STOCK PURCHASE AGREEMENT
between
THE CONTINENTAL CORPORATION
and
THE SELLING STOCKHOLDERS
NAMED HEREIN
Dated as of July 28, 1993
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
Section Page
1. PURCHASE OF SHARES AND CLOSING
1.1. Purchase of Shares. . . . . . . . . . . . . . 2
1.2. Consideration . . . . . . . . . . . . . . . . 2
1.3. Closing . . . . . . . . . . . . . . . . . . . 2
2. REPRESENTATIONS AND WARRANTIES
OF THE SELLING STOCKHOLDERS
2.1. Title to Shares . . . . . . . . . . . . . . . 3
2.2. Organization and Standing . . . . . . . . . . 3
2.3. Authority . . . . . . . . . . . . . . . . . . 3
2.4. Other Representations and Warranties. . . . . 4
3. REPRESENTATIONS AND WARRANTIES OF
CONTINENTAL
3.1. Organization and Standing . . . . . . . . . . 4
3.2. Authority . . . . . . . . . . . . . . . . . . 4
3.3. Other Representations and Warranties. . . . . 5
4. CONDITIONS TO OBLIGATIONS OF CONTINENTAL
4.1. Compliance with Agreement . . . . . . . . . . 5
4.2. Representations and Warranties. . . . . . . . 5
4.3. Opinion of Counsel for the
Selling Stockholders. . . . . . . . . . . . 5
4.4. Approvals . . . . . . . . . . . . . . . . . . 6
4.5. Absence of Certain Litigation . . . . . . . . 6
4.6. Transfer Taxes. . . . . . . . . . . . . . . . 6
4.7. Other Conditions. . . . . . . . . . . . . . . 6
5. CONDITIONS TO OBLIGATIONS OF
THE SELLING STOCKHOLDERS
5.1. Compliance with Agreement . . . . . . . . . . 7
5.2. Representations and Warranties. . . . . . . . 7
5.3. Opinion of Counsel for Continental. . . . . . 7
5.4. Approvals . . . . . . . . . . . . . . . . . . 7
5.5. Absence of Certain Litigation . . . . . . . . 7
5.6. Transfer Taxes. . . . . . . . . . . . . . . . 8
5.7. Other Conditions. . . . . . . . . . . . . . . 8
6. COVENANTS
6.1. Covenants Pending the Closing . . . . . . . . 8
(a) Filings and Approvals. . . . . . . . . . 8
(b) Reasonable Efforts . . . . . . . . . . . 8
(c) Publicity. . . . . . . . . . . . . . . . 9
(d) FIRPTA . . . . . . . . . . . . . . . . . 9
6.2. Additional Covenants. . . . . . . . . . . . . 9
(a) Further Assurances . . . . . . . . . . . 9
(b) Performance of Agreement . . . . . . . . 9
(c) Closing of Agreements. . . . . . . . . . 9
7. TERMINATION, AMENDMENT, WAIVERS
7.1. Termination . . . . . . . . . . . . . . . . . 10
7.2. Amendment . . . . . . . . . . . . . . . . . . 10
7.3. Waivers . . . . . . . . . . . . . . . . . . . 11
8. INDEMNIFICATION
8.1. Survival of Representations, Etc. . . . . . . 11
8.2. Indemnification . . . . . . . . . . . . . . . 11
8.3. Indemnification Procedures. . . . . . . . . . 12
8.4. Tax Indemnification . . . . . . . . . . . . . 14
9. OPTION
9.1. Exercise of Option. . . . . . . . . . . . . . 17
9.2. Option Closing. . . . . . . . . . . . . . . . 17
9.3. Conditions to Option Closing. . . . . . . . . 18
9.4. Further Assurances. . . . . . . . . . . . . . 19
9.5. Effect of Exercise. . . . . . . . . . . . . . 19
9.6. Termination of Option . . . . . . . . . . . . 20
10. MISCELLANEOUS PROVISIONS
10.1. Expenses . . . . . . . . . . . . . . . . . . 20
10.2. Notices. . . . . . . . . . . . . . . . . . . 20
10.3. Entire Agreement . . . . . . . . . . . . . . 21
10.4. No Third Party Beneficiaries . . . . . . . . 21
10.5. No Assignment. . . . . . . . . . . . . . . . 21
10.6. Governing Law. . . . . . . . . . . . . . . . 22
10.7. Counterparts . . . . . . . . . . . . . . . . 22
10.8. Headings . . . . . . . . . . . . . . . . . . 22
EXHIBIT A - [Reserved]
EXHIBIT B - Opinion of Sullivan & Cromwell
EXHIBIT C - Opinion of Debevoise & Plimpton
EXHIBIT D - Officer's Certificate
SCHEDULE 1.2 - Selling Stockholders
SCHEDULE 2.1 - Liens on Shares
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement") dated
as of July 28, 1993, among THE CONTINENTAL CORPORATION, a
New York corporation ("Continental"), and GOLDMAN, SACHS &
CO. and certain funds which Goldman, Sachs & Co. either
control or of which they are general partner (together, the
"Selling Stockholders").
W I T N E S S E T H:
WHEREAS, Continental and the Selling Stockholders
together hold approximately 90% of the issued and
outstanding capital stock of Underwriters Re Holdings
Corporation, a Delaware corporation ("Underwriters Re");
Underwriters Re is the owner of all of the issued and
outstanding capital stock of Underwriters Re Corporation, a
Delaware corporation ("Underwriters Re Corporation");
Underwriters Re Corporation is the owner of all of the
issued and outstanding capital stock of Underwriters
Reinsurance Company, a New Hampshire insurance company
("Underwriters Reinsurance"), and URC Risk Managers, Inc., a
Delaware corporation ("URC"); and Underwriters Reinsurance
is the owner of all of the issued and outstanding capital
stock of Commercial Underwriters Insurance Company, a
California insurance company ("Commercial Underwriters")
(Underwriters Re, Underwriters Re Corporation, Underwriters
Reinsurance, URC and Commercial Underwriters, together
referred to as the "Companies");
WHEREAS, Continental, the Selling Stockholders,
Underwriters Re and Underwriters Re Corporation are entering
into a Stock Purchase Agreement, dated as of July 28, 1993,
with Alleghany Corporation, a Delaware corporation
("Alleghany"), providing for the purchase by Alleghany of
all of the issued and outstanding capital stock of New
Holding Corporation, a Delaware corporation ("NHC") to be
formed to hold all of the issued and outstanding capital
stock of Underwriters Reinsurance (in the form executed by
the parties today, the "Alleghany Stock Purchase
Agreement");
WHEREAS, Underwriters Re has a total of 8,877,772
issued and outstanding shares of common stock, par value
$.01 per share (the "Common Stock");
WHEREAS, Continental presently holds 3,991,228
shares of Common Stock;
WHEREAS, Continental is entering into a management
stock purchase agreement with the management stockholders of
Underwriters Re, providing for the purchase by Continental
or a subsidiary of Continental designated by Continental at
or prior to the closing under the Alleghany Stock Purchase
Agreement (the "Alleghany Closing") of the shares of Common
Stock currently owned by such stockholders and to be owned
by them upon exercise of all outstanding stock options held
by them; and
WHEREAS, Continental desires to purchase from the
Selling Stockholders and the Selling Stockholders desire to
sell to Continental 3,991,228 shares of Common Stock, which
are held by the Selling Stockholders (the "Shares");
NOW, THEREFORE, in consideration of the premises
and the mutual covenants, agreements and provisions
contained herein, the parties hereto agree as follows:
1. PURCHASE OF SHARES AND CLOSING.
1.1. Purchase of Shares. Subject to the terms
and conditions set forth in this Agreement, at the Closing
(as defined below), each Selling Stockholder, severally and
not jointly, agrees to sell, convey, assign, transfer and
deliver such Selling Stockholder's Shares to Continental, or
a subsidiary of Continental designated by Continental, and
Continental, or such subsidiary, shall acquire from each
Selling Stockholder such Selling Stockholder's Shares.
1.2. Consideration. At the Closing, Continental
shall pay to each of the Selling Stockholders an amount
equal to $23.50 per Share multiplied by the number of Shares
set forth opposite the name of such Selling Stockholder on
Schedule 1.2, for an aggregate consideration for all the
Shares of Ninety-three Million Seven Hundred Ninety-three
Thousand Eight Hundred Fifty-eight Dollars ($93,793,858)
(the "Consideration").
1.3. Closing. The purchase and sale of the
Shares pursuant to this Agreement (the "Closing") shall take
place one business day prior to such time and at such place
as is set for the Alleghany Closing and after satisfaction
or waiver of the conditions precedent therefor (the "Closing
Date"), or on such other date as the parties hereto agree in
writing; provided, that both the Closing and the Option
Closing (as defined below) must occur (i) on or before
November 26, 1993 or (ii) after such date and on or before
December 31, 1993. At the Closing, (i) each Selling
Stockholder shall deliver to Continental a certificate or
certificates representing the Shares owned by such Selling
Stockholder, duly endorsed in blank or with appropriate
stock powers attached, free and clear of all liens, security
interests, pledges, agreements, claims, charges, options or
encumbrances of any nature whatsoever (collectively,
"Liens"), and (ii) Continental shall make payment to each
Selling Stockholder of such Selling Stockholder's portion of
the Consideration by certified or official bank check or
checks, payable to the order of such Selling Stockholder in
New York Clearing House (next day) funds as is set forth on
Schedule 1.2 opposite the name of such Selling Stockholder.
2. REPRESENTATIONS AND WARRANTIES
OF THE SELLING STOCKHOLDERS.
Each Selling Stockholder, severally and not
jointly, represents and warrants to Continental as follows:
2.1. Title to Shares. Such Selling Stockholder
owns beneficially and of record, free and clear of all
Liens, or owns of record and has full power and authority to
convey free and clear of all Liens, in each case except for
Liens set forth in Schedule 2.1, all of the Shares owned by
such Selling Stockholder as set forth in Schedule 2.1. Upon
delivery of the Consideration as herein provided, such
Selling Stockholder will convey good title thereto, free and
clear of all Liens.
2.2. Organization and Standing. Such Selling
Stockholder is duly organized, validly existing and in good
standing under the laws of its state of organization, and
has all requisite partnership power and authority to enter
into this Agreement and to perform its obligations
hereunder.
2.3. Authority. The execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
authorized by all necessary partnership action on the part
of such Selling Stockholder. This Agreement constitutes a
legal, valid and binding obligation of such Selling
Stockholder, enforceable against such Selling Stockholder in
accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of
general applicability relating to or affecting creditors'
rights and to general equity principles.
2.4. Other Representations and Warranties. The
representations and warranties of such Selling Stockholder
in Section 3.1 (Consents and Approvals) and the third
sentence of Section 5.2 (Authority) of the Alleghany Stock
Purchase Agreement are hereby incorporated by reference,
including the schedules relating thereto, and such Selling
Stockholder represents and warrants the same to Continental
(subject to the exceptions and qualifications set forth in
such representations and warranties and schedules, mutatis
mutandis), as if set out herein at length save that
identical terms defined both therein and herein shall be
deemed to have the respective meanings ascribed thereto in
this Agreement and all uses therein of the word "hereby"
shall refer to this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF CONTINENTAL.
Continental represents and warrants to each of the
Selling Stockholders as follows:
3.1. Organization and Standing. Continental is a
corporation, duly organized, validly existing and in good
standing under the laws of its state of incorporation, and
has all requisite corporate power and authority to enter
into this Agreement and to perform its obligations
hereunder.
3.2. Authority. The execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of
Continental. This Agreement constitutes a legal, valid and
binding obligation of Continental, enforceable against
Continental in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other
laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
3.3. Other Representations and Warranties. The
representations and warranties of Continental in Section 3.1
(Consents and Approvals) and the third sentence of
Section 4.2 (Authority) of the Alleghany Stock Purchase
Agreement are hereby incorporated by reference, including
the schedules relating thereto, and Continental represents
and warrants the same to each of the Selling Stockholders
(subject to the exceptions and qualifications set forth in
such representations and warranties and schedules, mutatis
mutandis), as if set out herein at length save that
identical terms defined both therein and herein shall be
deemed to have the respective meanings ascribed thereto in
this Agreement and all uses therein of the word "hereby"
shall refer to this Agreement.
4. CONDITIONS TO OBLIGATIONS OF CONTINENTAL.
The obligations of Continental under this
Agreement are subject to the satisfaction, on or before the
Closing Date, of each of the following conditions:
4.1. Compliance with Agreement. Each of the
Selling Stockholders shall have performed and complied in
all material respects with all the obligations required by
this Agreement to be performed or complied with by each of
them on or before the Closing Date, and Continental shall
have received from each of the Selling Stockholders at the
Closing a certificate, dated the Closing Date, to that
effect. Attached to such certificate shall be a certified
copy of the determination of a general partner of each of
the Selling Stockholders, in each case authorizing this
Agreement and the transactions contemplated hereby.
4.2. Representations and Warranties. The
representations and warranties made by each of the Selling
Stockholders in Section 2 of this Agreement shall be true
and correct in all material respects as of the Closing Date
as though such representations and warranties were made at
and as of such time. Continental shall have received from
each of the Selling Stockholders at the Closing a
certificate, dated the Closing Date, to that effect.
4.3. Opinion of Counsel for the Selling
Stockholders. Continental shall have received an opinion
from Sullivan & Cromwell, counsel for the Selling
Stockholders, dated the Closing Date and substantially to
the effect set forth in Exhibit B hereto.
4.4. Approvals. All Alleghany Approvals and all
Sellers Approvals (as such terms are defined in the
Alleghany Stock Purchase Agreement) shall have been obtained
and be in full force and effect on the Closing Date.
Without limiting the generality of the foregoing,
Continental shall have received the requisite approvals of
the consummation of the purchase and sale of the Shares, and
the transactions contemplated hereby, from the relevant
state insurance regulatory authorities, and such approvals
shall be in full force and effect, and no such approvals
shall impose upon Continental or any of the Companies any
conditions which materially adversely impair the ability of
the Companies to conduct their business in substantially the
same manner as such business is presently being conducted.
4.5. Absence of Certain Litigation. On the
Closing Date (i) there shall be no injunction, restraining
order or order of any nature issued by any court of
competent jurisdiction which directs that this Agreement or
any material transaction contemplated hereby shall not be
consummated as herein provided or compels or would compel
Continental to dispose of or discontinue a significant
portion of the business conducted by Continental and its
subsidiaries or of the business conducted by the Companies
as a result of the consummation of the transactions
contemplated hereby; and (ii) there shall be no suit, action
or other proceeding by the United States (or any agency
thereof) or by any state (or any agency thereof) pending
before any court or governmental agency, or threatened to be
filed or initiated, wherein such complainant seeks the
restraint or prohibition of the consummation of any material
transaction contemplated hereby or asserts the illegality of
any material transaction contemplated hereby.
4.6. Transfer Taxes. Each of the Selling
Stockholders shall have paid, or caused to be paid, all
stock transfer and other transfer taxes required to be paid
in connection with the sale and delivery to Continental of
the Shares owned by such Selling Stockholder, and shall have
caused all appropriate stock transfer tax stamps to be
affixed to the certificate or certificates representing the
Shares so sold and delivered by such Selling Stockholder.
4.7. Other Conditions. All conditions to the
obligations of Alleghany in Sections 7 and 8 of the
Alleghany Stock Purchase Agreement (other than the condition
in Section 7.8 thereof) shall have been satisfied or waived.
5. CONDITIONS TO OBLIGATIONS OF
THE SELLING STOCKHOLDERS.
The obligations of the Selling Stockholders under
this Agreement are subject to the satisfaction, on or before
the Closing Date, of each of the following conditions:
5.1. Compliance with Agreement. Continental
shall have performed and complied in all material respects
with all the obligations required by this Agreement to be
performed or complied with by it on or before the Closing
Date, and each Selling Stockholder shall have received from
Continental at the Closing a certificate, dated the Closing
Date, to that effect. Attached to such certificate shall be
a certified copy of the resolutions of the Board of
Directors of Continental authorizing this Agreement and the
transactions contemplated hereby.
5.2. Representations and Warranties. The
representations and warranties made by Continental in
Section 3 of this Agreement shall be true and correct in all
material respects as of the Closing Date as though such
representations and warranties were made at and as of such
time. The Selling Stockholders shall have received from
Continental at the Closing a certificate, dated the Closing
Date, to that effect.
5.3. Opinion of Counsel for Continental. The
Selling Stockholders shall have received an opinion from
Debevoise & Plimpton, special counsel for Continental, dated
the Closing Date and substantially to the effect set forth
in Exhibit C hereto.
5.4. Approvals. All Alleghany Approvals and all
Sellers Approvals (as such terms are defined in the
Alleghany Stock Purchase Agreement) shall have been obtained
and be in full force and effect on the Closing Date.
5.5. Absence of Certain Litigation. On the
Closing Date (i) there shall be no injunction, restraining
order or order of any nature issued by any court of
competent jurisdiction which directs that this Agreement or
any material transaction contemplated hereby shall not be
consummated as herein provided or compels or would compel
Continental to dispose of or discontinue a significant
portion of the business conducted by Continental and its
subsidiaries or of the business conducted by the Companies
as a result of the consummation of the transactions
contemplated hereby; and (ii) there shall be no suit, action
or other proceeding by the United States (or any agency
thereof) or by any state (or any agency thereof) pending
before any court or governmental agency, or threatened to be
filed or initiated, wherein such complainant seeks the
restraint or prohibition of the consummation of any material
transaction contemplated hereby or asserts the illegality of
any material transaction contemplated hereby.
5.6. Transfer Taxes. Continental shall have
filed, independently or jointly with each Selling
Stockholder, as the law requires, all real property and
other transfer tax filings required to be filed by or with
the cooperation of Continental in connection with the sale
and delivery to Continental of the Shares.
5.7. Other Conditions. All conditions to the
obligations of Continental and the Selling Stockholders in
Section 9 of the Alleghany Stock Purchase Agreement (other
than the condition in Section 9.7 thereof) shall have been
satisfied or waived.
6. COVENANTS.
6.1. Covenants Pending the Closing. From and
after the date hereof and until the Closing Date Continental
and each of the Selling Stockholders agrees, severally and
not jointly, that:
(a) Filings and Approvals. The Selling
Stockholders and Continental shall duly make all
regulatory filings required to be made by each in
respect of this Agreement or the transactions
contemplated hereby and shall use their reasonable
efforts to assist Alleghany in obtaining, all Alleghany
Approvals.
(b) Reasonable Efforts. Each of Continental and
the Selling Stockholders agrees to use its reasonable
efforts to take such reasonable action as may be
necessary or appropriate in order to effectuate the
transactions contemplated hereby as promptly as
reasonably practicable.
(c) Publicity. Except as required by law, the
parties agree to notify each other prior to issuing any
press release or making any public statement regarding
the transactions contemplated hereby, and will attempt
to obtain the reasonable approval of the other parties
hereto prior to making such release or statement.
(d) FIRPTA. On or prior to the Closing Date,
each of the Selling Stockholders shall provide
Continental with a certificate of its non-foreign
status that meets the requirements of Section 1.1445-
2(b)(2)(i) of the Internal Revenue Service treasury
regulations.
6.2. Additional Covenants.
(a) Further Assurances. Each of the Selling
Stockholders agrees that it will from time to time at
and subsequent to the Closing Date, at the request of
Continental and without further consideration, execute
and deliver such other instruments of conveyance,
assignment and transfer and take such other actions as
Continental may reasonably request in order more
effectively to convey, assign, transfer to and vest in
Continental, or any of Continental's wholly owned
subsidiaries designated hereunder, the Shares and the
right to operate the businesses of the Companies.
(b) Performance of Agreement. From and after the
Closing Date, each of Continental and the Selling
Stockholders agrees to use its reasonable efforts to
perform its obligations under the Alleghany Stock
Purchase Agreement and to cause the actions specified
in Sections 10.2(f) and 10.2(g) of the Alleghany Stock
Purchase Agreement to occur not more than two business
days before the Alleghany Closing.
(c) Closing of Agreements. From and after the
Closing Date, Continental agrees to use its reasonable
efforts to cause (i) the closing under the Management
Stock Purchase Agreement to occur on the date of, and
immediately prior to, the closing under the Stock
Purchase Related Agreement and (ii) the closing under
the Stock Purchase Related Agreement to occur on the
date of, and immediately prior to or simultaneously
with, the closing under the Alleghany Stock Purchase
Agreement (each such capitalized term having the
meaning ascribed thereto in the Alleghany Stock
Purchase Agreement).
7. TERMINATION, AMENDMENT, WAIVERS.
7.1. Termination. At any time prior to the
Closing Date, this Agreement may be terminated:
(i) by mutual written consent of the parties
hereto;
(ii) by Continental at any time after
December 31, 1993, if any of the conditions set forth
in Section 4 hereof have not been met and have not been
waived in writing by Continental; or
(iii) by any of the Selling Stockholders at any
time after December 31, 1993, if any of the conditions
set forth in Section 5 hereof have not been met and
have not been waived in writing by each of the Selling
Stockholders.
In the event of any termination pursuant to this Section 7.1
this Agreement shall thereupon become void and of no further
force or effect and there shall be no liability or
obligation on the part of any party hereto or their
respective officers, directors and partners in respect
hereof or of any representation, warranty, covenant or
agreement contained herein except for the last sentence of
Section 8.2(c), which shall survive such termination, and
except to the extent that such termination results from the
willful breach by a party hereto of any of its
representations, warranties, covenants or agreements set
forth in this Agreement, in which case the aggrieved party
may recover from the breaching party or parties its out-of-
pocket expenses (including reasonable fees and disbursements
of counsel, but excluding lost profit and consequential
damages) reasonably and actually incurred by such party in
connection with this Agreement and the transactions
contemplated hereby.
7.2. Amendment. This Agreement may be amended,
modified, superseded or supplemented only by an instrument
in writing executed and delivered on behalf of each of the
parties hereto.
7.3. Waivers. The representations, warranties,
covenants or conditions of this Agreement may be waived only
by a written instrument executed by the party so waiving.
The failure of any party at any time or times to require
performance of any provision hereof shall in no manner
affect the right of such party at a later time to enforce
the same. No waiver by any party of any condition, or
breach of any term, covenant, agreement, representation or
warranty contained in this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of
any other condition or of the breach of any other term,
covenant, agreement, representation or warranty contained in
this Agreement.
8. INDEMNIFICATION.
8.1. Survival of Representations, Etc. The
representations and warranties, covenants and obligations of
each of the Selling Stockholders and Continental contained
herein shall not survive the Closing Date, except that the
representations and warranties contained in Section 2.2
(Title to Shares) and the covenants contained in Section 6.2
shall survive the Closing Date, without regard to any
investigation made by the parties hereto.
8.2. Indemnification.
(a) Each Selling Stockholder shall, severally and
not jointly, indemnify Continental and each of the
Companies and their affiliates for any damage, claim,
liability or expense, including without limitation,
interest, penalties and reasonable attorneys' fees, but
excluding lost profit and consequential damages
(collectively "Damages"), arising out of the breach by
such Selling Stockholder of any warranty,
representation, covenant or agreement contained in this
Agreement which survives the Closing. Continental
shall indemnify each of the Selling Stockholders for
any Damages arising out of the breach of any
representation, warranty, covenant or agreement of
Continental contained in this Agreement which survives
the Closing.
(b) Continental shall indemnify each Selling
Stockholder for any Damages arising out of Alleghany's
purchase of the outstanding capital stock of NHC that
any such Selling Stockholder would not have incurred if
Alleghany had acquired approximately 93% of the
outstanding capital stock of Underwriters Re at the
closing pursuant to the Alleghany Stock Purchase
Agreement (which percentage includes the stock of
Underwriters Re to have been acquired from the
management stockholders of Underwriters Re), and no
changes had occurred in the ownership of Underwriters
Re capital stock prior to such closing.
(c) Continental shall indemnify each Selling
Stockholder for any Damages or diminution or impairment
of any rights, assets or benefits possessed by such
Selling Stockholder in respect of such Selling
Stockholder's Shares immediately prior to the Closing
(except with respect to taxes that are provided for in
Section 8.4 of this Agreement) arising out of (i) the
Companies having been majority-owned subsidiaries of
Continental prior to the Option Closing (as defined
below), including without limitation liabilities of
Continental and its affiliates arising under the
Internal Revenue Code of 1986, as amended (the "Code"),
or the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), by application of the aggregation
rules of Section 414 of the Code or Section 4001 of
ERISA or (ii) Continental's purchase of such Selling
Stockholder's Shares at the Closing and such Selling
Stockholders' repurchase thereof at the Option Closing,
that such Selling Stockholder would not have incurred
if the Closing and the Option Closing had not occurred.
Continental shall indemnify each Selling Stockholder
for any Damages or diminution or impairment of any
rights, assets or benefits possessed by such Selling
Stockholder in respect of such Selling Stockholder's
Shares immediately prior to the time any action is
taken that is required to be taken pursuant to Sections
10.2(f) and 10.2(g) of Alleghany Stock Purchase
Agreement arising out of the taking of such action in
the event that (i) the Closing does not occur or (ii)
the Closing and the Option Closing both occur.
8.3. Indemnification Procedures.
(a) Any party hereto entitled to indemnification
pursuant to Section 8.2 hereof (the "Indemnitee") shall
promptly notify the party or parties responsible for
such indemnification (the "Indemnitor") if the
Indemnitee becomes aware of any Damages with respect to
which indemnity may be asserted; and the failure to
give such notice promptly shall not relieve the
Indemnitor of its obligations hereunder except to the
extent the Indemnitor is prejudiced thereby. Promptly
after (x) the receipt by an Indemnitee of notice under
Section 8.2 hereof of any third party claim or (y) the
commencement of any action or proceeding the Indemnitee
will, if a claim with respect thereto is to be made
against the Indemnitor, give the Indemnitor written
notice in reasonable detail of such claim or the
commencement of such action or proceeding and shall
permit the Indemnitor to assume the defense of any such
claim or any litigation resulting from such claim.
Failure by the Indemnitor to notify the Indemnitee of
its election to defend any such action within a
reasonable time, but in no event more than thirty days
after notice thereof shall have been given to the
Indemnitor, shall be deemed a waiver by the Indemnitor
of its right to defend such action.
(b) If the Indemnitor assumes the defense of any
such claim or litigation resulting therefrom, the
obligations of the Indemnitor as to such claim shall be
limited to taking all steps necessary in the defense or
settlement of such claim or litigation resulting
therefrom and to holding Indemnitee harmless from and
against any and all losses, damages and liabilities
caused by, arising out of or relating to any settlement
approved by the Indemnitor or any judgment in
connection with such claim or litigation resulting
therefrom. The Indemnitee may participate, at its
expense, in the defense of such claim or litigation
provided that the Indemnitor shall direct and control
the defense of such claim or litigation. The
Indemnitor shall not, in the defense of such claim or
any litigation resulting therefrom, consent to entry of
any judgment or enter into any settlement other than a
judgment or settlement involving only the payment of
money, except with the written consent of Indemnitee,
which consent shall not be unreasonably withheld.
(c) If the Indemnitor shall not assume the
defense of any such claim or litigation resulting
therefrom, the Indemnitee may defend against such claim
or litigation in such manner as it may deem
appropriate. The Indemnitee shall not enter into any
settlement of such claim or litigation without the
written consent of the Indemnitor, which consent shall
not be unreasonably withheld. The Indemnitor shall
promptly reimburse the Indemnitee for the amount of all
reasonable expenses, legal or otherwise, incurred by
the Indemnitee in connection with the defense against
or settlement of such claims or litigation. If no
settlement of such claim or litigation is made, the
Indemnitor shall promptly reimburse the Indemnitee for
the amount of any judgment rendered with respect to
such claim or in such litigation and of all reasonable
expenses, legal or otherwise, incurred by the
Indemnitee in the defense of such claim or litigation.
(d) No indemnification amount shall be payable to
or by any Selling Stockholder pursuant to this
Section 8 in an amount in excess of the portion of the
Consideration payable to such Selling Stockholder
hereunder.
8.4. Tax Indemnification.
(a) If the Option Closing occurs, Continental
shall indemnify and hold harmless each of the Selling
Stockholders on an after-tax basis from and against any
taxes, including interest and penalties, imposed on
such Selling Stockholder or any partner (as defined in
Section 6231(a)(2) of the Code) of such Selling
Stockholder (hereinafter a "Partner") that would not
have been imposed but for the sale of the Shares by
such Selling Stockholder at the Closing and the
repurchase thereof at the Option Closing; provided,
that if such Selling Stockholder or such Partner
subsequently realizes any reduction in taxes (on a sale
of such Shares, or of any property the basis of which
is determined by reference to such Shares, or
otherwise) that would not have been realized but for
such sale of the Shares at the Closing, or if such
Selling Stockholder or such Partner shall receive a
refund or credit with respect to any taxes for which
Continental has made a payment pursuant to this Section
8.4, then such Selling Stockholder shall pay to
Continental the amount of such reduction in taxes,
refund or credit, plus the reduction in taxes realized
by such Selling Stockholder or such Partner as a result
of such Selling Stockholder's payment to Continental;
and provided, further, that such Selling Stockholder
shall not be required to pay to Continental pursuant to
the previous proviso amounts in excess of the amounts
received by such Selling Stockholder from Continental
pursuant to this Section 8.4.
(b) Continental shall be obligated to make
payments to a Selling Stockholder pursuant to Section
8.4(a) only if and to the extent that:
(i) such Selling Stockholder and Partners of
such Selling Stockholder (to the extent of such
Partners' interests in such Selling Stockholder)
report the transactions contemplated by this
Agreement on all federal, state and local tax
returns and reports (including reports to
Partners) in a manner that does not show liability
for taxes for which Continental is responsible
pursuant to this Section 8.4; provided, that this
clause (i) shall not apply with respect to a
return or report if and to the extent that such
Selling Stockholder or such Partner provides to
Continental, at least 30 days before the filing of
such return or report, an opinion of independent
tax counsel to the effect that (x) in the case of
federal income tax returns and all other returns
and reports on which the transactions contemplated
by this Agreement may be reported in accordance
with their Federal income tax treatment, there is
no substantial authority (within the meaning of
Section 6662 of the Code) for reporting in
accordance with this clause (i) because of a
change in law that became effective after the date
hereof, and (y) in the case of all other returns
and reports, there is no substantial authority
(within the meaning of Section 6662 of the Code)
for reporting in accordance with this clause (i);
and
(ii) (x) such Selling Stockholder or any
affected Partner of such Selling Stockholder, as
the case may be, provides Continental with prompt
notice of the commencement of any audit or other
administrative or judicial proceeding which could
give rise to a claim for payment against
Continental pursuant to this Section 8.4, (y) such
Selling Stockholder and each Partner of such
Selling Stockholder (to the extent relevant)
consults with Continental and provides such
cooperation and information as Continental
reasonably requests in connection with the conduct
of such audit or other proceeding, considers in
good faith Continental's opinions and requests
with respect thereto, and takes such actions to
contest any proposed adjustment as it would with
respect to any other item of equal magnitude for
which such Selling Stockholder or such Partner (to
the extent relevant) would be responsible without
the possibility of indemnification; provided, that
such Selling Stockholder or such Partner (to the
extent relevant) shall control such audit or other
proceeding, including the choice of counsel and
forum.
(c) For purposes of this Section 8.4, in
calculating the amount of any income taxes imposed on a
Partner and the amount of any reduction in taxes
realized by such Partner for purposes of this Section
8.4, it shall be assumed that such Partner, (i) if it
is a Partner in BROAD STREET INVESTMENT FUND I, L.P. or
is Goldman, Sachs & Co., pays tax at the highest
marginal federal, New York State and New York City tax
rates applicable to corporations on the type of income
affected, and (ii) if it is a Partner in STONE STREET
FUND 1986, STONE STREET FUND 1987, BRIDGE STREET FUND
1986 or BRIDGE STREET FUND 1987, pays tax at the
highest marginal federal, New York State and New York
City tax rates applicable to individuals on the type of
income affected, in each case taking into account the
deductibility of New York State and New York City
income taxes for federal income tax purposes and the
deductibility of New York City income taxes for New
York State corporate income tax purposes.
(d) Any payment required to be made by
Continental pursuant to this Section 8.4 shall be made
no later than 5 business days prior to the time that
the payment of taxes to which such payment relates is
required to be made. If such taxes are contested
without the prior payment of any amounts to the
relevant taxing authority, the payment pursuant to this
Section 8.4 with respect to such taxes shall not be
required to be made until 10 business days after a
final determination of the amount of such tax is made.
Any payment required to be made by any Selling
Stockholder to Continental pursuant to this Section 8.4
shall be made no later than (x) in the case of a
reduction of taxes, the due date (not including
extensions) for the filing of the return reflecting the
reduction of taxes to which such payment relates, and
(y) in the case of a refund or credit, the date such
refund is received from or credit is made by the
relevant taxing authority.
(e) All payments made to a Selling Stockholder
with respect to taxes of a Partner of such Selling
Stockholder shall discharge Continental's obligation to
such Partner with respect to such taxes.
9. OPTION.
9.1. Exercise of Option. If the Alleghany
Closing shall not have occurred within seven business days
following the Closing hereunder (the "Option Period"),
except if the failure of the Alleghany Closing to occur
within the Option Period results solely from the breach by
Continental of any representation, warranty, covenant or
agreement of Continental contained in the Alleghany Stock
Purchase Agreement, Continental shall have the right (the
"Option") to require all, but not less than all, of the
Selling Stockholders to purchase, and upon the exercise of
such right each Selling Stockholder shall purchase, subject
to the terms and conditions set forth in this Section 9 and
having the effect set forth in Section 9.5, from
Continental, all, but not less than all, of the Shares
Continental purchased from such Selling Stockholder at the
Closing (the "Option Shares") at a price equal to the
Consideration paid to such Selling Stockholder at the
Closing (the "Option Price"). To exercise the Option,
Continental shall deliver to each Selling Stockholder an
irrevocable written notice to such effect no later than the
last day of the Option Period (the "Option Notice").
9.2. Option Closing. If Continental exercises
the Option, the closing of the purchase of the Option Shares
shall, subject to the terms and conditions set forth in this
Section 9, take place at such time and place as is indicated
in the Option Notice (but in no event later than five
business days after the delivery of the Option Notice) or as
Continental and the Selling Stockholders may agree (the
"Option Closing"), provided that the timing of the Option
Closing must comply with the proviso to Section 1.3. At the
Option Closing, Continental shall sell, convey, transfer and
deliver to each Selling Stockholder full right, title and
interest in and to all of the Option Shares to be sold to
such Selling Stockholder, free and clear of all Liens, and
shall deliver a certificate or certificates representing
such Option Shares duly endorsed for transfer or accompanied
by appropriate stock powers duly endorsed for transfer. The
cost of any stock transfer tax stamps or any other transfer
tax payable, if any, in connection with the purchase of
Option Shares by the Selling Stockholder purchasing the same
shall be borne by, and the right to receive any refund in
respect thereof shall inure to the benefit of, such Selling
Stockholder. At the Option Closing, each Selling
Stockholder shall pay to Continental by wire transfer in
immediately available funds to such account or accounts as
was designated to such Selling Stockholder by Continental in
the Option Notice an amount equal to the Option Price of the
Option Shares being purchased by such Selling Stockholder.
9.3. Conditions to Option Closing. The
obligations of the Selling Stockholders under this Section 9
are subject to the satisfaction, on or before the date of
the Option Closing (the "Option Closing Date"), of each of
the following conditions:
(a) Compliance with Agreement. Each Selling
Stockholder shall have received from Continental at the
Option Closing a certificate, dated the Option Closing
Date and executed by an executive officer of
Continental, substantially in the form of Exhibit D
hereto (the "Officer's Certificate"), to the effect
that Continental shall have performed and complied in
all material respects with all the obligations required
by this Agreement to be performed or complied with by
it on or before the Option Closing Date.
(b) Representations and Warranties. The
Officer's Certificate shall be to the effect that the
representations and warranties made by Continental in
Section 3 hereof shall be true and correct in all
material respects as of the Option Closing Date.
(c) Absence of Certain Litigation. On the Option
Closing Date (i) there shall be no injunction,
restraining order or order of any nature issued by any
court of competent jurisdiction which directs that this
Agreement or any material transaction contemplated
hereby shall not be consummated as herein provided or
compels or would compel the Companies to dispose of or
discontinue a significant portion of the business
conducted by the Companies as a result of the
consummation of the transactions contemplated hereby;
and (ii) there shall be no suit, action or other
proceeding by the United States (or any agency thereof)
or by any state (or any agency thereof) pending before
any court or governmental agency, or threatened to be
filed or initiated, wherein such complainant seeks the
restraint or prohibition of the consummation of any
material transaction contemplated hereby or asserts the
illegality of any material transaction contemplated
hereby.
(d) Transfer Taxes. Continental shall have paid,
or caused to be paid, all stock transfer and other
transfer taxes required to be paid in connection with
the sale and delivery to the Selling Stockholders of
the Shares, and shall have caused all appropriate stock
transfer tax stamps to be affixed to the certificate or
certificates representing the Shares so sold and
delivered.
9.4. Further Assurances. Continental agrees that
it will from time to time at and subsequent to the Option
Closing Date, at the request of any Selling Stockholder and
without further consideration, execute and deliver such
other instruments of conveyance, assignment and transfer and
take such other actions as such Selling Stockholder may
reasonably request in order more effectively to convey,
assign, transfer to and vest in such Selling Stockholder the
Shares purchased by such Selling Stockholder at the Option
Closing.
9.5. Effect of Exercise. If Continental
exercises the Option, upon the conclusion of the Option
Closing this Agreement shall terminate and have no further
force or effect and there shall be no liability or
obligation on the part of either Continental or any of the
Selling Stockholders in respect of any covenant, condition
or agreement contained herein and the purchase and sale of
the Shares pursuant to Section 1.1 hereof shall be
rescinded, and each party shall be restored to the condition
existing prior to such purchase and sale, except that
(a) the representations and warranties contained in
Paragraphs 1 and 2 of the Officer's Certificate, (b) the
covenants of Continental contained in Section 9.4 hereof and
(c) the obligations of Continental contained in
Sections 8.2(c) (including the procedures with respect
thereto set forth in Section 8.3 hereof) and 8.4 hereof
shall survive the Option Closing, without regard to any
investigation made by the parties hereto. In such event,
each party hereto agrees, at its own expense, to execute,
deliver, file and record any instrument, document, agreement
or other paper and take any other action that the other
party may reasonably request from time to time or that the
other party shall become aware may be necessary or
desirable, in order to effect the foregoing. If between the
Closing and the Option Closing Continental shall receive any
dividends or other distributions (whether in the form of
cash, securities or other property) from Underwriters Re in
respect of the Shares acquired by Continental at the
Closing, Continental shall at the Option Closing pay such
dividends or other distributions over to the Selling
Stockholders, pro rata, in proportion to their respective
interests in such Shares.
9.6. Termination of Option. If the Alleghany
Closing shall have occurred at any time during the Option
Period or if Continental shall not have delivered an Option
Notice pursuant to the terms of this Section 9 during the
Option Period, then the Option shall terminate and have no
further force or effect.
10. MISCELLANEOUS PROVISIONS.
10.1. Expenses. Whether or not the Closing takes
place and regardless of whether this Agreement is
terminated, each party hereto shall pay all of the costs and
expenses incurred by it in connection with this Agreement or
in consummating the transactions contemplated hereby
(including, without limitation, disbursements and expenses
of its attorneys, accountants and advisors).
10.2. Notices. All notices or other
communications require or permitted under this Agreement
shall be in writing and shall be given (and shall be deemed
to have been duly given upon receipt) by personal delivery,
by facsimile transmission, or by registered, certified or
express mail, postage prepaid, addressed as follows:
If to Continental, to
William F. Gleason, Jr., Esq.
Senior Vice President,
General Counsel and Secretary
The Continental Corporation
180 Maiden Lane
New York, New York 10038
Telecopy: (212) 440-7982
with a copy to
Deborah F. Stiles, Esq.
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopy: (212) 909-6836
If to the Selling Stockholders, to
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: General Counsel
Telecopy: (212) 902-3000
with a copy to
Frank H. Golay, Jr., Esq.
Sullivan & Cromwell
444 South Flower Street
Los Angeles, California 90071
Telecopy: (212) 683-0457
Any party may change the person and addresses to which
notices or other communications are to be sent to it by
giving written notice of any such change in the manner
provided herein for giving notice.
10.3. Entire Agreement. Except as otherwise
provided herein, this Agreement, together with the exhibits
and schedules hereto, sets forth the entire agreement and
understanding of the parties hereto in respect of the
transactions contemplated hereby, and supersedes all prior
agreements, arrangements and understandings relating to the
subject matter hereof.
10.4. No Third Party Beneficiaries. Nothing in
this Agreement is intended or shall be construed to give any
person, other than the parties hereto, any legal or
equitable right, remedy or claim under or in respect of this
Agreement or any provision contained herein.
10.5. No Assignment. This Agreement shall inure
to the benefit of, and be binding upon, the respective
successors and assigns of the parties hereto; provided,
however, that no assignment of any rights or delegation of
any obligations provided for herein shall be made by any
party hereto without the express prior written consent of
the other party, except that Continental shall be permitted,
without such consent, to assign any of its rights hereunder
(but not to delegate any of its obligations hereunder) to
any of its wholly owned subsidiaries (provided that
Continental may not, following such assignment to such a
subsidiary, transfer or dispose of such subsidiary, or any
equity interest therein, to any third party without the
express prior written consent of each Selling Stockholder).
10.6. Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of
the State of New York applicable to agreements made and to
be performed entirely within such State, except (a) matters
related to the validity of corporate or partnership action,
which shall be governed by the laws of the state or other
jurisdiction of incorporation or organization of the
relevant corporation or partnership, as the case may be, and
(b) matters related to compliance of the transactions
contemplated hereby with applicable insurance regulatory
statutes, which shall be governed by the laws of the state
or other jurisdiction the insurance regulatory statutes of
which apply.
10.7. Counterparts. This Agreement may be
executed in any number of separate counterparts, each of
which shall be deemed to be an original, but which together
shall constitute one and the same instrument.
10.8. Headings. The section headings contained
in this Agreement are inserted for convenience of reference
only and shall not affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, each party hereto has caused
this Agreement to be duly executed on the date first above
written.
THE CONTINENTAL CORPORATION
By /s/Wayne H. Fisher
STONE STREET FUND 1986 BRIDGE STREET FUND 1986
BY: Stone Street Advisors Corp., BY: Stone Street Advisors Corp.,
General Partner Managing General Partner
BY: /s/Richard A. Friedman BY: /s/Richard A. Friedman
Vice President Vice President
STONE STREET FUND 1987 BRIDGE STREET FUND 1987
BY: Stone Street Capital Corp., BY: Stone Street Capital Corp.,
General Partner Managing General Partner
BY: Richard A. Friedman BY: Richard A. Friedman
Vice President Vice President
BROAD STREET INVESTMENT FUND I, LP.
BY: Goldman, Sachs & Co.,
General Partner
BY: /s/Richard A. Friedman
Partner
GOLDMAN, SACHS & CO.
BY: /s/Richard A. Friedman
General Partner
Schedule 1.2
Selling Stockholder Number of Shares
Goldman, Sachs & Co. 293,498
Stone Street Fund 1986 100,000
Stone Street Fund 1987 166,666
Broad Street Investment 3,297,730
Fund I, L.P
Bridge Street Fund 1986 66,667
Bridge Street Fund 1987 66,667
Schedule 2.1
The Shares are held subject to the Shareholders'
Agreement dated as of December 29, 1987, as amended on
July 6, 1988, May 29, 1991 and May 1, 1993, among
Continental, the Selling Stockholders and certain management
stockholders named therein.