,069 | 26,388 | ||||
BENEFITS AND EXPENSES | ||||||
Claims and other policy benefits | 13,878 | 17,014 | ||||
Acquisition costs and other insurance expenses | 2,848 | 2,539 | ||||
Operating expenses | 2,690 | 2,552 | ||||
TOTAL BENEFITS AND EXPENSES | 19,416 | 22,105 | ||||
INCOME BEFORE INCOME TAX EXPENSE | 4,653 | 4,283 | ||||
Income tax expense | 1,396 | 1,215 | ||||
NET INCOME | $ 3,257 | $ 3,068 | ||||
Nine Months Ended June 30, | ||||||
2001 | 2000 | |||||
NET INCOME | $3,257 | $3,068 | ||||
OTHER COMPREHENSIVE LOSS | ||||||
Unrealized gain on investments, net | 282 | 322 | ||||
Foreign currency translation adjustments, net | (1,849 | ) | (2,535 | ) | ||
TOTAL OTHER COMPREHENSIVE LOSS | (1,567 | ) | (2,213 | ) | ||
COMPREHENSIVE INCOME | $1,690 | $ 855 | ||||
Nine Months Ended June 30, | ||||||
2001 | 2000 | |||||
ORDINARY SHARES | 5,000,000 | 5,000,000 | ||||
COMMON STOCK | $ 8,458 | $ 8,458 | ||||
ADDITIONAL PAID IN CAPITAL | 21,444 | 21,444 | ||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS): | ||||||
Beginning of period | (2,365 | ) | 986 | |||
Unrealized gain on investments, net | 282 | 322 | ||||
Foreign currency translation adjustments, net | (1,849 | ) | (2,535 | ) | ||
End of period | (3,932 | ) | (1,227 | ) | ||
RETAINED EARNINGS: | ||||||
Beginning of period | 26,352 | 21,849 | ||||
Net income | 3,257 | 3,068 | ||||
End of period | 29,609 | 24,917 | ||||
TOTAL SHAREHOLDER’S EQUITY | $55,579 | $53,592 | ||||
Nine Months Ended June 30, | ||||||
2001 | 2000 | |||||
OPERATING ACTIVITIES | ||||||
Net income | $ 3,257 | $ 3,068 | ||||
Items not affecting cash: | ||||||
Amortization of investments | 137 | (356 | ) | |||
Amortization of deferred acquisition costs, net | 433 | 693 | ||||
Deferred income taxes | 1,171 | 990 | ||||
Change in unrealized gain on trading securities | 2,857 | (2,939 | ) | |||
Income credits on investment-type products | (3,268 | ) | 2,003 | |||
Changes in assets and liabilities: | ||||||
Accrued investment income | (461 | ) | 317 | |||
Reinsurance receivables | (354 | ) | 4,645 | |||
Other assets | 4,999 | (1,738 | ) | |||
Reserve for future policy benefits | 645 | 2,496 | ||||
Due to reinsurers | (412 | ) | (1,337 | ) | ||
Benefits payable | (377 | ) | (1,172 | ) | ||
Accounts payable and accrued expenses | (446 | ) | (261 | ) | ||
Net cash provided by operating activities | 8,181 | 6,409 | ||||
INVESTING ACTIVITIES | ||||||
Purchase of investments | (39,972 | ) | (57,032 | ) | ||
Proceeds from sales and maturities of investments | 28,289 | 41,006 | ||||
Cash received from assumption of reinsurance block of business | 21,572 | |||||
Net cash provided by (used in) investing activities | (11,683 | ) | 5,546 | |||
FINANCING ACTIVITIES | ||||||
Withdrawals from investment-type product liabilities | (1,514 | ) | (11,914 | ) | ||
Net cash used in financing activities | (1,514 | ) | (11,914 | ) | ||
OTHER | ||||||
Effect of exchange rate changes on cash and cash equivalents | (261 | ) | (2,897 | ) | ||
Net change in cash and cash equivalents | (5,277 | ) | (2,856 | ) | ||
Cash and cash equivalents, beginning of period | 13,927 | 12,400 | ||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ 8,650 | $ 9,544 | ||||
SUPPLEMENTAL SCHEDULE OF INVESTING AND FINANCING ACTIVITIES | ||||||
Inconnection with the assumption of a reinsurance block of business, as discussed in Note 1, the following assets and liabilities were assumed: | ||||||
Trading equity securities | $25,861 | |||||
Cash and cash equivalents | 21,572 | |||||
Reinsurance receivables | 4,350 | |||||
Deferred acquisition costs | 8,417 | |||||
Total assets assumed | $60,200 | |||||
Reserves for future policy benefits | $26,231 | |||||
Investment-type products | 31,381 | |||||
Benefits payable | 1,043 | |||||
Due to reinsurers | 1,545 | |||||
Total liabilities assumed | $60,200 | |||||
Nine Months Ended June 30, 2001 | |||||||||
Before Tax | Tax | Net of Tax | |||||||
(In thousands) | |||||||||
Unrealized gain, net, on available for sale securities arising during the year | $ 719 | $ (216 | ) | $ 503 | |||||
Less reclassification adjustment for gains realized in net income | (315 | ) | 94 | (221 | ) | ||||
Foreign currency translation adjustments | (3,172 | ) | 1,323 | (1,849 | ) | ||||
Other comprehensive income (loss) | $(2,768 | ) | $1,201 | $(1,567 | ) | ||||
Nine Months Ended June 30, 2000 | |||||||||
Before Tax | Tax | Net of Tax | |||||||
(In thousands) | |||||||||
Unrealized gain, net, on available for sale securities arising during the year | $ 517 | $ (155 | ) | $ 362 | |||||
Less reclassification adjustment for gains realized in net income | (57 | ) | 17 | (40 | ) | ||||
Foreign currency translation adjustments | (4,515 | ) | 1,980 | (2,535 | ) | ||||
Other comprehensive income (loss) | $(4,055 | ) | $1,842 | $(2,213 | ) | ||||
Page | ||||
ARTICLE I PURCHASE AND SALE OF SHARES | A-1 | |||
1.1. | Purchase and Sale of Shares | A-1 | ||
ARTICLE II CLOSING | A-2 | |||
2.1. | Closing | A-2 | ||
2.2 | Seller’s Deliverables | A-2 | ||
2.3. | Buyer’s Deliverables | A-4 | ||
2.4. | Payment of Cash Consideration; Stamp Duty | A-4 | ||
2.5. | Satisfaction with Documents | A-5 | ||
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER | A-5 | |||
3.1. | Corporate Existence | A-5 | ||
3.2. | Authorization; Enforcement | A-6 | ||
3.3. | Consents and Approvals | A-7 | ||
3.4. | No Conflicts | A-7 | ||
3.5. | Capital Structure; Subsidiaries | A-8 | ||
3.6. | Transactions with Affiliates | A-9 | ||
3.7. | Company Documents | A-9 | ||
3.8. | Financial Statements | A-9 | ||
3.9. | Annual Regulatory Returns | A-10 | ||
3.10. | Absence of Certain Changes or Events | A-11 | ||
3.11. | Contracts | A-12 | ||
3.12. | Litigation | A-14 | ||
3.13. | Liabilities and Reserves | A-14 | ||
3.14. | Taxation | A-15 | ||
3.15. | Assets | A-20 | ||
3.16 | Compliance with Laws, etc. | A-21 | ||
3.17. | Insurance for Company’s Operations | A-22 | ||
3.18. | Insurance Business | A-22 | ||
3.19. | Reinsurance Agreements | A-22 | ||
3.20. | Service Marks, Trademarks, Intellectual Property, etc. | A-23 | ||
3.21. | Pensions | A-24 | ||
3.22. | Directors, Officers and Employees | A-26 | ||
3.23. | Banks, Brokerage Accounts and Powers of Attorney | A-27 | ||
3.24. | Environmental Matters | A-27 | ||
3.25. | Registration Statement; Proxy Statement | A-28 | ||
3.26. | Investment Advisory and Investment Company Matters | A-28 | ||
3.27. | Derivatives | A-28 | ||
3.28. | Brokers and Finders, etc. | A-28 | ||
3.29. | Securities | A-28 | ||
3.30. | Money Laundering | A-29 | ||
3.31. | Full Disclosure | A-29 | ||
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER AND ITS SUBSIDIARIES | A-29 | |||
4.1. | Corporate Existence | A-29 | ||
4.2. | Authorization; Enforcement | A-29 | ||
4.3. | Consents and Approvals | A-30 | ||
4.4. | No Conflicts | A-30 | ||
4.5. | Capital Structure | A-31 |
Page | ||||
4.6. | SEC Reports; Buyer Financial Statements | A-31 | ||
4.7. | Absence of Certain Changes or Events | A-32 | ||
4.8. | Contracts | A-33 | ||
4.9. | Litigation | A-34 | ||
4.10. | Liabilities and Reserves | A-35 | ||
4.11. | Taxation | A-35 | ||
4.12. | Compliance with Laws, etc. | A-36 | ||
4.13. | Insurance Business | A-36 | ||
4.14. | Reinsurance Agreements | A-37 | ||
4.15. | Buyer Employee Benefit Plans | A-37 | ||
4.16. | Directors, Officers and Employees | A-37 | ||
4.17. | Environmental Matters | A-38 | ||
4.18. | Investment Advisory and Investment Company Matters | A-38 | ||
4.19. | Takeover Statutes | A-38 | ||
4.20. | Derivatives | A-39 | ||
4.21. | Brokers and Finders, etc. | A-39 | ||
4.22. | Securities | A-39 | ||
4.23. | Certain Actions | A-39 | ||
4.24. | Full Disclosure | A-39 | ||
ARTICLE V COVENANTS | A-39 | |||
5.1. | Operations in the Ordinary Course | A-39 | ||
5.2. | Restrictions | A-40 | ||
5.3. | Related Matters | A-42 | ||
5.4. | Tax Matters | A-43 | ||
5.5. | Access to Information | A-44 | ||
5.6. | No Solicitation | A-44 | ||
5.7. | Filings and Authorizations | A-45 | ||
5.8. | Confidentiality | A-45 | ||
5.9. | Registration Statement; Proxy Statement | A-45 | ||
5.10. | Shareholders’ Meeting | A-46 | ||
5.11. | Disaster Recovery Plan | A-46 | ||
ARTICLE VI CONDITIONS PRECEDENT | A-46 | |||
6.1. | Conditions to Each Party’s Obligations | A-46 | ||
6.2. | Conditions to Buyer’s Obligations | A-47 | ||
6.3. | Conditions to Seller’s Obligations | A-47 | ||
ARTICLE VII FURTHER AGREEMENTS | A-49 | |||
7.1. | Non-Competition | A-49 | ||
7.2. | Public Announcements | A-49 | ||
7.3. | Expenses | A-49 | ||
7.4. | D & O Insurance | A-50 | ||
7.5. | Further Assurances | A-51 | ||
7.6. | Books and Records | A-51 | ||
7.7. | Pensions | A-51 | ||
7.8. | Company Register of Members | A-53 | ||
ARTICLE VIII INDEMNIFICATION | A-53 | |||
8.1. | Survival of Representations, etc. | A-53 | ||
8.2. | Indemnification | A-53 | ||
8.3. | Indemnification Procedures | A-55 |
Page | ||||
ARTICLE IX TAX MATTERS | A-56 | |||
9.1. | Coordination of Tax Deed Covenant and the Agreement | A-56 | ||
ARTICLE X TERMINATION | A-57 | |||
10.1. | Termination | A-57 | ||
10.2. | Effect of Termination | A-58 | ||
ARTICLE XI MISCELLANEOUS | A-58 | |||
11.1. | Consent to Jurisdiction and Service of Process | A-58 | ||
11.2. | Notices | A-58 | ||
11.3. | Entire Agreement; No Third Party Beneficiaries | A-59 | ||
11.4. | Waivers and Amendments; Non-Contractual Remedies | A-60 | ||
11.5. | Payments and Currency | A-60 | ||
11.6. | Binding Effect; No Assignment | A-60 | ||
11.7. | Severability | A-60 | ||
11.8. | Interpretation | A-60 | ||
11.9. | Governing Law | A-61 | ||
11.10. | Waiver of Jury Trial | A-61 | ||
11.11. | Counterparts | A-61 |
Exhibit A | Form of Registration Rights Agreement | |
Exhibit B | Form of Stockholder Agreement | |
Exhibit C | Form of Tax Deed of Covenant | |
Exhibit D | Form of Powers of Attorney | |
Exhibit E | Form of Letters of Resignation | |
Exhibit F | Form of Charter Amendment | |
Exhibit G | Certain Holdings and Company Employees |
Schedule 3.4 | No Conflicts | |
Schedule 3.5(a) | Capital Structure | |
Schedule 3.5(c) | Subsidiaries | |
Schedule 3.7(b) | Company Documents | |
Schedule 3.8(b) | Financial Statements | |
Schedule 3.8(c) | Changes in Investment Portfolio/Accounting Methods | |
Schedule 3.9 | Annual Regulatory Returns | |
Schedule 3.10 | Certain Changes or Events Since the Balance Sheet Date | |
Schedule 3.11 | Contracts | |
Schedule 3.12 | Litigation | |
Schedule 3.13(a) | Liabilities and Reserves | |
Schedule 3.14 | Tax Matters | |
Schedule 3.15(a)(i) | Investments | |
Schedule 3.15(a)(ii) | Transactions Affecting Company’s Investment Portfolio | |
Schedule 3.15(b) | Real Property | |
Schedule 3.16 | Compliance with Laws | |
Schedule 3.17 | Insurance | |
Schedule 3.18 | Permits | |
Schedule 3.19 | Reinsurance Agreements and Retrocession Agreements | |
Schedule 3.20(a)(1) | Service Marks, Trademarks, Intellectual Property | |
Schedule 3.20(a)(2) | Software Matters | |
Schedule 3.21 | Pensions | |
Schedule 3.22 | Employees | |
Schedule 3.23 | Banks, Brokerage Accounts and Powers of Attorney | |
Schedule 5.2(a)(xvi) | Operating Restrictions |
Schedule 4.3 | Consents and Approvals | |
Schedule 4.4(b) | No Conflicts with Contracts | |
Schedule 4.4(c) | No Conflicts with Officers and Employees | |
Schedule 4.5 | Capital Structure | |
Schedule 4.6(c) | Material Changes in Investment Policies | |
Schedule 4.7 | Absence of Certain Changes or Events | |
Schedule 4.8 | Contracts | |
Schedule 4.9 | Litigation | |
Schedule 4.11 | Taxation | |
Schedule 4.12 | Compliance with Laws | |
Schedule 4.13 | Insurance Business | |
Schedule 4.14 | Reinsurance Agreements and Retrocession Agreements | |
Schedule 4.15 | Employee Benefit Plans | |
Schedule 4.19 | Takeover Statutes | |
Schedule 5.1(b) | Transactions not in the Ordinary Course |
Term | Section | |
2000 Company Financials | §3.14(a) | |
Affiliate | §1.1(d) | |
Agency Contracts | §3.11(a)(x) | |
Agreement | Preamble | |
Annual Regulatory Returns | §3.9(a) | |
Approved | §3.21(a) | |
Average Final Price | §1.1(c) | |
Balance Sheet Date | §3.8(a) | |
Business Day | §2.1 | |
Buyer | Preamble | |
Buyer Balance Sheet Date | §4.6(c) | |
Buyer Material Adverse Effect | §4.1(b) | |
Buyer Reports | §4.6(a) | |
Buyer SAP Statements | §4.6(d) | |
Buyer Scheduled Contract | §4.8(a) | |
Buyer Shares | §1.1(b) | |
Buyer Tax Benefit | §8.2(b)(i) | |
Buyer Tax Burden | §8.2(b)(i) | |
Cash Consideration | §1.1(b) | |
Charter Amendment | §5.10 | |
Closing | §2.1 | |
Closing Date | §2.1 | |
Code | Preamble | |
Companies Act | §3.5(a) | |
Company | Preamble | |
Company Dividend | §3.3 | |
Company Financials | §3.8(a) | |
Company Material Adverse Effect | §3.1(b) | |
Company Shares | Preamble | |
Consents | §3.3 | |
Contract | §3.11(a) | |
Damages | §8.2(a) | |
Derivatives | §3.27 | |
Disclosed Scheme | §3.21(a) | |
Dividend | §3.3 | |
Employee | §3.21(a) | |
Employee Benefit Plans | §3.10(d) | |
Environmental Law | §3.24(a)(i) | |
Event | §3.14(b) | |
Exchange Act | §1.1(d) | |
Facilities | §3.23(e) | |
FSA | §3.3 | |
Governmental Authority | §3.3 | |
Group Relief | §3.14(b) | |
Holdings | Preamble | |
HSR Act | §3.3 | |
Indemnified Parties | §7.4(b) | |
Indemnified Person | §8.3(a) | |
Indemnifying Person | §8.3(a) |
Term | Section | |
Insurance Companies Act | §3.9(a) | |
Intellectual Property Right | §3.20(a) | |
Investment Advisors Act | §3.26 | |
Investment Company Act | §3.26 | |
Investment Policies | §3.8(c) | |
Investment Proposal | §5.6 | |
Investment Reserves Release Tax | §3.3 | |
Investments | §3.15(a) | |
Lease | 3.15(b)(xii) | |
Liens | §1.1(a) | |
Litigation | §3.12(a) | |
Meeting | §4.3(a)(iv) | |
Permit | §3.18(a) | |
Person | §3.5(a) | |
Property | 3.15(b)(i) | |
Proxy Statement | §4.3(a) | |
Registration Rights Agreement | §2.2(d) | |
Registration Statement | §4.3(a) | |
Reinsurance Agreement | §3.19(a) | |
Relief | §3.14(b) | |
Representatives | §5.8 | |
Retrocession Agreement | §3.19(a) | |
Scheduled Contract | §3.11(a) | |
Scheduled Investments | §3.15(a) | |
SEC | §4.3(a) | |
Securities Act | §3.29 | |
Seller | Preamble | |
Seller Tax Benefit | §8.2(d)(i) | |
Seller Tax Burden | §8.2(d)(i) | |
Seller’s Actual Stamp Duty | §2.4(b) | |
Seller’s Estimated Stamp Duty | §2.4(b) | |
Share Consideration | §1.1(b) | |
Shares | Preamble | |
Shortfall | §7.7(g) | |
State | §3.3 | |
Stockholder Agreement | §2.2(e) | |
Subsidiary | §3.5(c) | |
Tax | §3.14(b) | |
Tax Authority | §3.14(b) | |
Tax Clearance | §3.14(a) | |
Tax Deed Covenant | §2.2(f) | |
Tax Return | §3.14(b) | |
Taxes Act | §3.14(b) | |
Transaction Documents | §2.5 | |
UK Accounting Standards | §3.8(b) | |
Unaudited Financials | §3.8(a) | |
US GAAP | §3.8(b)(ii) | |
VAT | §3.14(b) | |
VAT Legislation | §3.14(b) | |
VAT Regulations | §3.14(a) | |
World-Wide Reassurance Business | §7.1 |
(i) if the Average Final Price is less than US $13.00, the Average Final Price shall be deemed to be US $13.00; and |
(ii) if the Average Final Price is greater than US $21.00, the Average Final Price shall be deemed to be US $21.00. |
(i) the Company: |
(A) recording acceptance of the resignation of the directors, the Secretary of the Company and the Company’s auditors; and |
(B) recording the appointment of such persons as the directors, the Secretary and the auditors of the Company as Buyer shall nominate; |
(ii) Holdings: |
(A) recording the acceptance of the resignation of the directors, the Secretary of Holdings and Holding’s auditors; |
(B) recording the appointment of such persons as the directors, the Secretary and the auditors of Holdings as Buyer shall nominate; |
(C) approving (subject only to proper stamping) the transfer of the Shares referred to in Section 2.2(a); and |
(D) approving (subject only to proper stamping) the placing on the Register of Members of Holdings of the name of Buyer in accordance with the stock transfer form referred to in Section 2.2(a); |
(iii) Seller, authorizing the execution and delivery of, and the performance by Seller of its obligations under, this Agreement and the other Transaction Documents to which it is a party; and |
(i) repaid, redeemed or purchased or agreed to repay, redeem or purchase any securities or shares of any class of its share capital or otherwise reduced or agreed to reduce its issued share capital or any class thereof; |
(ii) directly or indirectly provided any financial assistance (as defined in Section 151 of the Companies Act) for the purpose of the acquisition of its shares or the shares of its holding company or for the purpose of reducing or discharging any liability incurred in any such acquisition whether pursuant to Section 155 of the Companies Act or otherwise; or |
(iii) capitalized or agreed to capitalize in the form of shares, debentures or any other securities or in paying up any amounts unpaid on any shares, debentures or other securities any profits or reserves of any class or description. |
(i) true, complete and correct copies of the Memorandum and Articles of Association of Holdings and the Company, with all amendments thereof, having attached thereto all of the resolutions required by virtue of the Companies Act to be so attached; and |
(ii) all of the forms, filings and information of Holdings and the Company supplied to the Registrar of Companies under the Companies Act since January 1, 1995, which are all of the forms, filings and information required by the Companies Act to be so supplied since such date. |
(i) Contracts relating to the borrowing of money, guarantees, security agreements, factoring agreements and deferred purchase or hire purchase Contracts, including obligations for reimbursement |
under letters of credit or reimbursement agreements therefor (other than letters of credit or reimbursement agreements therefor that are (A) fully secured or collateralized and (B) related to Reinsurance Agreements and Retrocession Agreements entered into by the Company in the ordinary course of business consistent with past practice) in any case representing future liabilities in excess of US $100,000; |
(ii) Contracts which permit a financial institution or other Person to block or otherwise restrict Holdings’ or the Company’s immediate access to deposits or other monies held thereby in any case involving amounts in excess of US $50,000; |
(iii) Contracts with any Employee pursuant to which Holdings or the Company owes any monetary obligation (other than those Contracts involving annual payments in any case of less than US $100,000 or which are cancelable by Holdings or the Company on not more than ninety (90) days’ notice without cause or penalty); |
(iv) Contracts with insurance agents and agencies, managing general agents with binding authority, brokers, third party administrators and consultants (other than those Contracts which are cancelable by Holdings or the Company on not more than thirty (30) days’ notice without cause or penalty or that involve payments by Holdings or the Company of less than US $100,000 annually);provided, however, that with respect to such Contracts with managing general agents,Schedule 3.11 of Seller’s Disclosure Schedule shall also set forth (A) a brief description of each managing general agent, including its jurisdiction of domicile, its address of record and (where reasonably available) information regarding the ultimate beneficial ownership thereof, and (B) the aggregate amount of insurance or reinsurance which such managing general agent has written and has been authorized to write on behalf of Holdings or the Company since the Balance Sheet Date; |
(v) Contracts containing any provision or covenant limiting the ability of Holdings or the Company to engage in any line of business or compete with any Person (other than Contracts with insurance agents and agencies or managing general agents with binding authority entered into by Holdings or the Company in the ordinary course of business consistent with past practice); |
(vi) Contracts between Holdings and its Affiliates or between the Company and its Affiliates; |
(vii) Contracts in which any Employee has any monetary or other interest in any case in excess of US $50,000, other than employment arrangements entered into in the ordinary course of business; |
(viii) Contracts involving the sale, transfer, assignment or other disposition of assets or liabilities of Holdings or the Company having a value in any case in excess of US $100,000 pursuant to which Holdings or the Company has given representations and/or indemnities which continue to be in effect and pursuant to which liability would reasonably be expected to arise; |
(ix) investment management agreements, investment custody agreements and similar Contracts; |
(x) Contracts with each reinsurance broker (including each managing general agent) or agency (the “Agency Contracts”) that individually produced US $250,000 or more of gross written premiums for the Company during the year ended September 30, 2000, or are reasonably expected by the Company individually to produce US $250,000 or more of gross written premiums for the Company during the year ending September 30, 2001, which are subject to termination upon the occurrence of a change of ownership or control of the Company; |
(xi) Contracts (other than the Scheduled Contracts referred to in Section 3.11(a)(iv) and Agency Contracts) representing future liabilities in any case in excess of US $250,000 individually that are subject to termination upon the occurrence of a change of ownership or control of Holdings or the Company;provided, however, that if the aggregate future liabilities for all Contracts (other than the Scheduled Contracts referred to in Section 3.11(a)(iv) and Agency Contracts) representing future liabilities in any case of less than US $250,000 that are subject to termination upon the occurrence of a change of ownership or control of Holdings or the Company and not listed onSchedule 3.11 of Seller’s Disclosure Schedule exceeds US $1,000,000, those Contracts shall also be included inSchedule 3.11 of Seller’s Disclosure Schedule; |
(xii) Contracts pursuant to which Holdings or the Company has agreed to grant or has granted an option or similar right to another Person affecting any material asset of Holdings or the Company (other than assets held by Holdings or the Company in its investment portfolio); |
(xiii) Contracts which provide for payments in the event of a change of control; |
(xiv) insurance Contracts entered into by the Company; and |
(xv) all other Contracts material to the business, operations, assets, liabilities or financial condition of Holdings or the Company in any case representing future liabilities (to the extent reasonably ascertainable) which require payments by or to Holdings or the Company in excess of US $50,000 individually (other than those Contracts which are cancelable by Holdings or the Company on not more than ninety (90) days’ notice without cause or penalty) and which are not listed on any other Schedule hereto. |
(A) All material liabilities, whether actual, deferred, contingent or disputed, of the Company for Tax measured by reference to income, profits or gains earned, accrued or received (or premiums earned, accrued or received) on or before the Balance Sheet Date, or arising in respect of an Event occurring or deemed to occur on or before the Balance Sheet Date, are provided for or (as appropriate) disclosed in the Company Financials for the year ended September 30, 2000 (the “2000 Company Financials”) in accordance with UK Accounting Standards and the accounting policies set out in the 2000 Company Financials. All other warranties relating to specific Tax matters set out in this Section 3.14 are made without prejudice to the generality of the foregoing. |
(B) Since the Balance Sheet Date: |
(1) Except with respect to the Company Dividend and the Dividend, neither Holdings nor the Company has been involved in any transaction that has given or may give rise to a liability to Tax on Holdings or the Company (or would have given or might give rise to such a liability but for the availability of any Relief) other than Tax in respect of transactions entered into by it in the ordinary course of business; |
(2) no accounting period (as defined in section 12 of the Taxes Act) of Holdings or the Company has ended as referred to in section 12(3) of the Taxes Act; and |
(3) neither Holdings nor the Company has been a party to, nor has Holdings or the Company or any of their respective assets or properties been subject to, any tax sharing agreement or arrangement with any Person effective for any year subsequent to the financial year ended September 30, 2000, and since the Balance Sheet Date, neither Holdings nor the Company has made, nor is either liable for, any payments or other compensation for any such tax sharing agreement or arrangement. |
(C) The Company has duly, and within any appropriate time limits, made all Tax Returns required to be supplied to all relevant Tax Authorities. All such Tax Returns were and remain true, complete and correct in all material respects and were made on a proper basis and to the knowledge of Seller do not reveal any transactions which may be the subject of any dispute with any Tax Authority. The Company is neither involved in any current dispute with any Tax Authority nor is it (nor has it in the last seven (7) years been) the subject of any investigation, audit or non-routine visit by any Tax Authority. The Company has not been informed of any planned investigation, audit or non-routine visit by any Tax Authority and, to the knowledge of Seller, there are no facts which are likely to cause such an investigation, audit or non-routine visit to be instituted in respect of the Company. Within the past seven (7) years, neither the Company nor any director or officer of the Company (in his/her capacity as such) has paid or become liable to pay, and to the knowledge of Seller there are no circumstances by reason of which it or they may become liable to pay, to any Tax Authority, any penalty, fine, surcharge or interest in respect of any Tax (including in respect of any failure to make, give or supply any Tax Return to any relevant Tax Authority, or any failure to pay Tax on the due date for payment). |
(D) No transaction in respect of which any ruling, consent or clearance (each, a “Tax Clearance”) was required or sought from any Tax Authority has been entered into or carried out by Holdings or the |
Company without a Tax Clearance having first been properly obtained, and all information supplied to any Tax Authority or other appropriate authority in connection with any such Tax Clearance fully and accurately disclosed all facts and circumstances material to the giving of the Tax Clearance. Any transaction for which a Tax Clearance was obtained has been carried out only in accordance with the terms of such Tax Clearance and the application on which the Tax Clearance was based and at a time when, to the knowledge of Seller, the Tax Clearance was valid and effective. To the knowledge of Seller, no facts or circumstances have arisen since any such Tax Clearance was obtained that would cause the Tax Clearance to become invalid or ineffective. |
(E) No Tax Authority has operated or agreed to operate any special arrangement (being an arrangement which departs from any relevant legislation or any published practice or concession) in relation to the Company’s affairs. |
(F) The Company has not made, nor is there in effect with respect to the Company, an election pursuant to sections 953(c)(3)(C) or 953(d) of the Code. The Company has not been, and has no reason to believe that it will be, characterized as a “passive foreign investment corporation” (as defined in Section 1291et seq. of the Code). |
(G) Neither Holdings nor the Company is, nor will either become, liable to pay, or make reimbursement or indemnity in respect of, any Tax in consequence of the failure by any other Person to discharge that Tax within any specified period or otherwise, where such Tax relates to income, profits or gains, earned, accrued or received (or premiums earned, accrued or received), or to any Event or circumstance occurring or arising or deemed to occur or arise (whether wholly or partly) prior to the Closing. No Relief has been claimed by and/or given to Holdings or the Company and/or taken into account in determining or eliminating any provision for Tax or deferred Tax in the 2000 Company Financials, which is not validly available to Holdings or the Company and no challenge has been made by, nor to the knowledge of Seller are grounds for a challenge available to, a Tax Authority in relation thereto. |
(H) The Company has made all deductions and retentions of or on account of Tax as it was or is obliged or entitled to make, and all such payments of or on account of Tax as should have been made to any Tax Authority in respect of such deductions or retentions. |
(ii) Employees/Pensions. All United Kingdom income tax and class I national insurance contributions and other sums payable to the Inland Revenue under the PAYE system and any amounts of a corresponding nature payable to any foreign Tax Authority due and payable by the Company up to the date hereof have been paid and the Company has made all such deductions and retentions as should have been made under section 203 of the Taxes Act and all regulations made thereunder or under any comparable laws or regulations of any relevant foreign jurisdiction, including United States Federal and State wage withholding, Social Security and other similar systems. The Company has not adopted and does not operate, and is not part of, any scheme approved, or for which approval has been or is to be sought, under section 202 of the Taxes Act (charities: payroll deduction scheme). Since the Balance Sheet Date, no payment has been made to the Company to which section 601 of the Taxes Act applies (pension scheme surpluses: payments to employers). |
(iii) Capital Gains and Other Realization Proceeds. Upon the Closing or the execution and delivery of this Agreement or otherwise as a result of any matter contemplated by this Agreement, the Company will not incur any liability pursuant to section 179 of the Taxation of Chargeable Gains Act 1992. |
(iv) Group Relief. |
(A) Seller has disclosed to Buyer in writing prior to the date of this Agreement full, accurate and complete details of all arrangements or agreements to which Holdings or the Company is a party or which in any way affect Holdings or the Company and which relate to Group Relief and of any such arrangements or agreements under which any claim could be made by any Person either for the |
surrender to it by or by it to Holdings or the Company of Group Relief or for the making or repayment of any payment in relation to Group Relief. Seller also has disclosed full details of all claims made (whether agreed with the Inland Revenue or not) for the surrender by or to Holdings or the Company of Group Relief and of any such claims intended to be so made or which were taken into account or assumed in preparing the 2000 Company Financials and of the terms of any arrangements or agreements pursuant to which such surrenders were or are to be or were assumed to be made. |
(B) The Company is not a dual resident investing company within the meaning of section 404 of the Taxes Act. The Company is not, and at no time within the seven (7) years immediately preceding the date of this Agreement has been, a close company as defined in section 414 of the Taxes Act. |
(v) Distributions, etc. Except as disclosed or provided for in their respective accounts, neither Holdings nor the Company has on or after April 6, 1965: (1) made any distribution or deemed distribution within the meanings of section 209, 210 or 418 of the Taxes Act (distributions and deemed distributions) except as provided for in its audited accounts; (2) repaid, redeemed or purchased or agreed to repay, redeem or purchase any of its share capital; or (3) capitalized or agreed to capitalize in the form of shares or debentures any profits or reserves of any class or description, or otherwise issued or agreed to issue share capital other than for new consideration (as defined in section 254 of the Taxes Act). Neither Holdings nor the Company has been concerned in any exempt distribution within section 213 of the Taxes Act within the seven (7) years immediately preceding the date of this Agreement (demergers: exempt distributions). Neither Holdings nor the Company has issued any share capital which is of a relevant class as defined in section 249(2) of the Taxes Act. Neither Holdings nor the Company has issued any security (as defined in section 254(1) of the Taxes Act) outstanding on Closing in circumstances such that any interest or other payment payable in respect of it may be treated as a distribution under section 209 of the Taxes Act, and has not agreed to issue any such security. |
(vi) Controlled Foreign Companies. The Company has not received any notice of the making of a direction under section 747 of the Taxes Act and no circumstances exist which would entitle the Inland Revenue to make such a direction and to apportion to the Company any profits of a controlled foreign company pursuant to section 752 of the Taxes Act. |
(vii) Company Residence, Treasury Consents and Migration. The Company is and has at all times in the seven (7) years immediately preceding the date of this Agreement been accepted by the UK Inland Revenue as resident in the United Kingdom for Tax purposes and is not and has not been treated for the purposes of any double taxation arrangements having effect by virtue of section 788 of the Taxes Act or for any other Tax purpose as resident in any other jurisdiction (including the conduct of the affairs of the Company so as to be engaged in a United States trade or business through a permanent establishment within the meaning of Article 5 of the United Kingdom/United States Double Taxation Agreement of 31st December, 1975), nor is the Company nor has it been directly subject to Tax in any other jurisdiction, except for United States Federal excise taxes imposed under section 4371et seq. of the Code in the circumstances described inSchedule 3.14 of Seller’s Disclosure Schedule. The Company has not carried out or caused or permitted to be carried out any of the transactions specified at the relevant time in section 765(1) of the Taxes Act other than with the prior written consent of HM Treasury (and, in the case of a special consent, full particulars of which have been disclosed to Buyer in writing prior to the date hereof; and any conditions subject to which such consent was given have been complied with in full) or specified at the relevant time in section 765A of the Taxes Act without having duly provided the required information to the Inland Revenue. |
(viii) Value Added Tax. |
(A) This Section 3.14(i) of Seller’s Disclosure Schedule shall apply, with appropriate modifications, to any equivalent sales or turnover tax in any jurisdiction other than the United Kingdom to which the Company is subject. |
(B) The Company: |
(1) is registered for the purposes of VAT, has been so registered at all times that it has been required to be registered by VAT Legislation, and such registration is not subject to any |
conditions imposed by or agreed with HM Customs & Excise; and has complied fully with and observed in all material respects the terms of VAT Legislation; |
(2) has maintained and obtained all the records, invoices and other documents (as the case may be) required by the VAT Legislation and has preserved such records, invoices and other documents in such form and for such periods as are required by VAT Legislation; |
(3) has disclosed to Buyer in writing (i) full details of any method approved or directed for use by the Company by Customs & Excise under regulation 102 of the Value Added Tax (General) Regulations 1995 (SI 1995/2518) (the “VAT Regulations”) and which continues in force and effect whether by specific agreement with Customs and Excise or otherwise and (ii) the average percentage input tax recovery obtained by the Company in the last eight (8) prescribed accounting periods ending before the date of this Agreement (prescribed accounting period having the meaning ascribed to that expression by regulation 25 of the VAT Regulations); |
(4) is a member of a group for VAT purposes but is not the representative member of that group; |
(5) is not required to make payments on account of VAT for which it may become liable in a prescribed accounting period (pursuant to VAT regulations 44 to 48 of the VAT Regulations); and |
(6) is not and has not been subject under VAT Legislation to any penalty liability notice, written warning of failure to comply, surcharge liability notice or requirement to give security as a condition of making taxable supplies. |
(C) In respect of each of the assets of the Company (if any) which is a capital item for the purpose of Part XV of the VAT Regulations, Seller has disclosed to Buyer in writing, prior to the date of this Agreement, full details of the capital item affected, the amount of the total input tax (within the meaning of such Regulations) which is subject to adjustment, the percentage of the total input tax which was reclaimable on the capital item in the first interval applicable to it and any adjustments made or to be made having regard to Events that occurred up to the date of this Agreement, the date of acquisition of the capital item and the number of intervals in the adjustment period remaining from the date of this Agreement, and full details of all matters to date relevant in determining any adjustments. |
(ix) Stamp Duties. All documents in the possession or under the control of the Company or to the production of which the Company is entitled which establish or are necessary to establish the title of the Company to any asset have been duly stamped and any applicable stamp duties or interest and penalties relating to stamp duty in respect of such documents have been duly accounted for and paid, and no such documents which are outside the United Kingdom would attract stamp duty or interest and penalties relating to stamp duty if they were brought into the United Kingdom. |
(x) Miscellaneous |
(A) As of the Closing Date, neither Holdings nor the Company has been engaged in a U.S. trade or business as defined in section 864(b) of the Internal Revenue Code of 1986, (as amended) (the “Code”). |
(B) Neither Holdings nor the Company is a public company limited by shares. |
(C) Neither Holdings nor any affiliate of Holdings has taken any action that (or failed to take any action if such failure) would reasonably be likely to cause Holdings to be characterized as an association taxable as a corporation for U.S. federal income tax purposes. |
(D) The Company is a UK insurance company that is eligible for exemption from the US federal excise tax imposed by Code section 4371 on insurance and reinsurance premiums paid to the Company under the terms of the Convention Between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains effective April 25, 1980. |
(E) There are no Tax sharing agreements or arrangements between any of Seller or any of its Subsidiaries (other than Holdings or the Company) on the one hand and Holdings or the Company on the other hand. |
(i) “Event” means the winding up or dissolution of any Person, and any act, transaction or omission whatsoever, and any reference to an event occurring on or before a particular date shall include events which for Tax purposes are deemed to have, or are treated or regarded as having, occurred on or before that date. |
(ii) “Group Relief” means: (A) Relief surrendered or claimed pursuant to Chapter IV of Part X of the Taxes Act; (B) advance corporation tax surrendered or claimed pursuant to section 240 of the Taxes Act; and (C) any Tax refund surrendered or claimed pursuant to section 102 of the Finance Act of 1989 of the United Kingdom. |
(iii) “Relief” means, unless the context otherwise requires, any allowance, credit, deduction, exemption or set-off in respect of any Tax or relevant to the computation of any income, profits or gains for the purposes of any Tax; and (A) any reference to the “use” or “set off” of Relief shall be construed accordingly and shall include use or set off in part; and (B) any reference to the “loss” of a Relief shall include the absence or non-existence of any such Relief, or to such Relief being available only in a reduced amount. |
(iv) “Tax” or“Taxes” means corporation tax, advance corporation tax, income tax (including income tax or amounts on account of income tax required to be deducted or withheld from or accounted for in respect of any payment), capital gains tax, inheritance tax, VAT, national insurance contributions, stamp duty, stamp duty reserve tax, duties of customs and excise, petroleum revenue tax, council tax and local authority rates and charges, insurance premium tax (including insurance premium excise tax), climate change levy, landfill tax, all taxes, duties or charges replaced by or replacing any of them, and all other taxes (direct or indirect) or similar impost on gross or net income, profits or gains, distributions, receipts, sales, use, occupation, franchise, value added and personal property, taxes on premiums (whether calculated on the gross or net amount thereof), and all levies, imposts, duties, charges or withholdings of any nature whatsoever chargeable by any Tax Authority, and any payment whatsoever which the Company may be or become bound to make to any Person as a result of the discharge by that Person of any Tax which the Company has failed to discharge, together with all penalties, charges and interest relating to any of the foregoing or to any late or incorrect return (or failure to file such return or other form or statement) in respect of any of them, and regardless of whether any such taxes, levies, duties, imposts, charges, withholdings, penalties and interest are chargeable directly or primarily against or attributable directly or primarily to the Company or any other Person and of whether any amount in respect of any of them is recoverable from any other Person. |
(v) “Tax Authority” means any taxing or other authority (whether within or outside the United Kingdom, including the United States or any State) competent to impose any Tax liability. |
(vi) “Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to taxes, including any schedule or attachment thereto, and including any amendment thereof. |
(vii) “Taxes Act” means the Income and Corporation Taxes Act 1988. |
(viii) “VAT” means value added tax. |
(ix) “VAT Legislation” shall include the Value Added Tax Act 1994, and all other enactments in relation to VAT and all notices, provisions and conditions made or issued thereunder, including the terms of |
any agreement reached with HM Customs & Excise or any concession disclosed to Buyer in writing prior to the date of this Agreement. |
(x) Any reference to income, profits or gains “earned,” “accrued” or “received” on or before a particular date or in respect of a particular period shall include income, profits or gains which for Tax purposes are deemed to have been or are treated or regarded as earned, accrued or received on or before that date or in respect of that period. |
(xi) Any reference to something occurring (including a Tax liability arising) “in the ordinary course of business” shall, without prejudice to the generality thereof, be deemed not to include: |
(A) anything which results in the Company receiving a valid Tax claim in respect of any liability to Tax of, or properly attributable to, another Person (other than the Company); |
(B) the acquisition or disposal of an asset or the supply of services (including the lending of money, or the hiring or licensing of tangible or intangible property) in a transaction which is not entered into on arm’s length terms; |
(C) the creation, cancellation or reorganization of share or loan capital, the creation, cancellation of any intra-group debt or any company becoming or ceasing or being treated as ceasing to be a member of a group of companies or as becoming or ceasing to be associated or connected with any other company for any Tax purposes; or |
(D) anything which relates to a transaction or arrangement which includes, or a series of transactions or arrangements which includes, any step or steps having no commercial or business purpose apart from the reduction, avoidance or deferral of a Tax Liability. |
(xii) Persons shall be treated as “connected” for the purposes of this Section 3.14 if they are Connected within the meaning of section 839 of the Taxes Act. |
(xiii) References to any provision of an enactment include any provision re-enacted by such provision. |
(a) (i) Schedule 3.15(a)(i) of Seller’s Disclosure Schedule sets forth a true, complete and correct list of all securities, mortgages and other investments (collectively, the “Investments”) owned by Holdings and the Company on May 31, 2001, together with the date of purchase, cost basis and book value thereof as of May 31, 2001. Except as set forth onSchedule 3.15(a)(1), Holdings and the Company have good and marketable title to all the investments listed onSchedule 3.15(a)(1) or acquired in the ordinary course of business since May 31, 2001 (collectively, the “Scheduled Investments”). As of May 31, 2001, none of the Scheduled Investments is in default in the payment of principal or interest and, except as disclosed onSchedule 3.15(a)(1), the ratings assigned to each of the Scheduled Investments that are rated by a rating agency have not been lowered or downgraded since May 31, 2001. There are no Liens on any of the Scheduled Investments, except as set forth onSchedule 3.15(a)(1). |
(ii) Schedule 3.15(a)(ii) of Seller’s Disclosure Schedule sets forth a true, complete and correct list of all sales, purchases, exchanges or other transactions in or affecting Holdings’ or the Company’s investment portfolio from the Balance Sheet Date to May 31, 2001. |
(b) (i) The premises disclosed by Seller in Schedule 3.15(b) of Seller’s Disclosure Schedule, (the “Property”) comprise all the land and premises owned, occupied or used by Holdings and the Company and all details set out therein relating to the Property are correct and complete. |
(ii) There are no properties (other than the Property) in respect of which Holdings or the Company has any right or liability (whether contingent, secondary or interest in anyotherwise) arising out of a conveyance, transfer, lease, tenancy, licence, agreement or other document relating to land or buildings or premises or an interest in land or premises. |
(iii) References in this Section 3.15(b) to legislation are to English legislative expressions having particular meaning or effects under English law and such expressions are deemed to have that meaning or effect for the purposes of such Section. |
(iv) Holdings is solely entitled, legally and beneficially, to the estate of the Property specified in Schedule 3.15(b), and has good title to it registered at HM Land Registry. |
(v) The title documents necessary to prove Holdings’ title to the Property are in Holdings’ possession and control, and are originals or, where appropriate, properly examined abstracts. |
(vi) Neither the Property nor any of its title deeds are subject to an encumbrance, agreement, obligation, condition, right, easement, exception, reservation, overriding interest (as defined in section 70(1) of the Land Registration Act 1925) or other interest, subject to entries on the registered title to the Property. |
(vii) There is no person in possession of, or who has or claims a right or interest in, the Property adversely to Holdings’ interest. Holdings is entitled to and has exclusive vacant possession of the Property, and no person occupies, or has any right to occupy, the Property. |
(viii) Holdings has not received notice complaining of non performance or breach of any permission, consent, licence, permit, obligation, condition, restriction, agreement (including, without limitation, the terms of any lease or licence) or legal or administrative requirement affecting the Property, its ownership, occupation or existing use. |
(ix) Holdings has not received notice of any current, pending or threatened civil, criminal, arbitration, administrative or other proceeding or dispute concerning the Property. |
(x) Holdings is not aware of any application for planning permission relating to the Property awaiting determination and is not aware of any planning decision or deemed refusal currently being the subject of any appeal. |
(xi) The Property is not subject to outgoings other than the uniform business rate, water and sewerage rates and, in the case of a property held under a lease, tenancy or licence, rent, service charge and insurance premiums. |
(xii) The rent under the Lease is not at the date of this Agreement being reviewed or subject to pending review. For the purposes of this Section 3.15(b), the term “Lease” shall mean the lease dated 28 March, 1977 between the Dean and Canons of Her Majesty’s Free Chapel of St George within Her Majesty’s Castle at Windsor (1) and Telex Computer Products Limited (2) relating to Old Bank House, Thames Road, Windsor, Berkshire, England, or any renewal, extension, modification thereto, or any successor lease thereof. |
(xiii) Sections 24 to 28 of the Landlord and Tenant Act 1954 have not been excluded in relation to the Lease. |
(i) “Approved” means approved by the Inland Revenue for the purposes of Chapter I of Part XIV of the Income and Corporation Taxes Act 1988 and a reference to “Approval” is to be construed accordingly. |
(ii) “Disclosed Scheme” means the World-Wide Holdings Limited Retirement Benefits Scheme established pursuant to a trust deed dated 7 December 1978, and, where the context so permits, the individual pension plan policies issued by Equitable Life Assurance Society in favor of C.Z. Znowski, J.H. Greenhalgh and D.E. Brown under the respective policy numbers IPP0002046, IPP0002040 and IPP0013714. |
(iii) “Employee” means a director or employee or former employee or former director of Holdings or the Company. |
All particulars of the Disclosed Scheme required to permit Buyer to form a true and fair view of the benefits provided or to be provided (including contingent benefits) to the Employees have been disclosed to Buyer, including true and complete copies of: |
(i) the current trust deed and rules governing the Disclosed Scheme and any deeds of alteration; |
(ii) the current explanatory booklet issued to members of the Disclosed Scheme; |
(iii) all announcements to members of the Disclosed Scheme other than announcements which have been fully incorporated into the documents referred to in paragraphs (a) and (b); |
(iv) membership data of the members of the Disclosed Scheme; |
(v) the reports on the last two actuarial valuations of the Disclosed Scheme together with any subsequent draft valuations or actuarial updates; and |
(vi) the last two trustees reports and accounts of the Disclosed Scheme. |
Except for the Disclosed Scheme there is not in operation, and no proposal has been announced to enter into or establish, any agreement, arrangement, custom or practice (whether legally enforceable or not and whether Approved or not and whether funded or otherwise) for the payment of, or payment of a contribution towards, a pension, allowance, lump sum or other similar benefit on retirement, death, termination of employment (whether voluntary or not) or during periods of sickness or disablement, for the benefit of an Employee or an Employee’s dependants. |
(i) No discretion or power has been exercised (or practice followed) under the Disclosed Scheme in relation to any of the Employees to: |
(A) augment benefits (whether in relation to early retirement or otherwise); |
(B) admit to membership a person who would not otherwise have been eligible for admission to membership; |
(C) admit to membership a person on terms which provided for or envisaged the payment of a transfer value or a transfer of assets from another scheme to the Disclosed Scheme in a case in which the payment or transfer has not been made or has not been made in full; |
(D) provide a benefit which would not otherwise be provided; or |
(E) pay a contribution which would not otherwise have been paid. |
(ii) Each benefit (except a refund of contributions) payable under the Disclosed Scheme on the death of a member of the Disclosed Scheme or during periods of sickness or disability of the member is, at the date of this Agreement, fully insured under a policy effected with an insurance company of good repute. Each member has been covered for that insurance by that insurance company at its usual rates and on its usual terms for person in good health and all insurance premiums payable have been paid. |
(iii) No plan, proposal or intention to amend, discontinue (in whole or in part) or exercise a discretion in relation to the Disclosed Scheme has been communicated to a member of the Disclosed Scheme. |
(iv) Each Employee who has been admitted to or promised admission to membership of the Disclosed Scheme has been admitted or promised admission on terms which are consistent with the continue treatment of the Disclosed Scheme as Approved and (if applicable) the provisions of Part II of Schedule 6 to the Finance Act 1989. The substance of the terms of admission or promised admission have been communicated to the Employee. |
(v) To the knowledge of Seller, there has been no breach of the trusts of the Disclosed Scheme. |
(vi) To the knowledge of Seller, there is no civil, criminal, arbitration, administrative or other proceeding or dispute (which includes, without limitation, contact with OPAS or the Pensions Ombudsman) in relation to any Employee concerning the Disclosed Scheme by or against the trustees or administrator of the Disclosed Scheme, Seller, the Company or Holdings and none is pending or threatened. Seller is also not aware of a matter in relation to any Employee which might give rise to a proceeding or dispute of that type. |
(vii) All employer and member contributions due to the Disclosed Scheme have been paid to the trustees of the Disclosed Scheme in accordance with the Schedule of Contributions (as required by, and defined in, section 58 of the Pensions Act 1995). |
(viii) To the knowledge of Seller, all fees, charges and expenses of whatever nature (including, without limitation, all levies to be paid under the Pensions Act 1995) with respect to the Disclosed Scheme have been paid and no services have been rendered for which an account or invoice has not been delivered. |
(ix) To the knowledge of Seller, no claim has been made or threatened against Seller or the trustees or administrators of the Disclosed Scheme, or against any person whom the Seller is or may be liable to indemnify or compensate, in connection with the Disclosed Scheme (other than routine claims for benefits), there are no circumstances which may give rise to any such claim and Seller has not given any indemnity to any person in connection with the Disclosed Scheme. |
(i) The Disclosed Scheme is Approved and, to the knowledge of Seller, there is no matter which might give the Inland Revenue reason to withdraw Approval. |
(ii) The Disclosed Scheme is a contracted-out scheme for the purposes of the Pension Schemes Act 1993 and, to the knowledge of Seller, has been administered in accordance with the contracting-out requirements of that Act. There is a current contracting-out certificate issued in relation to the Disclosed Scheme. |
(iii) The Disclosed Scheme has been designed to comply with, and has been administered in accordance with all applicable legal and administrative requirements (including, without limitation, Article 141 of the Treaty of Rome as it applies to the eligibility of an Employee to join the Disclosed Scheme) and the trusts, powers and provisions of the Disclosed Scheme. |
(i) To the knowledge of Seller, the Disclosed Scheme has been operated at all times in accordance with the documents constituting the same (as lawfully amended from time to time) and all applicable laws and, without limitation to the foregoing, all decisions made by the trustees and administrators of the Disclosed Scheme have been made in accordance with their powers and duties as the trustees or administrators respectively. |
(ii) No part-time Employee or former Employee has either: |
(A) been excluded from membership of the Disclosed Scheme; or |
(B) been provided with benefits under the Disclosed Scheme which are different from those provided for, or in respect of, full-time Employees or former Employees or do not comply with the requirements of Article 141 of the Treaty of Rome. |
(iii) The Disclosed Scheme has not accepted any transfer value from a pension arrangement (the “Paying Scheme”) in respect of an Employee or former Employee where the Paying Scheme in relation to such transfer value did not comply with the requirements of Article 141 of the Treaty of Rome (which, for the avoidance of doubt, includes obligations in respect of part-timers). |
(i) Contracts relating to the borrowing of money, guarantees, security agreements, factoring agreements and deferred purchase or hire purchase Contracts, including obligations for reimbursement under letters of credit or reimbursement agreements therefor (other than letters of credit or reimbursement agreements therefor that are (A) fully secured or collateralized and (B) related to Reinsurance Agreements and Retrocession Agreements entered into by Buyer or its Subsidiaries in the ordinary course of business consistent with past practice) in any case representing future liabilities in excess of US $300,000; |
(ii) Contracts which permit a financial institution or other Person to block or otherwise restrict immediate access by Buyer or its Subsidiaries to deposits or other monies held thereby in any case involving amounts in excess of US $300,000; |
(iii) Contracts with any employee pursuant to which Buyer or any of its Subsidiaries owes any monetary obligation (other than those Contracts involving annual payments in any case of less than US $100,000 or which are cancelable by Buyer or its Subsidiaries on not more than ninety (90) days’ notice without cause or penalty); |
(iv) Contracts with insurance agents and agencies, managing general agents with binding authority, brokers, third party administrators and consultants (other than those Contracts which are cancelable by Buyer or its Subsidiaries on not more than ninety (90) days’ notice without cause or penalty or that involve payments by Buyer or its Subsidiaries of less than US $100,000 annually);provided, however, that with respect to such Contracts with managing general agents,Schedule 4.8 of Buyer’s Disclosure Schedule shall also set forth (A) a brief description of each managing general agent, including its jurisdiction of domicile, its address of record and (where reasonably available) information regarding the ultimate beneficial ownership thereof, and (B) the aggregate amount of insurance or reinsurance which such managing general agent has written and has been authorized to write on behalf of Buyer or its Subsidiaries since the Buyer Balance Sheet Date; |
(v) Contracts containing any provision or covenant limiting the ability of Buyer or its Subsidiaries to engage in any line of business or compete with any Person (other than Contracts with insurance agents and agencies or managing general agents with binding authority entered into by Buyer or its Subsidiaries in the ordinary course of business consistent with past practice); |
(vi) Contracts between Buyer or its Subsidiaries and any Affiliates; |
(vii) Contracts in which any employee has any monetary or other interest in any case in excess of US $100,000, other than employment arrangements entered into in the ordinary course of business; |
(viii) Contracts involving the sale, transfer, assignment or other disposition of assets or liabilities of Buyer or its Subsidiaries having a value in any case in excess of US $300,000 pursuant to which Buyer or its Subsidiaries has given representations and/or indemnities which continue to be in effect and pursuant to which liability would reasonably be expected to arise; |
(ix) investment management agreements, investment custody agreements and similar Contracts; |
(x) Agency Contracts that individually produced US $300,000 or more of gross written premiums for Buyer or its Subsidiaries during the year ended December 31, 2000, or are reasonably expected by Buyer or its Subsidiaries individually to produce US $300,000 or more of gross written premiums for Buyer or its Subsidiaries during the year ending December 31, 2001, which are subject to termination upon the occurrence of a change of ownership or control of Buyer or its Subsidiaries; |
(xi) Contracts (other than the Buyer Scheduled Contracts referred to in Section 4.8(a)(iv) and Agency Contracts) representing future annual liabilities in any case in excess of US $300,000 individually that are subject to termination upon the occurrence of a change of ownership or control of Buyer or its Subsidiaries;provided,however, that if the aggregate future liabilities for all Contracts (other than the Buyer Scheduled Contracts referred to in Section 4.8(a)(iv) and Agency Contracts) representing future annual liabilities in any case of less than US $300,000 that are subject to termination upon the occurrence of a change of ownership or control of Buyer or its Subsidiaries and not listed onSchedule 4.8 of Buyer’s Disclosure Schedule exceeds US $1,000,000 those Contracts shall also be included in Section 4.8; |
(xii) Contracts pursuant to which Buyer or its Subsidiaries have agreed to grant or have granted an option or similar right to another Person affecting any material asset of Buyer or its Subsidiaries (other than assets held by Buyer or its Subsidiaries in its investment portfolio); |
(xiii) Contracts which provide for payments in the event of a change of control; |
(xiv) insurance Contracts entered into by Buyer or its Subsidiaries; and |
(xv) all other Contracts material to the business, operations, assets, liabilities or financial condition of Buyer or its Subsidiaries in any case representing future liabilities (to the extent reasonably ascertainable) which require payments by Buyer in excess of US $300,000 individually (other than those Contracts which are cancelable by Buyer or its Subsidiaries on not more than ninety (90) days’ notice without cause or penalty) and which are not listed on any other Schedule hereto. |
(i) maintain insurance coverages on the assets and properties of Holdings and the Company on a basis consistent with past practice; |
(ii) maintain its books, accounts and records on a basis consistent with past practice; |
(iii) comply in all material respects with all applicable judgments, orders, injunctions, laws, statutes, regulations, ordinances and Permits of Governmental Authorities and preserve in full force and effect all Permits material to business and operations; |
(iv) maintain and keep its material assets and equipment in good repair, working order and condition, subject to reasonable and normal wear and tear; |
(v) perform in all material respects its obligations under all Seller Scheduled Contracts and under all insurance Contracts, Reinsurance Agreements and Retrocession Agreements to which it is a party (in each case, on a basis consistent with past practice); and |
(vi) use its reasonable efforts to maintain and preserve its business organization, retain the services of senior management, and maintain its relationships with its agents, policyholders, suppliers and customers. |
(i) maintain its books, accounts and records on a basis consistent with past practice; |
(ii) comply in all material respects with all applicable judgments, orders, injunctions, laws, statutes, regulations, ordinances and Permits of Governmental Authorities and preserve in full force and effect all Permits material to business and operations; |
(iii) maintain and keep its material assets and equipment in good repair, working order and condition, subject to reasonable and normal wear and tear; |
(iv) perform in all material respects its obligations under all Buyer Scheduled Contracts and under all insurance Contracts, Reinsurance Agreements and Retrocession Agreements to which it is a party (in each case, on a basis consistent with past practice); and |
(v) use its reasonable efforts to maintain and preserve its business organization, retain the services of senior management, and maintain its relationships with its agents, policyholders, suppliers and customers. |
(i) incur any indebtedness for borrowed money in excess of US $250,000 or guarantee any such indebtedness or issue or sell any debt securities of Holdings or the Company or guarantee any debt securities of other Persons other than in the ordinary course of business consistent with past practice; |
(ii) grant or create any Lien on any of its assets other than Liens granted or created in the ordinary course of business consistent with past practice; |
(iii) make any material changes in its Investment Policies or make any material change in its financial, tax or accounting methods, principles or practices (including any material change with respect to the establishment of reserves, losses (including incurred but not reported losses) or any change in depreciation or amortization policies or rates adopted by it), except as may be required by law or applicable UK Accounting Standards; |
(iv) other than in the ordinary course of business consistent with past practice, grant to any employee any increase in salary or other regularly paid remuneration which would constitute a material increase in the salary or other remuneration of such employee, or grant to any employee any increase in severance or termination pay; grant or approve any general increase in salaries of all or a substantial portion of the employees; pay or award any bonus, incentive compensation, service award or other like benefit for or to the credit of any employee; enter into any employment Contract with any employee except as may be required under any employment Contract set forth onSchedule 3.11 of Seller’s Disclosure Schedule; or adopt or amend in any material respect any Employee Benefit Plan; |
(v) authorize, allot, issue, deliver or sell any shares in the capital of Holdings or the Company or obligations or securities convertible into or exchangeable for, or warrants, options or other rights in respect of, any such shares; |
(vi) amend its Memorandum or Articles of Association; |
(vii) declare, pay or make any dividends or other distributions (whether in cash, securities or other property or any combination thereof) or reduce, repurchase, redeem or otherwise acquire any of its share capital;provided,however, that the Company may pay and make the Company Dividend and Holdings may pay and make the Dividend; |
(viii) acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any Person or otherwise acquire any assets or properties that are material, individually or in the aggregate, to Holdings or the Company; |
(ix) sell, lease or otherwise dispose of any of its assets or properties that are material, individually or in the aggregate, to Holdings or the Company (other than transactions involving securities in its investment portfolio in the ordinary course of business consistent with past practice, except as set forth in paragraph (xvi) of this Section 5.2); |
(x) make any capital expenditure or execute any lease (other than a lease renewal for its Windsor property) or incur any commitment or liability therefor not contained in a written budget prepared by the management of Holdings or the Company on or before the date of this Agreement involving annual payments in excess of US $30,000 individually or US $100,000 in the aggregate (other than expenditures, leases, commitments or liabilities arising from the purchase or lease of automobiles owned by Holdings or the Company for use in its business, if such automobiles are purchased or leased to replace an existing Holdings or Company automobile); |
(xi) terminate, amend or modify any Scheduled Contract involving future liabilities in excess of US $100,000 in any case: |
(xii) commute any insurance Contract, Reinsurance Agreement or Retrocession Agreement involving more than US $1,000,000 in future liabilities; |
(xiii) cancel any indebtedness involving liabilities in excess of US $250,000 in any case; |
(xiv) waive or compromise any rights having an economic value to the Company in excess of US $25,000 in any case (other than commutations of insurance Contracts, Reinsurance Agreements or Retrocession Agreements and settlements of insurance and reinsurance claims in the ordinary course of business consistent with past practice); |
(xv) settle pending or threatened Litigation (other than schedule insurance or reinsurance litigation in the ordinary course of business consistent with past practice) in an amount exceeding US $25,000 in the aggregate; |
(xvi) take any capital gains (or realize any investment profit) in excess of US $250,000 in the aggregate or decrease the level of its benefit reserves; |
(xvii) purchase or otherwise invest in any interest in (i) real property (including any extension of credit secured by a mortgage or deed of trust), (ii) common or ordinary shares or (iii) bonds, notes, debentures or other evidence of indebtedness, in each case other than in the ordinary course of business consistent with past practice; |
(xviii) make any payments to its Affiliates (other than the Dividend or pursuant to the terms of the Scheduled Contracts described in Section 3.11(a)(vi)); |
(xix) take any action, or omit to take any action, that would result in (i) any of the representations and warranties of Seller that are qualified as to materiality becoming untrue or any of such representations or warranties that are not so qualified becoming untrue in any material respect or (ii) any of the conditions to the Closing being incapable of being satisfied; or |
(xx) authorize any of, or commit or agree to take any of, the foregoing actions. |
(i) make any material changes in its Investment Policies or make any material change in its financial, tax or accounting methods, principles or practices (including any material change with respect to the establishment of reserves, losses (including incurred but not reported losses) or any change in depreciation or amortization policies or rates adopted by it), except as may be required by law or applicable accounting standards; |
(ii) authorize, allot, issue, deliver or sell any shares in the capital of Buyer or any of its Subsidiaries or obligations or securities convertible into or exchangeable for, or warrants, options or other rights in respect of, any such shares, other than (A) shares issued upon exercise of outstanding options and warrants and (B) options granted under Buyer’s stock option plans existing as of the date hereof; |
(iii) amend its Memorandum or Articles of Association; |
(iv) declare, pay or make any dividends (excluding regular quarterly cash dividends in amounts consistent with past practice) or other distributions (whether in cash, securities or other property or any combination thereof) or reduce, repurchase, redeem or otherwise acquire any of its share capital; |
(v) acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any Person or otherwise acquire any assets or properties that are material, individually or in the aggregate, to Buyer; |
(vi) sell, lease or otherwise dispose of any of its assets or properties that are material, individually or in the aggregate, to Buyer (other than transactions involving securities in its investment portfolio in the ordinary course of business consistent with past practice; |
(vii) settle pending or threatened Litigation (other than scheduled insurance or reinsurance litigation in the ordinary course of business consistent with past practice) in an amount exceeding US $250,000 in the aggregate; |
(viii) make any payments to its Affiliates (other than payments or transfers by or among Buyer and any of its Subsidiaries); |
(ix) take any action, or omit to take any action, that would result in (i) any of the representations and warranties of Buyer that are qualified as to materiality becoming untrue or any of such representations or warranties that are not so qualified becoming untrue in any material respect or (ii) any of the conditions to the Closing being incapable of being satisfied; or |
(x) authorize any of, or commit or agree to take any of, the foregoing actions. |
(i) Buyer, Seller, Holdings and Company shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the filing of Tax Returns pursuant to Section 9 of the Tax Deed Covenant and any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Seller agrees (A) to retain all books and records with respect to Tax matters pertinent to Holdings and Company relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by Buyer, any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any Tax Authority, and (B) to give the other party reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the other party so requests, shall allow the other party to take possession of such books and records. |
(ii) Buyer and Seller further agree, upon request, to use their best efforts to obtain any certificate or other document from any governmental authority or any other person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including, but not limited to, with respect to the transactions contemplated hereby). |
(i) “Actuary” means a Fellow of the Institute of Actuaries (or, in Scotland, a Fellow of the Faculty of Actuaries). |
(ii) “Buyer’s Actuary” means the actuary appointed by Buyer for the purposes of this Section 7.7 and may be the Scheme Actuary. |
(iii) “Independent Actuary” means the Actuary (if any) appointed for the purpose of Section 7.7(e), who shall act as expert not as arbitrator, whose fees for acting shall be borne equally between Buyer and Seller, whose decision shall (in the absence of manifest error) be final and binding, and to whom Buyer and Seller shall instruct their respective Actuaries to give all such assistance as he may require in order to perform the functions for which he is appointed. |
(iv) “Minimum Funding Requirement” has the meaning given to it by section 56 of the Pensions Act 1995. |
(v) “Scheme Actuary” means the actuary appointed by the trustees of the Disclosed Scheme for the purposes of section 47(1)(b) of the Pensions Act 1995. |
(vi) “Seller’s Actuary” means such actuary (if any) appointed by Seller for the purposes of this Section 7.7, and if no such appointment is made then references thereto shall be to Seller. |
(vii) “Shortfall” shall have the meaning given to it in Section 7.7(f). |
(viii) “Timing Adjustment Factor” means (0.6 x A/B ) + (0.4 x (1+i) n ), where: |
“A” is the value of one unit in the Britannic Asset Management Fund in which the Disclosed Scheme is partially invested on the date that payment of the Shortfall is actually made by Seller; |
“B” is the value of one such unit on the Closing Date; |
“i” is the annualized percentage yield during 2001 on the Emeritus Fund Deposit Administration Policy in which the Disclosed Scheme is also partially invested; and |
“n” is the period (expressed as a percentage of a complete year) from and including the Closing Date to but excluding the date of actual payment. |
(i) the amount of any Damages to be indemnified by Seller under this Article VIII shall be (A) reduced by an amount (the “Buyer Tax Benefit’’) equal to the excess of (1) the amount of Taxes that would have |
been payable in a taxable year by Buyer or its Subsidiaries, as the case may be, if Buyer or its Subsidiaries had not incurred the Damages over (2) the Taxes actually payable by Buyer or its Subsidiaries, as the case may be, in such taxable year, provided, that the Buyer Tax Benefit shall include any refund or reduction of Taxes actually received or realized from the incurrence of the Damages and (B) increased by an amount (the “Buyer Tax Burden”) equal to the amount of Taxes payable by Buyer or its Subsidiaries attributable to the receipt of Buyer or its Subsidiaries, as the case may be, of any indemnification payment hereunder; |
(ii) the amount of any Damages to be indemnified by Seller under this Article VIII shall be reduced by the net amount that Buyer or its Subsidiaries recovers (after deducting all attorneys’ fees, expenses and other costs of recovery) from any insurer or third party liable for such Damages;provided, however, that Buyer or its Subsidiaries, as the case may be, shall not be obligated to request, pursue or obtain such insurance or third party proceeds prior to receiving indemnification proceeds from Seller; and,provided,further, that to the extent that Seller makes any indemnification payment to Buyer or its Subsidiaries, Seller shall be subrogated to the rights of Buyer or its Subsidiaries to obtain such insurance or third party proceeds, and, upon its receipt of the full amount of the indemnification payment owing hereunder with respect to such matter, Buyer or its Subsidiaries, as the case may be, shall assign all such rights to Seller (it being understood that if such rights are not assignable, then Buyer or its Subsidiaries, as the case may be, will cooperate with Seller to the extent reasonably requested in order to pursue such subrogated rights); |
(iii) Buyer shall be entitled to indemnification for Damages under this Article 8 only when the aggregate of all such Damages exceeds US $1,000,000 and then only to the extent of any such excess; |
(iv) the aggregate liability of Seller under this Section 8.2 shall not exceed US $42,500,000; and |
(v) Seller shall not be liable for duplicative indemnification payments under the Transaction Documents. |
(i) the amount of any Damages to be indemnified by Buyer under this Article 8 shall be (A) reduced by an amount (the “Seller Tax Benefit”) equal to the excess of (1) the amount of Taxes that would have been payable in a taxable year by Seller if Seller had not incurred the Damages over (2) the Taxes actually payable by Seller in such taxable year;provided, however, that the Seller Tax Benefit shall include any refund or reduction of Taxes actually received or realized from the incurrence of the Damages and (B) increased by an amount (the “Seller Tax Burden”) equal to the amount of Taxes payable by Seller attributable to the receipt of Seller of any indemnification payment hereunder; |
(ii) the amount of any Damages to be Indemnified under this Article 8 shall be reduced by the net amount that Seller recovers (after deducting all attorneys’ fees, expenses, and other costs of recovery) from any insurer or third party liable for such Damages;provided, however, that Seller shall not be obligated to request, pursue or obtain such insurance or third party proceeds prior to enforcing or receiving Indemnification proceeds from Buyer; andprovided, further, that to the extent that Buyer makes any Indemnification payment to Seller, Buyer shall be subrogated to the rights of Seller, as the case may be, to obtain such Insurance or third party proceeds and, upon its receipt of the full amount of the Indemnification payment owing hereunder, with respect to such matter, Seller, as the case shall be, shall assign all such rights to Buyer (it being understood that if such rights are not assignable, then Seller, as the case may be, will cooperate with Buyer to the extent reasonably requested in order to pursue such subrogated rights); |
(iii) Seller shall be entitled to indemnification for Damages under this Article 8 only when the aggregate of all such Damages exceeds US $1,000,000 and then only to the extent of any such excess (excluding Damages arising from breaches of Section 5.4 hereof); |
(iv) the aggregate liability of Buyer under this Section 8.2 shall not exceed US $42,500,000 (excluding Damages arising from breaches by Buyer of Section 5.4 hereof); and |
(v) Buyer shall not be liable for duplicative indemnification payments under the Transaction Documents. |
Scottish Annuity & Life Holdings, Ltd. |
Grand Pavilion Commercial Centre |
802 West Bay Road |
Grand Cayman, Cayman Islands, BWI |
Telephone: (345) 949-2800 |
Facsimile: (345) 949-0276 |
Attention: Scott E. Willkomm, President |
LeBoeuf, Lamb, Greene & MacRae, L.L.P. |
125 West 55th Street |
New York, New York 10019-5389 |
U.S.A. |
Telephone: (212) 424-8219 |
Facsimile: (212) 424-8500 |
Attention: Hugh T. McCormick |
Pacific Life Insurance Company |
700 Newport Center Drive |
Newport Beach, CA 92660-6397 |
Telephone: (949) 219-3011 |
Facsimile: (949) 219-3706 |
Attention: General Counsel |
Gibson, Dunn & Crutcher LLP |
333 South Grand Avenue |
Los Angeles, California 90071-3197 |
Telephone: 212-229-7000 |
Facsimile: 213-229-7520 |
Attention: Karen E. Bertero |
BU | YER: |
SC | OTTISH ANNUITY & LIFE HOLDINGS, LTD. |
By: /s/ Scott E. Willkomm |
Name: Scott E. Willkomm |
Title: President and CFO |
SE | LLER: |
PA | CIFIC LIFE INSURANCE COMPANY |
By: /s/ Glenn S. Schafer |
Name: Glenn S. Schafer |
Title: President |
By: /s/ Audrey L. Milfs |
Name: Audrey L. Milfs |
Title: Secretary |
Section 1. | Definitions | A-64 | ||
Section 2. | Demand Registrations | A-65 | ||
Section 3. | Piggyback Registrations | A-67 | ||
Section 4. | Hold-Back Agreements | A-68 | ||
Section 5. | Registration Procedures | A-68 | ||
Section 6. | Registration Expenses | A-71 | ||
Section 7. | Indemnification | A-72 | ||
Section 8. | Rules l44 and 144A | A-74 | ||
Section 9. | Underwritten Registrations | A-74 | ||
Section 10. | Covenants of Stockholder | A-74 | ||
Section 11. | Miscellaneous | A-74 |
(i) the Board of Directors of the Company determines that, in the Board of Director’s reasonable judgment and good faith, the registration and distribution of the Registrable Securities covered or to be covered by such Registration Statement would materially interfere with any pending financing, acquisition, reorganization or other material transaction involving the Company or any of its subsidiaries or would require disclosure of any other material corporate development that the Company is not otherwise required or prepared to disclose, for a period not in excess of 90 days; provided, however, that the Company may not exercise this right more than twice in any 12 month period; or |
(ii) the Demand Registration would require that the Company prepare audited financial statements as of a date other than its fiscal year end (unless Stockholder agrees to pay the expenses of such an audit), until such time as year-end audited financial statements become available. |
Section | 3. Piggyback Registrations. |
(i) when a prospectus or any supplement or post-effective amendment to such prospectus has been filed and, with respect to a Registration Statement or any post-effective amendment thereto, when the same has become effective, |
(ii) of any request by the Commission or any other Federal or state governmental authority for amendments or supplements to a Registration Statement or related prospectus or for additional information, |
(iii) of the issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any prospectus or the initiation of any proceedings by any Person for that purpose, |
(iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Securities for offer or sale under the securities or blue sky laws of any jurisdiction, or the contemplation, initiation or threatening of any proceeding for such purpose, and |
(v) of the happening of any event or the existence of any facts that make any statement made in such Registration Statement or prospectus untrue in any material respect or that require the making of any changes in such Registration Statement or prospectus so that it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made (in the case of any prospectus), not misleading (which notice shall be accompanied by an instruction to Stockholder and the lead underwriters, if any, to suspend the use of the prospectus until the requisite changes have been made); |
Scottish Annuity & Life Holdings Ltd. |
Grand Pavilion Commercial Centre |
802 West Bay Road |
Grand Cayman, Cayman Islands, BWI |
Attention: Scott E. Willkomm |
President and Chief Financial Officer |
Fax: (345) 949-0276 |
LeBoeuf, Lamb, Greene & MacRae, L.L.P. |
125 West 55th Street |
New York, New York 10019 |
Attention: Hugh T. McCormick, Esq. |
Fax: (212) 424-8500 |
Pacific Life Insurance Company |
700 Newport Center Drive |
Newport Beach, CA 92660-6397 |
Attention: General Counsel |
Fax: (949) 219-3706 |
Gibson, Dunn & Crutcher LLP |
333 South Grand Avenue |
Los Angeles, California 90071-3197 |
Attention: Karen E. Bertero |
Fax: 213-229-6360 |
SC | OTTISH ANNUITY & LIFE HOLDINGS, LTD. |
By: |
Name: |
Title: |
PA | CIFIC LIFE INSURANCE COMPANY |
By: �� |
Name: |
Title: |
By: |
Name: |
Title: |
Page | ||||
ARTICLE I | Definitions | A-80 | ||
ARTICLE II | Agreements of Stockholder | A-82 | ||
Section 2.1 | Restrictions on Purchase | A-82 | ||
Section 2.2 | Stockholder Change of Control | A-82 | ||
Section 2.3 | Standstill Provisions | A-83 | ||
ARTICLE III | Board and Committee Representation | A-83 | ||
Section 3.1 | Board Representation | A-83 | ||
Section 3.2 | Committees | A-84 | ||
ARTICLE IV | Effectiveness and Termination | A-84 | ||
Section 4.1 | Effectiveness | A-84 | ||
ARTICLE V | Representations and Warranties | A-84 | ||
Section 5.1 | Representations and Warranties of the Company | A-84 | ||
Section 5.2 | Representations and Warranties of the Stockholder | A-84 | ||
ARTICLE VI | Miscellaneous | A-85 | ||
Section 6.1 | Injunctive Relief | A-85 | ||
Section 6.2 | Successors and Assigns | A-85 | ||
Section 6.3 | Amendments; Waiver | A-85 | ||
Section 6.4 | Notices | A-86 | ||
Section 6.5 | Governing Law | A-86 | ||
Section 6.6 | Headings | A-86 | ||
Section 6.7 | Integration | A-86 | ||
Section 6.8 | Severability | A-87 | ||
Section 6.9 | Consent to Jurisdiction | A-87 | ||
Section 6.10 | Counterparts | A-87 |
Value = A x B x C, where |
A is the Company’s earnings per share for the most recently completed fiscal year; |
B is the multiple of earnings used by the acquiring person in such Stockholder Change of Control to determine the acquisition price of the Stockholder or such other Pacific Life Entity, as applicable; and |
C is the number of Shares Beneficially Owned by Stockholder or such other Pacific Life Entity, as applicable. |
Scottish Annuity & Life Holdings, Ltd. |
Grand Pavilion Commercial Centre |
802 West Bay Road |
Grand Cayman, Cayman Islands, BWI |
Attention: Scott E. Willkomm |
Fax: (345) 949-0276 |
LeBoeuf, Lamb, Greene & MacRae, L.L.P. |
125 West 55th Street |
New York, New York 10019 |
Attention: Hugh T. McCormick, Esq. |
Fax: (212) 424-8500 |
Pacific Life Insurance Company |
700 Newport Center Drive |
Newport Beach, CA 92660-6397 |
Attention: General Counsel |
Fax: (949) 219-3706 |
Gibson Dunn & Crutcher LLP |
333 South Grand Avenue |
Los Angeles, California 90071-3197 |
Attention: Karen E. Bertero |
Fax: (213) 229-6360 |
THE COMPANY: |
SCOTTISH ANNUITY & LIFE HOLDINGS,LTD. |
By: |
Name: |
Title: |
STOCKHOLDER: |
PACIFIC LIFE INSURANCE COMPANY |
By: |
Name: |
Title: |
By: |
Name: |
Title: |
ACKNOWLEDGED AND AGREED: |
solely with respect to Section 2.1 hereof: |
PMHC: |
PACIFIC MUTUAL HOLDING COMPANY |
By: |
Name: |
Title: |
By: |
Name: |
Title: |
PACIFIC LIFECORP: |
PACIFIC LIFECORP |
By: |
Name: |
Title: |
By: |
Name: |
Title: |
(1) | PACIFIC LIFE INSURANCE COMPANY a company registered in California, United States at 700 Newport Center Drive, Newport Beach, California CA 92660-6397, United States (the “Seller”); and |
(2) | SCOTTISH LIFE AND ANNUITY HOLDINGS LIMITED a company registered in the Cayman Islands at Grand Pavilion Commercial Centre, 801 West Bay Road, Grand Cayman, Cayman Islands, BW1 75201 (“theBuyer”). |
1. | Interpretation |
1.1 | In this Deed words and expressions defined in the Agreement have the same meaning except where otherwise provided or unless there is something in the subject matter or context which is inconsistent with them. |
1.2 | “Auditors” means the auditors for the time being of the relevant Group Company; |
1.3 | “Covenantors’ Reliefs” means any Relief or right to repayment of Taxation which is or becomes available to any Group Company in respect of or by reference to any period or part of a period prior to the Closing Date other than a Purchaser’s Relief; |
1.4 | “Group Company” means either Holdings or the Company, and “Group” means both of them. |
1.5 | “Event” means the existence of any state of affairs and any payment, transaction, act, omission or occurrence of whatever nature whether or not a Group Company or the Buyer is a party thereto and for the avoidance of doubt includes: |
1.5.1 | the execution of the Agreement and closing of the sale of the Shares to the Buyer; and |
1.5.2 | the death of any person; and |
references to an Event occurring on or before the Closing Date shall include an Event deemed, pursuant to any Taxation Statute, to occur or which is otherwise treated or regarded as occurring on or before the Closing Date. References to an Event which occurred on or before the Closing Date include the combined result of two or more Events all of which occurred on or before the Closing Date. |
1.6 | “Liability for Taxation” means any liability of a Group Company to make an actual payment of or in respect of Taxation whether or not the same is primarily payable by the Group Company and whether or not the Group Company has or may have any right of reimbursement against any other person or persons and shall also include: |
1.6.1 | the Loss of any Relief where such Relief has been taken into account in computing and so reducing or eliminating any provision for deferred Tax which appears in the 2000 |
Company Financials (or which but for such Relief would have appeared in the 2000 Company Financials) or where such Relief was treated as an asset of the Group in the 2000 Company Financials or was taken into account in computing any deferred Tax asset which appears in the 2000 Company Financials in which case the amount of the Liability for Taxation shall be the amount of Taxation which would (on the basis of Tax rates current at the Balance Sheet Date) have been saved but for such Loss assuming for this purpose that the Company had sufficient profit or was otherwise in a position to use the relief; |
1.6.2 | the Loss of any right to repayment of Taxation (including any repayment supplement) which was treated as an asset in the 2000 Company Financials in which case the amount of the Liability for Taxation shall be the amount of the right to repayment and any related repayment supplement; and |
1.6.3 | the set off or use against income, profits or gains earned, accrued or received or against any Tax chargeable in respect of an event occurring on or before the Closing Date of any Relief or right to repayment of taxation (including any repayment supplement) which is not available before the Closing Date but arises after the Closing Date in circumstances where, but for such set off or use, a Group Company would have had a liability to make an actual payment of or in respect of Taxation for which the Buyer would have been able to make a claim against the Seller under this Deed in which case the amount of the Liability for Taxation shall be the amount of Taxation saved by a Group Company as a result of such set off or use. |
1.7 | “Loss” means any reduction, modification, loss, counteraction, nullification, utilisation, disallowance or claw back for whatever reason. |
1.8 | “Purchaser’s Relief” means any Relief or right to repayment of Taxation as is mentioned in clauses 1.6.1 to 1.6.3. |
1.9 | “Relevant Company” means any company other than a Group Company, the Buyer and any company that may be treated as being a member of the same group of companies as the Buyer or as being associated with the Buyer for the purposes of the Tax that has given rise to the Liability for Taxation under clause 2.1.2. |
1.10 | “Relief” means any loss, relief, allowance, credit, exemption or set off in respect of Taxation or any deduction in computing income, profits or gains for the purposes of Taxation. |
1.11 | “Tax” or “Taxation” means: |
1.11.1 | all forms of Taxation (both direct and indirect) including and without limitation any charge, tax, duty, levy, impost, withholding or liability wherever chargeable imposed for support of national, state, federal, municipal or local government or any other person and whether of the UK or any other jurisdiction; and |
1.11.2 | any penalty, fine, surcharge, interest, charges or costs payable in connection with any taxation within clause 1.11.1 above. |
1.12 | “Tax Claim” means any assessment, self assessment, notice, demand, letter or other document issued or action taken by or on behalf of any Taxation Authority from which it appears that a Group Company or the Buyer is or may be subject to a Liability for Taxation or other liability in respect of which the Seller are or may be liable under this Deed. |
1.13 | “Taxation Authority” means the Inland Revenue, Customs & Excise, Department of Social Security and any other governmental or other authority whatsoever competent to impose any Taxation whether in the United Kingdom or elsewhere. |
1.14 | “Taxation Statute” means any directive, statute, enactment, law or regulation wheresoever enacted or issued, coming into force or entered into providing for imposing any Taxation and shall include orders, regulations, instruments, by-laws or other subordinate legislation made under the relevant statute or statutory provision and any directive, statute, enactment, law, order, regulation or provision which amends, extends, consolidates or replaces the same or which has been amended, extended, consolidated or replaced by the same. |
1.15 | Headings are for convenience only and shall not affect the construction of this Deed. |
1.16 | References to gross receipts, income, profits or gains earned, accrued or received shall include any gross receipts, income, profits or gains deemed pursuant to the relevant Taxation Statute to have been or treated or regarded as earned, accrued or received. |
1.17 | Unless the context otherwise requires the singular shall include the plural and vice versa, the masculine shall include the feminine and references to persons shall include bodies corporate, unincorporated associations and partnerships in each case whether or not having separate legal personality. |
2. | Covenant |
2.1 | Subject as hereinafter provided the Seller hereby covenants to pay to the Buyer an amount equal to: |
2.1.1 | any Liability for Taxation resulting from or by reference to any Event occurring on or before the Closing Date or in respect of any gross receipts, income, profits or gains earned, accrued or received by the Group Company in question on or before the Closing Date; |
2.1.2 | any Liability for Taxation for which the Group Company in question would not have been liable but for being treated as being or having been a member of the same group as or associated with any Relevant Company on or prior to the Closing Date for the purposes of any Tax; and |
2.1.3 | all costs and expenses reasonably and properly incurred and payable by a Group Company or the Buyer in connection with any action taken to avoid, resist or settle any Tax Claim, Liability for Taxation or otherwise taking or defending any action under this Deed. |
3. | Limitation of Sellers Liability |
3.1 | The covenant given by clause 2 above shall not cover any Liability for Taxation: |
3.1.1 | to the extent that a provision or reserve in respect thereof was made in the 2000 Company Financials; |
3.1.2 | to the extent that such Liability for Taxation arises from any gross receipts, income, profits or gains earned, accrued or received, Event, act or transaction of a Group Company to which the Liability for Taxation relates in the ordinary course of its trading of the Group Company since the Balance Sheet Date; |
3.1.3 | to the extent that such Liability for Taxation arises or is increased wholly as a result of any decision of any court or tribunal or the coming into force of or any change in any enactment, law, regulation, directive, requirement or any published practice of any government, government department or agency or regulatory body (including but not limited to extra statutory concessions of any Taxation Authority) after the date hereof; |
3.1.4 | to the extent recovery (less costs and expenses) has been made by the Buyer or a Group Company under the Agreement in respect of the same subject matter; |
3.1.5 | to the extent that such Liability for Taxation would not have arisen but for a voluntary act or transaction carried out by the Buyer or a Group Company after the date hereof otherwise than in the ordinary course of business or otherwise than pursuant to a legally binding obligation created on or before the date hereof, wherein either such case such act or transaction was carried out without the consent of the Seller and where the Buyer or a Group Company knew or ought reasonably to have known that such act or transaction would give rise to such Liability for Taxation; |
3.1.6 | except in the case of fraudulent conduct unless written notice of such Liability for Taxation or any Tax Claim which may give rise to such Liability for Taxation specifying in reasonable detail the circumstances giving or which may give rise to such Liability for Taxation and the amount thereof has been served on the Seller on or prior to the seventh anniversary of the Closing Date; |
3.1.7 | in respect of stamp duty or stamp duty reserve Tax payable on the transfer or agreement to transfer the Shares pursuant to the Agreement; |
3.1.8 | to the extent that the Liability for Taxation has been made good or otherwise compensated for or extinguished at no expense to the Buyer or a Group Company; |
3.1.9 | where the Liability for Taxation is attributable to a Group Company ceasing to be entitled to the small companies’ rate of corporation tax; |
3.1.10 | to the extent that the Liability for Taxation arises or is increased as a consequence of the failure of the Buyer to comply with or procure the compliance of a Group Company with their respective obligations under clauses 4 (disputes and conduct of Tax claims), 7 (recovery from other persons),and 8 (corporation Tax returns); |
3.1.11 | to the extent that the Auditors of the relevant Group Company confirm that a specific amount in respect of that Liability for Taxation was taken into account in computing any provision or reserve for deferred Taxation in the 2000 Company Financials; |
3.1.12 | to the extent that the Liability for Taxation has been paid or otherwise extinguished on or before the Closing Date; |
3.1.13 | to the extent that the Liability for Taxation can be discharged at no cost to the Group Company in question by the surrender of a Relief by the Seller to the Group Company in question; |
3.1.14 | to the extent that any Covenantors’ Reliefs are available to relieve or mitigate that Liability for Taxation or would have been available but for the application of any of sections 245, 245A, 245B or 768 ICTA 1988 in so far as the Loss of any of the Covenantors’ Reliefs arises as a result of an Event occurring after Completion and any Relief that is so available in relation to more than one Liability for Taxation to which this Deed applies shall be deemed, so far as possible, to be used in such a way as to reduce to the maximum extent possible the Seller’s total liability hereunder; |
3.1.15 | the Liability for Taxation arises or is increased as a result of any increase in the rates of Taxation or variation in the method of applying or calculating the rate of Taxation made after the Closing Date with retrospective effect; |
3.1.16 | the Liability for Taxation comprises interest or penalties arising by virtue of an underpayment of Tax prior to Completion, insofar as such underpayment would not have been an underpayment but for any event or events occurring wholly after the Closing Date; |
3.1.17 | the Liability for Taxation arises or is increased as a result of any change made after Completion to the accounting period or the accounting policy or practice of or applicable to the Buyer or any Group Company after the Closing Date; |
3.1.18 | the Liability for Taxation would not have arisen or would have been reduced or eliminated but for: |
(i) | the making of a claim, election, surrender or disclaimer or the giving of a notice or consent or the doing of any other thing by any Group Company or any other person connected with any of them (other than the making giving or doing of which was taken in to account in computing any provision or reserve for Taxation in the 2000 Company Financials under or in connection with a provision of an enactment of regulation relating to Taxation otherwise than at the written direction of the Seller; or |
(ii) | the failure or omission on the part of any Group Company or any other person connected with any of them to make any such valid claim, election, surrender or disclaimer or give any notice or consent or do any other thing the making or giving or doing of which was disclosed to the Buyer as taken into account in computing any provision or reserve for Taxation in 2000 Company Financials; |
3.1.19 | the matter giving rise to the Liability for Taxation is an amount for which the Buyer or relevant Group Company has a right of recovery against, or an indemnity from, a person other than the Seller or a Relevant Company; |
3.1.20 | the Liability for Taxation arises or is increased by any voluntary act of the Buyer or a Group Company after the Closing Date which has the result that any instalment of corporation Tax (within the meaning of section 6 of the Taxes Act 1988) paid prior to the Closing Date pursuant to the Corporation Tax (Instalment Payments) (Large Companies) Regulations 1998 is insufficient. |
and for the purposes of this clause 3 only “Liability for Taxation” shall be deemed to include a liability or loss falling within clause 2.1.3 above. |
3.2 | The Seller shall have no liability to the Buyer under any part of this Deed in respect of any non-availability, inability to use, or loss or restriction of any Relief (“failure of relief”) where such failure of relief does not give rise to a Tax liability to which clause 2 applies. |
4. | Disputes and Conduct of Tax Claims |
4.1 | If the Buyer or a Group Company shall become aware of a Tax Claim of which the Seller is not then aware, the Buyer shall or shall procure that a Group Company shall within 14 days thereafter give written notice thereof to the Seller. |
4.2 | If the Seller shall indemnify a Group Company and/or (as the case shall require) the Buyer to the Buyer’s reasonable satisfaction against all liabilities, reasonable costs, damages or reasonable expenses which may be incurred thereby including any additional Liability for Taxation, the Buyer shall and shall procure that a Group Company shall take such action as the Seller may reasonably request by notice in writing given to a Group Company and the Buyer to avoid, dispute, defend, resist, appeal, postpone or compromise any Tax Claim (such a Tax Claim where action is so requested being hereinafter referred to as a “Dispute”). Provided that neither a Group Company nor the Buyer shall be obliged to appeal or procure an appeal against any assessment to Taxation raised on either of them if, the Seller has been given written notice of the receipt of such assessment the Buyer has not at least 5 Business Days prior to the last day for filing notice of appeal received instructions in writing from the Seller to do so. |
4.3 | If the Seller does not request the Buyer or a Group Company to take any action under clause 4.2 of this Deed or fails to indemnify the Buyer and a Group Company to the Buyer’s reasonable satisfaction within a period of time (commencing with the date of the notice given to the Seller) that is reasonable having regard to the nature of the Tax Claim and the existence of any time limit in relation to avoiding, disputing, defending, resisting, appealing or compromising such Tax Claim and which period shall not in any event exceed a period of 90 days or the Dispute concerns fraudulent conduct, the Buyer or Company shall have the conduct of the Dispute absolutely (without prejudice to its rights under this Deed) and shall be free to pay or settle the Tax Claim on such reasonable terms as the Buyer or a Group Company may in its absolute discretion consider fit. |
4.4 | Subject to sub-clause 4.3, if the Seller indemnifies the Buyer and a Group Company in accordance with clause 4.2, the conduct of a Dispute shall be delegated to the Seller upon the following terms (or such other terms as may be agreed from time to time between the Buyer and the Seller): |
4.4.1 | the Buyer shall promptly be kept fully informed of all matters pertaining to a Dispute and shall be entitled to see and keep copies of all correspondence and notes or other written records of telephone conversations or meeting and, in the event that there is no written record, shall be given a report of all telephone conversations with any Taxation Authority to the extent that it relates to a Dispute; |
4.4.2 | the appointment of solicitors or other professional advisers to any Group Company shall be subject to the approval of the Buyer, such approval not to be unreasonably withheld; |
4.4.3 | all written communications pertaining to the Dispute which are to be transmitted to the relevant Taxation Authority shall first be submitted to the Buyer and a Group Company for approval and shall only be finally transmitted if such approval is given, which approval is not to be unreasonably withheld or delayed; and |
4.4.4 | the Seller shall make no settlement or compromise of the Dispute or agree any matter in the conduct of the Dispute which is likely to affect the amount of any material future Liability for Taxation of a Group Company or of the Buyer without the prior approval of a Group Company and the Buyer (as may be appropriate), such approval not to be unreasonably withheld or delayed. |
4.5 | Neither the Buyer nor a Group Company shall be subject to any claim by or liability to the Seller for non-compliance with any of the foregoing provisions of this clause 4 if the Buyer or a Group Company has bona fide acted in accordance with the instructions of the Seller. |
5. | Payment Date and Interest |
5.1 | Where the Seller is liable to make any payment under clause 2, the due date for the making of that payment (the “Due Date”) shall be the later of the date falling seven days after the Buyer has served a notice on the Seller demanding that payment and: |
5.1.1 | in a case that involves an actual payment of Taxation by a Group Company, the date on which the Taxation in question would have had to have been paid to the relevant Taxation Authority in order to prevent a liability to a fine, surcharge or penalty from arising in respect of the Liability for Taxation in question; or |
5.1.2 | in any case that involves a Liability for Taxation falling within clause 1.6.1 the last date upon which the Taxation is or would have been required to be paid to the relevant Taxation Authority in respect of the period in which the Loss of the Relief occurs (assuming for this purpose that a Group Company had sufficient profits or was otherwise in a position to use the Relief); or |
5.1.3 | in any case that involves a Liability for Taxation falling within Clause 1.6.2 the date upon which the repayment was due from the relevant Taxation Authority; or |
5.1.4 | in any case that involves a Liability for Taxation falling within clause 1.6.3 the date upon which the Taxation saved by a Group Company is or would have been required to be paid to the relevant Taxation Authority. |
5.2 | Any dispute as to the amount specified in any notice served on the Seller under clause 5.1.2, 5.1.3 or 5.1.4 shall be determined by the Auditors of a Group Company for the time being, acting as experts and not as arbitrators (the costs of that determination being shared equally the Seller and the Buyer). |
5.3 | If any sums required to be paid by the Seller under this Deed are not paid on the Due Date, then, except to the extent that the Seller’s liability under clause 2 compensates the Buyer for the late payment by virtue of it extending to interest and penalties, such sums shall bear interest (which shall accrue from day to day after as well as before any judgment for the same) at the rate equal to the base rate from time to time of Buyer’s bank or (in the absence thereof) at such similar rate as the Buyer shall select from the day following the Due Date up to and including the day of actual payment of such sums such interest to be compounded quarterly. |
6. | Taxation of Payments |
6.1 | Any sum payable by the Seller to the Buyer under this Deed shall be paid free and clear of any deduction or withholding whatsoever, save only as may be required by law. |
6.2 | If any deduction or withholding is required by law to be made from any payment by the Seller under this Deed (other than a payment made pursuant to clause 5.3) or if (ignoring any Relief) the Buyer is subject to Taxation in respect of such payment the Seller shall increase the amount of the payment by such additional amount as is necessary to ensure that the net amount received and retained by the Buyer (after taking account of all deductions or withholdings or Taxation) is equal to the amount which it would have received and retained had the payment in question not been subject to any deductions or withholdings or Taxation. |
7. | Recovery from other persons |
7.1 | Where the Buyer or a Group Company is or becomes entitled to recover from some other person not being the Buyer a Group Company or any other company within the same group of companies as the Buyer or a Group Company (i) any amount or Relief which is referable to a Liability for Taxation which has resulted in a payment being made by the Seller under this Deed; or (ii) any amount or Relief which is referable to any deduction or withholding under clause 6.2, the Buyer shall or procure that a Group Company shall: |
7.1.1 | notify the Seller of its entitlement; and |
7.1.2 | if required by the Seller and, subject to the Buyer and a Group Company being secured and indemnified by the Seller against any Taxation that may be suffered on receipt of that amount and any costs and expenses incurred in recovering that amount or obtaining that Relief, take or procure that a Group Company takes all reasonable steps to enforce that recovery or right. |
7.2 | If the Buyer or a Group Company recovers or obtains any amount or Relief referred to in clause 7.1 the Buyer shall account to the Seller for: |
7.2.1 | any amount recovered (including any related interest or related repayment supplement) less any Taxation suffered in respect of that amount and any costs and expenses incurred in recovering that amount (save to the extent that that amount has already been made good by the Seller under sub-clause 7.1.2) within five Business Days of the date of recovery; and |
7.2.2 | in the case of a Relief, the Purchaser shall, within five Business Days of the date on which Taxation would otherwise have been payable had such credit not been available, pay to the Covenantor an amount equal to the amount of such Taxation; |
subject to a maximum of the aggregates of the amounts paid by the Seller under clause 2 and clause 6 in respect of the Liability for Taxation in question. |
8. | Over-provisions and Savings |
8.1 | If the Buyer discovers (or is made aware) that any provision for Taxation in the 2000 Company Financials (excluding any provision for deferred tax) may prove to be an over-provision (an “Over-provision”) or any Liability for Taxation which may result in a payment under this Deed by the Seller may give rise to a saving of Taxation by any Group Company (a “Saving”), it shall or shall procure that the Group Company give full details to the Seller. The Buyer shall (at the Seller’s request and expense) procure that the Auditors certify the amount of the Over-provision or the value of the Saving. |
8.2 | In the case of a Saving, the Buyer will as soon as reasonably practicable after the amount of the Saving is certified by the Auditors in accordance with clause 8.1 repay to the Sellers the lesser of: |
8.2.1 | the amount of the Saving (as determined by the Auditors) less any costs incurred by the Group Companies or the Buyer; and |
8.2.2 | the amount paid by the Seller under clause 2 in respect of the Liability for Taxation which gave rise to the Saving less any part of the amount previously repaid to the Seller under any provision of this Deed or otherwise. |
8.3 | In the case of an Over-provision, the Buyer shall as soon as reasonably practicable after the amount of the Over-provision is certified by the Auditors in accordance with clause 8.1: |
8.3.1 | set off the Over-provision against any payment then due from the Sellers under this Deed; |
8.3.2 | to the extent there is an excess, refund to the Sellers any previous payment or payments made by the Sellers under this Deed; and |
8.3.3 | to the extent the excess referred to in clause 8.3.2 is not exhausted under that clause, the remainder of that excess shall be carried forward and set off against any future payment or payments which become due from the Covenantors under this Deed. |
8.4 | Where any such certification as is mentioned in clause 8.1 has been made, the Seller or the Buyer (in either case at the expense of the person requesting the review) may request the Auditors to review such certification in the light of all relevant circumstances, including any facts which have become known only since such certification, and to certify whether such certification remains correct or whether, in the light of those circumstances, the amount that was the subject of such certification should be amended. |
8.5 | If the Auditors certify under clause 8.4 that an amount previously certified should be amended, that amended amount shall be substituted for the purposes of clauses 8.2 and 8.3 as the amount of the Over-provision or Saving (as appropriate) in respect of the certification in question in place of the amount originally certified, and such adjusting payment (if any) as may be required by virtue of the above-mentioned substitution shall be made as soon as practicable by the Buyer or (as the case may be) to the Seller. |
8.6 | For the purposes of this clause, an Over-provision is a provision for Taxation in the 2000 Company Financials (excluding a provision for deferred taxation) which is or proves to be an Over-provision. |
9. | Corporation Tax Returns |
9.1 | The Seller or its authorised agent shall at the Seller’s cost and expense prepare the corporation Tax returns and computations of a Group Company for all accounting periods ended on or prior to the Balance Sheet Date, to the extent that the same shall not have been prepared before the Closing Date, and submit them to the Buyer. |
9.2 | The Buyer shall procure that the returns and computations mentioned in clause 9.1 shall be authorised, signed and submitted to H.M. Inspector of Taxes without amendment or with such amendments as the Buyer reasonably considers to be necessary and shall give the Seller or its agents all such assistance as may reasonably be required (at the Seller’s cost and expense) to agree those returns and computations with H.M. Inspector of Taxes provided that the Buyer shall not be obliged to take any such action as is mentioned in this clause 8.2 in relation to any return that is not full, true and accurate in all material respects. |
9.3 | The Seller or its duly authorised agents shall at the Seller’s cost and expense prepare all documentation and shall have conduct of all matters (including correspondence) relating to the corporation Tax returns and computations of a Group Company for all accounting periods ended on or prior to the Balance Sheet Date provided that the Seller shall not without the prior written |
consent of the Buyer (not to be unreasonably withheld or delayed) transmit any communication (written or otherwise) to H.M. Inspector of Taxes or agree any matter with H.M. Inspector of Taxes. | |||||||||
9.4 | The Buyer shall procure that a Group Company, affords such access to its books, accounts and records as is necessary and reasonable to enable the Seller or its duly authorised agents to prepare the corporation Tax returns and computations of a Group Company for all accounting periods ended on or before the Balance Sheet Date and conduct matters relating to them in accordance with this clause 9. | ||||||||
9.5 | The Seller shall take all reasonable steps to ensure that the corporation Tax returns and computations of a Group Company for all accounting periods ended on or before the Balance Sheet Date are prepared and agreed with H.M. Inspector of Taxes as soon as possible. | ||||||||
10. | General | ||||||||
10.1 | The provisions of clauses 9.1 (Coordination of Tax Deed Covenant and the Agreement), 11.1 (Consent to Jurisdiction and Service of Process), 11.2 (Notices), 11.8 (Interpretation) and 11.11 (Counterparts) of the Agreement shall apply mutatis mutandis to this Deed. | ||||||||
10.2 | The benefit of this Deed may be assigned by the Buyer only with the prior written consent of the Covenantors (such consent not to be unreasonably withheld or delayed). | ||||||||
10.3 | The Buyer hereby covenants with the Seller to pay to the Seller by way of adjustment to the consideration for the sale of the Shares, an amount equivalent to any Taxation for which the Seller or any other person falling within section 767A(2) of Taxes Act 1988 (“ICTA”) become liable by virtue of the operation of sections 767A, 767AA and 767B of ICTA in circumstances where the taxpayer company (as referred to in section 767A(1)) is any Group Company. The covenant contained in this clause 10.3 shall: | ||||||||
10.3.1 | extend to any reasonable costs incurred by the Seller or such person in connection with such taxation or a claim under clause 10.3; | ||||||||
10.3.2 | not apply to Taxation to the extent that the Buyer could claim payment in respect of it under clause 2; and | ||||||||
10.3.3 | not apply to Taxation which has been recovered under section 767B(2) of ICTA (and the Seller shall procure that no such recovery is sought to the extent that payment is made hereunder). | ||||||||
10.4 | This Deed shall be governed by and construed in accordance with the laws of New York. The parties irrevocably submit to the exclusive jurisdiction of the Courts of New York in respect of any claim, dispute or difference arising out of or in connection with this Deed |
This deed has been entered into on the date stated at the beginning of this document.
Signed as a Deed by: | ) | |
Pacific Life Insurance Company | ) | |
presence of: | ) | |
Signed as a Deed by: | ) | |
Scottish Life and Annuity | ) | |
Holdings Limited | ) | |
presence of: | ) |
3. The objects for which the Company is established are, subject to section (i) of this Clause 3, unrestricted and shall include, but without limitation, the following:
(i) (a) To own, hold, purchase or otherwise acquire equity or debt securities in companies, firms or other persons engaged in all or any forms of insurance or reinsurance business and to promote the establishment of such entities. [NOTWITHSTANDING any other provisions of this Memorandum of Association and of this Clause 3 in particular, the objects for which the Company is established are restricted to holding shares in one or more majority-owned subsidiaries, each of which operates as an insurance company (i) incorporated under the laws of the Cayman Islands, British West Indies, (ii) regulated as such by the government of the Cayman Islands and (iii) engaged primarily and predominantly in the writing of insurance agreements of the type specified in section 3(a)(8) of the United States Securities Act of 1933, as amended (except for the substitution of supervision by Cayman Islands insurance regulators for the regulators referred to in that section), or the reinsurance of risks on such agreements underwritten by insurance companies.]
August 6, 2001
Board of Director
Scottish Annuity & Life Holdings, Ltd.
P.O Box 10657-APO
Grand Pavilion Commercial Centre
802 West Bay Road
Grand Cayman, Cayman Islands, BWI
a. | The sum of: |
i. | US$78,000,000 plus |
ii. | The amount equal to the product obtained by multiplying (A) 0.59 by (B) the amount, if any, by which US$13,000,000 exceeds the sum of (1) the Dividend (as defined in the Share Purchase Agreement) and (2) the Investment Reserves Release Tax (as defined in the Share Purchase Agreement), by |
b. | The average of the closing trading prices of Buyer Shares for the 20 consecutive trading days ending on the fifth business day immediately preceding the closing date (“Average Final Price”); provided however that: |
· | the Average Final Price is less than US$13.00, the Average Final Price shall be deemed to be US$13.00, and |
· | If the Average Final Price is greater than $21.00, the Average Final Price shall be deemed to be $21.00. |
· | If upon receipt of the Share Consideration Seller would own more than 24.9% of all of the then issued and outstanding Buyer Shares, the Share Consideration shall be reduced so that the total amount of Buyer Shares owned by Seller will not exceed 24.9% of the total of all issued and outstanding Buyer Shares immediately after the closing. |
· | The difference, if any, between the value of the Share Consideration pursuant to section (i) and the value of the Share Consideration pursuant to this section (ii), shall be paid in cash. |
Ve | ry Truly Yours, |
PU | TNAM LOVELL SECURITIES INC. |
By | : |
Rh | onda B. Rosen |
Ma | naging Director |
SCOTTISH ANNUITY & LIFE HOLDINGS, LTD. |
The undersigned acknowledge(s) receipt of the Proxy Statement of Scottish Annuity & Life Holdings, Ltd. (the “Company”) relating to the Extraordinary General Meeting of Shareholders (the “Extraordinary General Meeting”) and hereby constitute(s) and appoint(s) Michael C. French and Scott E. Willkomm, attorneys and proxies of the undersigned, with full power of substitution and resubstitution to each and with all the powers the undersigned would possess if personally present, to vote for and in the name and place of the undersigned all ordinary shares of the Company held or owned by the undersigned, or standing in the name of the undersigned, at the Extraordinary General Meeting to be held on [ ], 2001, commencing at 11:00 a.m. Bermuda time, at the Fairmount Hamilton Princess, 76 Pitts Bay Road, Pembroke, Bermuda, or any adjournment or postponement thereof, upon the matters referred to in the Proxy Statement for the Extraordinary General Meeting as stated below and on the reverse side. The proxies are further authorized to vote, in their discretion, upon such other business as may properly come before the Extraordinary General Meeting or any adjournment or postponement thereof. A majority of said attorneys and proxies present and acting at the Extraordinary General Meeting (or if only one shall be present and act, then that one) shall have, and may exercise, all the powers of all said attorneys and proxies hereunder. |
This proxy is being solicited on behalf of the Board of Directors of Scottish Annuity & Life Holdings, Ltd. Unless otherwise specified below or on the reverse side, this proxy will be voted “FOR” the Share Purchase Agreement and related transaction documents, including the issuance of shares to Pacific Life; “FOR” the amendments to the Memorandum of Association; “FOR” the amendments to the Articles of Association; and “FOR” the 2001 Stock Option Plan. Discretionary authority is hereby conferred as to all other matters that may come before the Extraordinary General Meeting. |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSALS 1 through 4. |
Please date and sign on reverse side and return in the enclosed postage-paid envelope. |
SCOTTISH ANNUITY & LIFE HOLDINGS, LTD. |
1. | APPROVAL OF THE SHARE PURCHASE AGREEMENT and related transactions, including the issuance of shares to Pacific Life. |
FOR |
AGAINST |
ABSTAIN |
¨ |
¨ |
¨ |
2. | APPROVAL OF THE AMENDMENTS to the Memorandum of Association. |
FOR |
AGAINST |
ABSTAIN |
¨ |
¨ |
¨ |
FOR |
AGAINST |
ABSTAIN |
3. | APPROVAL OF THE AMENDMENTS to the Articles of Association. |
¨ |
¨ |
¨ |
4. | APPROVAL OF THE 2001 Stock Option Plan. |
FOR |
AGAINST |
ABSTAIN |
¨ |
¨ |
¨ |
Da | te: |
Sig | nature |
Da | te: |
Sig | nature |