Exhibit 99.1
CONFORMED COPY
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AGREEMENT AND PLAN OF
MERGER AND SCHEME OF ARRANGEMENT
BETWEEN
MARKEL CORPORATION
AND
TERRA NOVA (BERMUDA) HOLDINGS LTD.
Dated as of August 15, 1999
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
1.1 Definitions ..................................................... 2
ARTICLE II
THE MERGER AND SCHEME
2.1 The Scheme ...................................................... 10
2.2 The Merger ...................................................... 10
2.3 Effective Time .................................................. 10
2.4 Effects of the Merger and the Scheme ............................ 11
2.5 Articles and Bylaws ............................................. 11
2.6 Directors ....................................................... 11
2.7 Officers ........................................................ 11
2.8 Treatment of Shares ............................................. 12
2.9 Conversion of Sub Shares ........................................ 12
2.10 Shareholders Approval ........................................... 12
2.11 Election Procedure .............................................. 13
2.12 Issuance of MINT Common Stock and Payment of Cash and Stock
Consideration; Proration ........................................ 14
2.13 Exchange of BB Common Share Certificates ........................ 18
2.14 Stock Options ................................................... 20
2.15 Best Efforts To Increase Maximum Cash Consideration ............. 21
2.16 Closing ......................................................... 21
2.17 Tax Consequences ................................................ 22
2.18 VA Governance ................................................... 22
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BB
3.1 Organization, Standing and Corporate Power ...................... 22
3.2 Subsidiaries .................................................... 22
3.3 Capital Structure................................................ 23
3.4 Authority; Noncontravention ..................................... 23
3.5 SEC Documents; Undisclosed Liabilities; SAP Statements .......... 25
3.6 Liabilities and Reserves ........................................ 26
3.7 Investment Advisory and Investment Company Matters ............. 26
3.8 Information Supplied ........................................... 27
3.9 Absence of Certain Changes or Events ........................... 27
3.10 Litigation ..................................................... 28
3.11 Labor Relations ................................................ 28
3.12 Benefit Plans .................................................. 28
3.13 Tax Matters .................................................... 29
3.14 No Excess Parachute Payments ................................... 30
3.15 Compliance with Applicable Laws ................................ 30
3.16 Properties ..................................................... 31
3.17 Voting Requirements ............................................ 31
3.18 Takeover Statutes............................................... 31
3.19 Brokers ........................................................ 31
3.20 Related Party Transactions...................................... 31
3.21 Material Contracts ............................................. 32
3.22 Intellectual Property .......................................... 32
3.23 No Regulatory Disqualifications ................................ 32
3.24 Insurance Ratings............................................... 32
3.25 Reinsurance, etc................................................ 32
3.26 Derivatives .................................................... 33
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF VA
4.1 Organization, Standing and Corporate Power ..................... 33
4.2 Subsidiaries ................................................... 33
4.3 Capital Structure............................................... 33
4.4 Authority; Noncontravention .................................... 34
4.5 SEC Documents; Undisclosed Liabilities; SAP Statements.......... 35
4.6 Liabilities and Reserves ....................................... 37
4.7 Investment Advisory and Investment Company Matters ............. 37
4.8 Information Supplied ........................................... 37
4.9 Absence of Certain Changes or Events ........................... 38
4.10 Litigation ..................................................... 38
4.11 Labor Relations ................................................ 38
4.12 Benefit Plans .................................................. 39
4.13 Tax Matters .................................................... 39
4.14 No Excess Parachute Payments ................................... 40
4.15 Compliance with Applicable Laws ................................ 40
4.16 Properties ..................................................... 40
4.17 Voting Requirements ............................................ 41
4.18 Takeover Statutes............................................... 41
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4.19 Brokers .......................................................... 41
4.20 Related Party Transactions ....................................... 41
4.21 Material Contracts ............................................... 41
4.22 Intellectual Property ............................................ 42
4.23 No Regulatory Disqualifications .................................. 42
4.24 Insurance Ratings................................................. 42
4.25 Reinsurance, etc.................................................. 42
4.26 Derivatives ...................................................... 42
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Conduct of Business .............................................. 44
5.2 Additional Financial Statements .................................. 47
5.3 No Solicitation; Notification .................................... 47
5.4 Investigation of Business and Properties ......................... 49
5.5 Regulatory Matters ............................................... 49
5.6 Investment Portfolio ............................................. 50
5.7 Confidentiality .................................................. 50
5.8 Books and Records................................................. 51
5.9 Fees and Expenses................................................. 51
5.10 Preparation of the Form S-4 and the Proxy Statement/Prospectus;
Shareholders Meetings............................................. 52
5.11 Public Announcements ............................................. 54
5.12 Efforts to Consummate ............................................ 54
5.13 Employee Benefits ................................................ 55
5.14 Agreements With Respect to Affiliates ............................ 55
5.15 Indemnification, Exculpation and Insurance ....................... 56
5.16 NYSE Listing and Delisting........................................ 57
5.17 Formation of MINT and Sub ........................................ 57
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF VA
6.1 Representations and Warranties ................................... 58
6.2 Material Adverse Change .......................................... 58
6.3 Performance of this Agreement .................................... 58
6.4 Injunction ....................................................... 58
6.5 Shareholder Approval ............................................. 59
6.6 Governmental Approvals ........................................... 59
6.7 NYSE Listing ..................................................... 59
6.8 HSR Act .......................................................... 59
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6.9 Form S-4.......................................................... 59
6.10 Tax Opinion ...................................................... 59
6.11 Frustration of Closing Conditions ................................ 59
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BB
7.1 Representations and Warranties ................................... 60
7.2 Material Adverse Change .......................................... 60
7.3 Performance of this Agreement .................................... 60
7.4 Injunction ....................................................... 60
7.5 Shareholder Approval ............................................. 60
7.6 Governmental Approvals ........................................... 60
7.7 NYSE Listing ..................................................... 60
7.8 HSR Act .......................................................... 61
7.9 Form S-4.......................................................... 61
7.10 Tax Opinion ...................................................... 61
7.11 Frustration of Closing Conditions ................................ 61
ARTICLE VIII
NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES
8.1 Non-Survival of Representations and Warranties ................... 61
ARTICLE IX
TERMINATION
9.1 Termination ...................................................... 61
9.2 Restructuring .................................................... 63
9.3 Procedure: Effect of Termination ................................. 63
ARTICLE X
GENERAL PROVISIONS
10.1 Notices .......................................................... 63
10.2 Interpretation ................................................... 64
10.3 Entire Agreement ................................................. 64
10.4 No Third Party Beneficiaries ..................................... 65
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10.5 Successors and Assigns .......................................... 65
10.6 Severability .................................................... 65
10.7 Amendment ....................................................... 65
10.8 Extension; Waiver................................................ 65
10.9 Counterparts .................................................... 66
10.10 Governing Law ................................................... 66
10.11 Disclosure Letter................................................ 66
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AGREEMENT AND PLAN OF
MERGER AND SCHEME OF ARRANGEMENT
THIS AGREEMENT AND PLAN OF MERGER AND SCHEME OF ARRANGEMENT (the
"Agreement") dated as of August 15, 1999, is made between MARKEL CORPORATION, a
Virginia corporation ("VA") and TERRA NOVA (BERMUDA) HOLDINGS LTD., a Bermuda
corporation ("BB").
RECITALS
A. This Agreement provides for (i) the merger ("Merger") of MINT Sub Ltd.
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("Sub"), a corporation to be organized under the laws of Virginia as a wholly-
owned subsidiary of Virginia Holdings Inc. ("MINT"), a corporation to be
organized under the laws of Virginia, with and into VA and (ii) a Scheme of
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Arrangement between BB and its shareholders (the "Scheme"). Pursuant to the
Merger and the Scheme, the holders of outstanding capital stock of BB and VA,
respectively, will receive the applicable consideration set forth herein. Upon
consummation of the Merger and the Scheme, each of BB and VA will be a wholly-
owned subsidiary of MINT, which will change its name to "Markel Corporation."
B. The respective Boards of Directors of VA and BB have determined that
it is advisable and in the best interests of their respective shareholders that
each of VA and BB become a subsidiary of MINT pursuant to, and have approved,
the Merger and the Scheme.
C. In furtherance of such determination, VA will cause MINT to be formed
and MINT will cause Sub to be formed in accordance with the terms hereof.
D. The parties intend that, for U.S. federal income tax purposes, (i) the
Merger shall qualify as a tax-free reorganization under Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code") and (ii)
the Merger together with the Scheme, when integrated, will be treated as a
transaction described in Section 351 of the Internal Revenue Code.
E. Concurrently with the execution and delivery of this Agreement and as
a condition and inducement to VA's and BB's willingness to enter into this
Agreement, certain shareholders of BB and VA have entered into Stockholders
Agreements dated as of the date of this Agreement (the "Stockholders
Agreements"), pursuant to which, among other things, such shareholders have
agreed to vote the BB Common Shares or VA Common Shares, as the case may be,
held by them in favor of the Merger, the Scheme and the transactions
contemplated hereby.
F. Concurrently with the execution and delivery of this Agreement, VA has
entered into a Registration Rights Agreement (the "Registration Rights
Agreement") with certain shareholders of BB, pursuant to which VA has agreed to
cause MINT to grant such shareholders certain registration
rights with respect to the MINT Common Shares to be acquired by such
shareholders upon the consummation of the Scheme.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties and agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the following
meanings:
"Acquisition Proposal" has the meaning set forth in Section 5.3(a).
"Action" means any complaint, claim, prosecution, indictment, action,
suit, arbitration, investigation, governmental audit, inquiry or proceeding by
or before any Governmental Authority.
"Affiliate" of a Person means a Person who, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, such Person.
"Aggregate Fractional Amount" has the meaning set forth in Section
2.13(e).
"Assets" of a Person means all of such Person's properties, assets and
rights of any kind, whether tangible or intangible, real or personal, owned by
such Person or in which such Person has any interest whatsoever.
"BB Acquisition Proposal" has the meaning set forth in Section 5.9(b).
"BB Common Shares" means, collectively, the Class A Ordinary Shares
and the Class B Ordinary Shares of BB.
"BB Designated Insurance Approvals" has the meaning set forth in
Section 3.4
"BB Directors Unit Plan" means the Terra Nova (Bermuda) Holdings
Ltd.1997 Non-Employee Directors Share Unit Plan.
"BB Directors Unit Plan Cash Amount" means the aggregate amount of
cash to be paid to participants in the BB Directors Unit Plan pursuant to the
provisions of Section 2.14(b) hereof.
"BB Disclosure Letter" has the meaning set forth in Article III.
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"BB Exchange Ratio" means 0.184 of a MINT Common Share for each BB
Common Share.
"BB Insurance Subsidiaries" has the meaning set forth in Section
3.5(b).
"BB Intellectual Property Rights" means the Intellectual Property
owned by BB or any of its Subsidiaries.
"BB Option" means each option granted prior to the date of this
Agreement under a BB Option Plan that is outstanding as of the Effective Time.
"BB Option Plans" means the Terra Nova (Bermuda) Holdings Ltd.
Approved Executive Share Option Scheme and the Terra Nova (Bermuda) Holdings
Ltd. Non Approved Executive Share Option Scheme.
"BB SAP Statement" has the meaning set forth in Section 3.5(b).
"BB SEC Documents" has the meaning set forth in Section 3.5 (a).
"BB Shareholder Approval" has the meaning set forth in Section 3.17.
"BB Shareholders Meeting" has the meaning set forth in Section
5.10(c).
"BCA" means the Bermuda Companies Act of 1981, as amended.
"Books and Records" means all books, records, lists, ledgers, files,
reports, plans, drawings and operating records of every kind relating to VA or
BB or their respective Subsidiaries, their Assets, their Business operations,
customers, suppliers and personnel, including, without limitation, (i) all
corporate books and records of VA or BB and their respective Subsidiaries, disk
or tape files, printouts, runs or other computer-based information and VA's and
BB's and their respective Subsidiaries' interest in all computer programs
required to access, and the equipment containing, all such computer-based
information, (ii) all product, business and marketing plans, (iii) all
environmental control records and (iv) all sales, maintenance and production
records.
"Business" means, as the context suggests, the insurance business
conducted by VA or BB and their respective Subsidiaries taken as a whole.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in Hamilton, Bermuda, Richmond, Virginia or New York, New
York are authorized by Law to close.
"Cash Consideration" has the meaning set forth in Section 2.8(a).
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"Cash Election" has the meaning set forth in Section 2.11(a).
"Cashout Election" has the meaning set forth in Section 2.14(a).
"Certificate" has the meaning set forth in Section 2.13(c).
"Claim" has the meaning set forth in Section 5.15(a).
"Closing" has the meaning set forth in Section 2.16.
"Closing Date" has the meaning set forth in Section 2.16.
"Common Stock Consideration" has the meaning set forth in Section
2.8(b).
"Contract" means any written agreement, contract, lease, note, loan,
evidence of indebtedness, purchase order, letter of credit, franchise agreement,
undertaking, covenant not to compete, employment agreement, license, instrument,
obligation, commitment, purchase and sales order, quotation and other executory
commitment, which pursuant to its terms has not expired, terminated or been
fully performed by the parties thereto.
"Conversion Election" has the meaning set forth in Section 2.14(a).
"Defaulting Party" has the meaning set forth in Section 5.9(f).
"Derivatives" has the meaning set forth in Section 3.26.
"Directors Plan Grantor Trust" means the trust created under that
certain Trust Agreement, effective as of May 13, 1997, between BB and Codan
Trust Company Limited, as Trustee, with respect to the BB Directors Unit Plan.
"Disclosure Letters" means the BB Disclosure Letter and the VA
Disclosure Letter.
"DLJ" means Donaldson, Lufkin & Jenrette Securities Corporation.
"Effective Time" has the meaning set forth in Section 2.3(b).
"Election" has the meaning set forth in Section 2.11(a).
"Election Deadline" has the meaning set forth in Section 2.11(c).
"Election Form" has the meaning set forth in Section 2.11(b).
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"Employee Benefit Plan" of a Person means each benefit plan maintained
or contributed to by such Person or with respect to which such Person may
reasonably be expected to have any liability, which provides (or is intended to
provide) benefits to the current or former directors or employees of such Person
(or other service providers to such Person), including, without limitation, each
pension, retirement or deferred compensation plan, incentive compensation plan,
share plan, unemployment compensation plan, vacation pay, severance pay, bonus
or benefit arrangement, insurance, medical or hospitalization program, sickness,
accident, disability or death benefit program or any other fringe benefit
arrangement.
"Employee Plan Grantor Trust" means the trust created under that
certain Trust Agreement II, made as of May 13, 1997, between BB and Codan Trust
Company Limited, as Trustee.
"Encumbrance" means any claim, lien, pledge, option, charge, easement,
security interest, deed of trust, mortgage, right-of-way, encroachment,
conditional sales agreement, encumbrance or other right of third parties,
whether voluntarily incurred or arising by operation of Law, and includes any
agreement to give any of the foregoing in the future, and any contingent sale or
other title retention agreement or lease in the nature thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" means Chase Mellon or such other Person as may be
selected by VA and is reasonably acceptable to BB.
"Expense Payment" has the meaning set forth in Section 5.9(b).
"Form S-4" means the registration statement on Form S-4 filed with the
SEC relating to the issuance of MINT Common Shares in the Merger and Scheme.
"GAAP" means generally accepted accounting principles in the United
States of America, as in effect from time to time, consistently applied.
"Governmental or Regulatory Authority" means any federal, state,
local, foreign, supernational or supranational court or tribunal, governmental,
regulatory or administrative agency, department, bureau, authority or commission
or arbitral panel or any self or other regulatory body or authority (including
the Council of Lloyds) having responsibility or oversight, direct or indirect,
over the operations of VA, BB or any of their respective Subsidiaries.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnified Liabilities" has the meaning set forth in Section
5.15(a).
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"Indemnified Parties" has the meaning set forth in Section 5.15(a).
"Insurance Laws" means Laws applicable to the business and products of
insurance.
"Intellectual Property" means all patents, trademarks, trade names,
service marks, copyrights and any applications, therefor, technology, know-how,
computer software programs or applications, and tangible or intangible
proprietary information or materials, trademarks, trade names, service marks and
copyrights.
"Internal Revenue Code" has the meaning set forth in the Recitals.
"Investment Advisers Act" has the meaning set forth in Section 3.7(a).
"Investment Company Act" has the meaning set forth in Section 3.7(a).
"knowledge of BB" means the actual knowledge of any of John Dwyer,
Nigel Rogers, William Wedlake, Jean Waggett and John O'Neill.
"knowledge of VA" means the actual knowledge of any of Alan Kirshner,
Steven Markel, Anthony Markel, Darrell Martin, Greg Nevers and Brad Kiscaden.
"Laws" means laws, statutes, ordinances, regulations, rules, policies,
guidelines, orders, directives, bye-laws or codes of conduct of any Governmental
or Regulatory Authority.
"Licenses and Permits" means all registrations, applications, filings,
certifications, notices, orders, licenses, permits, approvals, consents,
qualifications, authorizations and waivers of any Governmental or Regulatory
Authority.
"Lloyd's" means the Corporation of Lloyds, the Society of Lloyd's or
the Council of Lloyd's, as the context requires.
"Lloyd's Acts" means the Lloyd's Acts 1871 - 1982, together with the
bye-laws and regulations passed pursuant thereto.
"Lloyd's Member" means an underwriting member of Lloyd's, whether
corporate or individual.
"Mailing Date" has the meaning set forth in Section 2.11(b).
"Material Adverse Effect" or "Material Adverse Change" means as to any
Person any material adverse effect on or change with respect to (A) the
business, operations, assets, liabilities, condition (financial or otherwise) or
results of operations of such Person and its Subsidiaries, taken as a whole, or
(B) the right or ability of such Person or any of its Subsidiaries to consummate
the
6
transactions contemplated hereby, other than any such effect or change resulting
from this Agreement or the announcement of the transactions contemplated hereby.
"Maximum Cash Consideration" means an amount equal to 40% of the sum
of the Scheme Consideration and Option Scheme Consideration (determined using a
value for Stock Consideration and Option Stock Consideration equal to the value
for each VA Common Share used in setting the BB Exchange Ratio), as such
percentage may be increased pursuant to Section 2.15, minus the Aggregate
Fractional Amount and the BB Directors Unit Plan Cash Amount.
"Maximum Cash Conversion Number" has the meaning set forth in Section
2.12(a).
"Maximum Stock Consideration" means 60% of the sum of the Scheme
Consideration and Option Scheme Consideration (determined using a value for
Stock Consideration and Option Stock Consideration equal to the value for each
VA Common Share used in setting the BB Exchange Ratio), as such percentage may
be decreased pursuant to Section 2.15.
"Maximum Stock Conversion Number" has the meaning set forth in Section
2.12(a).
"Merger" has the meaning set forth in Recital A.
"MINT Common Shares" means the shares of common stock, no par value,
of MINT.
"Non-Electing BB Options" has the meaning set forth in Section
2.12(g).
"Non-Electing Shares" has the meaning set forth in Section 2.12(g).
"Notice of Exercise" has the meaning set forth in Section 2.14(a).
"Notice of Superior Proposal" has the meaning set forth in Section
5.3(b).
"NYSE" means the New York Stock Exchange, Inc.
"Octavian Plan" means the Octavian Syndicate Management Ltd. 1996
Option Plan.
"Option Cash Consideration" has the meaning set forth in Section
2.14(a).
"Option Scheme Consideration" has the meaning set forth in Section
2.14(a).
"Option Stock Consideration" has the meaning set forth in Section
2.14(a).
"Other Agreements" means the Registration Rights Agreement and the
Stockholders Agreements.
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"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
governmental or political subdivision or an agency or instrumentality thereof.
"Personnel" of a corporation means all directors, officers and
employees of such corporation and its Subsidiaries.
"Proxy Statement/Prospectus" has the meaning set forth in Section 3.4.
"Registrar" has the meaning set forth in Section 2.3.
"Registration Rights Agreement" has the meaning set forth in the
Recitals.
"Reinsurance Agreement" means a reinsurance, coinsurance, excess
insurance, ceding of insurance, assumption of insurance or indemnification or
similar arrangement with respect to insurance.
"SAR" has the meaning set forth in Section 3.3.
"SCC" has the meaning set forth in Section 2.3.
"Scheduled Closing Date" has the meaning set forth in Section 2.16.
"Scheme" has the meaning set forth in Recital A.
"Scheme Consideration" has the meaning set forth in Section 2.8(a).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Share Units" means Share Units as defined in the BB Directors Unit
Plan.
"SSB" means Salomon Smith Barney, Inc..
"Statutory Accounting Practices" means the accounting practices
prescribed or permitted by the applicable Insurance Laws.
"Stock Election" has the meaning set forth in Section 2.11(a).
"Stockholders Agreements" has the meaning set forth in Recital E.
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"Subsidiary" with respect to any party to this Agreement, means any
corporation or other business entity, whether or not incorporated, of which at
least 50% of the securities or interests having, by their terms, ordinary voting
power to elect members of the Board of Directors, or other persons performing
similar functions with respect to such entity, is held directly or indirectly by
such party.
"Superior Proposal" has the meaning set forth in Section 5.3(b).
"Taxes" shall mean any taxes of any kind, including but not limited to
those on or measured by or referred to as income, gross receipts, capital,
sales, use, ad valorem, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, value added, property
or windfall profits taxes, customs, duties or similar fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional tax amounts imposed with respect thereto by any
Governmental or Regulatory Authority.
"Tax Return" shall mean any return, report or statement required to be
filed with any Governmental or Regulatory Authority with respect to Taxes,
including any schedule or attachment thereto or amendment thereof.
"Termination Fee" has the meaning set forth in Section 5.9(b).
"Third-Party Intellectual Property Rights" means Intellectual Property
owned by any third party.
"VA Acquisition Proposal" has the meaning set forth in Section 5.9(d).
"VA Common Shares" means the Common Shares, no par value, of VA.
"VA Designated Insurance Approvals" has the meaning set forth in
Section 4.4(a).
"VA Disclosure Letter" has the meaning set forth in Article IV.
"VA Insurance Subsidiaries" has the meaning set forth in Section
4.5(b).
"VA Intellectual Property Rights" means the Intellectual Property
owned by VA or any of its Subsidiaries.
"VA SAP Statements" has the meaning set forth in Section 4.5(b).
"VA SEC Documents" has the meaning set forth in Section 4.5(a).
"VA Shareholder Approval" has the meaning set forth in Section 4.17.
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"VA Shareholders Meeting" has the meaning set forth in Section
5.10(b).
"VA Surviving Corporation" has the meaning set forth in Section 2.2.
"VSCA" means the Virginia Stock Corporation Act, as amended.
ARTICLE II
THE MERGER AND SCHEME
2.1 The Scheme. (a) Upon the terms and subject to the satisfaction or
waiver, if permissible, of the conditions hereof and subject to the Supreme
Court of Bermuda (the "Court") exercising its discretion and sanctioning the
Scheme pursuant to Section 99 of the BCA and making such facilitating orders as
are appropriate pursuant to Section 99 of the BCA, at the Effective Time all of
the issued share capital of BB shall be cancelled and redeemed for the
applicable Scheme Consideration and 40,000,000 newly issued Class A Ordinary
Shares, par value $5.80, of BB (the "New Ordinary Shares") shall be allotted,
issued and transferred to MINT in consideration of the issuance of the Scheme
Consideration.
(b) As soon as practicable after the date hereof, (i) BB, will (x)
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cause an application to be made to the Court requesting the Court to summon such
class meetings of members of BB as the Court may direct, (y) convene such class
-
meetings, and obtain the approval required under Section 99 of the BCA and,
subject to such approvals being obtained, (z) cause a petition to be presented
-
to the Court seeking the sanctioning of a Scheme of Arrangement pursuant to
Section 99 of the BCA and file such other documents as are required to be duly
filed with the Court to effect the Scheme.
(c) BB shall, subject to the provisions of this Agreement, do all
things necessary to effect the Scheme including but not limited to the holding
of extraordinary general meetings of its shareholders to approve the Scheme.
2.2 The Merger. Upon the terms and subject to the satisfaction or waiver,
if permissible, of the conditions hereof, in accordance with the VSCA, at the
Effective Time, Sub shall be merged with and into VA (the "Merger"). Following
the Merger, the separate corporate existence of Sub shall cease and VA shall
continue as the surviving corporation (the "VA Surviving Corporation") and shall
be governed by the VSCA.
2.3 Effective Time. (a) On the Closing Date, the parties shall cause the
Merger to be consummated by causing articles of merger with respect to the
Merger to be executed and filed with the Clerk of the State Corporation
Commission of the Commonwealth of Virginia (the "SCC") in accordance with the
relevant provisions of the VSCA. The Merger shall become effective at the time
of issuance of the certificate of merger by the SCC (such time and date being
referred to as the "Merger Effective Time").
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(b) On the Closing Date, subject to receipt of orders from the Court
sanctioning the Scheme, and subject to the terms and provisions of this
Agreement, the order sanctioning the Scheme shall be duly filed with the
Registrar of Companies of Bermuda (the "Registrar"). The Scheme shall become
effective upon the filing of the order of the Court with respect to the Scheme
with the Registrar (the time of such filing being the "Scheme Effective Time"
and, together with the Merger Effective Time, the "Effective Time").
2.4 Effects of the Merger and the Scheme. (a) The Merger shall have the
effects set forth in the Section 13.1-721 of the VSCA.
(b) As of the Scheme Effective Time, BB shall be a wholly owned
Subsidiary of MINT and the holders of BB Common Shares (other than the New
Ordinary Shares) shall only have the right to receive the Scheme Consideration
as set forth in Section 2.8(a)..
2.5 Articles and Bylaws. (a) The Articles of Incorporation of VA, as in
effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the VA Surviving Corporation with the exception of the change
in name, and thereafter may be amended as provided therein and in the VSCA. The
Bylaws of VA, as in effect immediately prior to the Effective Time, shall be the
Bylaws of the VA Surviving Corporation, and thereafter may be amended as
provided therein.
(b) At the Effective Time, the Memorandum of Association of BB shall
be the same as the existing Memorandum of Association of BB until thereafter
amended or restated as provided therein and by law. At the Effective Time, the
Bylaws of BB shall be amended as necessary to permit the allotment, issue and
transfer of the New Ordinary Shares to MINT.
2.6 Directors. (a) The directors of Sub immediately prior to the Effective
Time shall be the initial directors of the VA Surviving Corporation and shall
hold office until their respective successors are duly elected and qualified, or
their earlier death, resignation or removal.
(b) The parties hereto shall procure that at the Scheme Effective
Time, only those directors of BB and such additional persons, in each case who
shall be designated by MINT shall remain or be elected to serve as directors of
BB, each of such directors to hold office in accordance with the applicable
provisions of the articles of association of BB and until their successors shall
be elected or appointed and shall duly qualify.
2.7 Officers. The officers of BB immediately prior to the Effective Time
shall be the initial officers of BB following the Scheme Effective Time and
shall hold office in accordance with its By-laws. The officers of VA immediately
prior to the Merger Effective Time shall be the initial officers of the VA
Surviving Corporation and shall hold office until their respective successors
are duly elected and qualified, or their earlier death, resignation or removal.
11
2.8 Treatment of Shares.
(a) Each BB Common Share outstanding immediately prior to the
Effective Time shall, by virtue of the Scheme and without any action on the part
of the holder thereof, automatically be cancelled, and the holder thereof shall
be entitled to receive the BB Exchange Ratio of a MINT Common Share (the "Common
Stock Consideration") or $34.00 in cash per share without any interest thereon
(the "Cash Consideration" and, together with the Common Stock Consideration, the
"Scheme Consideration") in each case as the holder thereof shall have elected or
deemed to have elected in accordance with, and subject to the limitations set
forth in, Sections 2.11 and 2.12 hereof.
(b) Each VA Common Share outstanding immediately prior to the Merger
Effective Time (other than VA Common Shares, if any, owned by MINT, Sub, VA or
BB or any Subsidiary of MINT, Sub or VA) shall, by virtue of the Merger and
without any action on the part of the holder thereof, automatically be converted
into the right to receive one (1) MINT Common Share.
(c) Each VA Common Share owned by MINT, Sub, VA or BB or any
Subsidiary of MINT, Sub, VA or BB, in each case, immediately prior to the Merger
Effective Time, shall, by virtue of the Merger, and without any action on the
part of the holder thereof, automatically be canceled and cease to exist at and
after the Effective Time and no consideration shall be paid with respect
thereto.
(d) Each share of capital stock of MINT outstanding immediately prior
to the Merger Effective Time shall by virtue of the Merger, and without any
action on the part of the holder thereof, automatically be canceled and cease to
exist at and after the Merger Effective Time and no consideration shall be paid
with respect thereto.
2.9 Conversion of Sub Shares. The common shares, no par value, of Sub
issued and outstanding immediately prior to the Merger Effective Time shall, by
virtue of the Merger and without any action on the part of the holder thereof,
automatically be converted into and thereafter represent 1,000 validly issued,
fully paid and nonassessable common shares, no par value, of the VA Surviving
Corporation, so that thereafter MINT will be the sole and exclusive owner of the
outstanding common shares of the VA Surviving Corporation.
2.10 Shareholders' Approval. Except as otherwise provided in Section 5.3,
BB, acting through its Board of Directors (which has recommended approval of the
Scheme and approval and adoption of this Agreement to its shareholders), shall,
in accordance with applicable law, use its best efforts to obtain the approval
of the Scheme and the approval and adoption of this Agreement by its
shareholders. Except as otherwise provided in Section 5.3, VA, acting through
its Board of Directors (which has recommended approval of the Merger and
approval and adoption of this Agreement to its shareholders), shall, in
accordance with applicable law, use its commercially reasonable efforts to
obtain the approval of the Merger and the approval and adoption of this
Agreement by its shareholders.
12
2.11 Election Procedure. Each holder (or beneficial owner through
appropriate and customary documentation and instructions) of outstanding BB
Common Shares shall have the right to submit a request specifying the number of
BB Common Shares that such holder desires to have converted into shares of MINT
Common Stock in the Scheme and the number of BB Common Shares that such holder
desires to have converted into the right to receive Cash Consideration in the
Scheme in accordance with the following procedure:
(a) Subject to Section 2.12, each such holder of BB Common Shares may
specify in a request made in accordance with the provisions of this Section 2.11
(herein called an "Election") (i) the number of BB Common Shares owned by such
holder that such holder desires to have converted into MINT Common Stock in the
Scheme (a "Stock Election") and (ii) the number of BB Common Shares owned by
such holder that such holder desires to have converted into the right to receive
the Cash Consideration in the Scheme (a "Cash Election").
(b) An election form and other appropriate and customary transmittal
materials in such form as VA and BB shall mutually agree (the "Election Form")
or, as applicable, a form of Notice of Exercise (as defined in Section 2.14)
shall be mailed thirty days prior to the anticipated Effective Time or on such
other date as VA and BB shall mutually agree (the "Mailing Date") to each holder
of record of BB Common Shares and each holder of BB Options not more than five
Business Days prior to the Mailing Date.
(c) Any Election shall have been made properly only if the Exchange
Agent shall have received, by 5:00 p.m. local time in the city in which the
principal office of such Exchange Agent is located, on the second Business Day
prior to the anticipated Effective Time (or such other time and date as VA and
BB shall mutually agree) (the "Election Deadline"), an Election Form properly
completed and signed and accompanied by certificates for the BB Common Shares to
which such Election Form relates (or customary affidavits and indemnification
regarding the loss or destruction of such certificate or certificates or by an
appropriate guarantee of delivery of such certificates, as set forth in such
Election Form, from a member of any registered national securities exchange or
of the National Association of Securities Dealers, Inc. or a commercial bank or
trust company in the United States provided such certificates are in fact
delivered to the Exchange Agent by the time required in such guarantee of
delivery). Failure to deliver BB Common Shares covered by such a guarantee of
delivery within the time set forth on such guarantee shall be deemed to
invalidate any otherwise properly made Election.
(d) Any holder of BB Common Shares may at any time prior to the
Election Deadline revoke or change his or her Election by written notice
received by the Exchange Agent prior to the Election Deadline accompanied by a
properly completed and signed, revised Election Form or by withdrawal of his or
her certificates for BB Common Shares, or of the guarantee of delivery of such
certificates, previously deposited with the Exchange Agent. All Elections shall
be revoked automatically if the Exchange Agent is notified in writing by VA or
BB that this Agreement has been terminated. In the event an Election Form is
revoked prior to the Election Deadline, the shares of BB Common Stock
represented by such Election Form shall be promptly returned without charge
13
to the person submitting the Election Form upon written request to that effect
from the holder who submitted the Election Form. The Exchange Agent shall have
reasonable discretion to determine whether any election, revocation or change
has been properly or timely made and to disregard immaterial defects in the
Election Forms, and any good faith decisions of the Exchange Agent regarding
such matters shall be binding and conclusive. The Exchange Agent shall be under
no obligation to notify any person of any defect in an Election Form.
(e) Within two Business Days after the Election Deadline, unless the
Effective Time has not yet occurred, in which case within one Business Day prior
to the Effective Time, VA shall cause the Exchange Agent to effect the
allocation among the holders of BB Common Stock and BB Options of rights to
receive MINT Common Stock, Cash Consideration or cash (in respect of a Cashout
Election) in the Scheme in accordance with Sections 2.12 and 2.14.
2.12 Issuance of MINT Common Stock and Payment of Cash and Stock
Consideration; Proration. The manner in which each outstanding BB Common Share
shall be converted into MINT Common Stock or the right to receive the Cash
Consideration at the Effective Time shall be as set forth in this Section 2.12.
All references to "outstanding" BB Common Shares in Section 2.8(a), Section 2.11
and this Section 2.12 shall mean all BB Common Shares outstanding immediately
prior to the Effective Time, other than BB Common Shares owned by VA, MINT, Sub
or BB or any direct or indirect wholly owned Subsidiary of VA, MINT, Sub or BB.
(a) As is more fully set forth below, the aggregate number of
outstanding BB Common Shares to be converted into the right to receive the Cash
Consideration pursuant to the Scheme shall not exceed the number of such BB
Common Shares that, when multiplied by the Cash Consideration plus the amount of
cash payable to all holders of BB Options pursuant to a Cashout Election, and
after giving effect to the pro-ration contemplated by Section 2.12(c)(vii),
equals the Maximum Cash Consideration (the "Maximum Cash Conversion Number"). As
is more fully set forth below, the aggregate number of BB Common Shares to be
converted into the right to receive the Common Stock Consideration in the Scheme
shall not exceed the number of such BB Common Shares that, when multiplied by
the Common Stock Consideration plus the number of shares of Mint Common Stock
issuable to all holders of BB Options pursuant to a Option Stock Election, and
after giving effect to the pro-ration contemplated by Section 2.12(e)(vii),
equals the Maximum Stock Consideration (the "Maximum Stock Conversion Number").
(b) If Cash Elections are received for a number of BB Common Shares
that is equal to or less than the Maximum Cash Conversion Number, each BB Common
Share covered by a Cash Election shall be converted in the Scheme into the right
to receive the Cash Consideration.
(c) If Cash Elections are received for a number of outstanding BB
Common Shares in the aggregate in excess of the Maximum Cash Conversion Number,
then:
14
(i) Each Non-Electing Share and each outstanding BB Common Share
for which a Stock Election has been received shall be converted in the
Scheme into a fraction of a share of MINT Common Stock equal to the BB
Exchange Ratio;
(ii) Each Non-Electing BB Option and each BB Option for which a
Conversion Election has been received shall receive a number of shares of
MINT Common Stock calculated pursuant to the formula set forth in subclause
(ii) of the second sentence of Section 2.14(a).
(iii) Subject to the provisions of clause (vii) below, the Exchange
Agent will distribute Cash Consideration with respect to the number of such
outstanding BB Common Shares equal to the Maximum Cash Conversion Number of
outstanding BB Common Shares;
(iv) Each outstanding BB Common Share covered by a Cash Election and
not fully converted into the right to receive the Cash Consideration as set
forth in clause (iii) above shall be converted in the Scheme into the right
to receive the fraction of a MINT Common Share equal to the BB Exchange
Ratio;
(v) Subject to the provisions of clause (vii) below), the Exchange
Agent will distribute the Option Cash Consideration pursuant to a Cashout
Election with respect to that number of BB Options subject to such election
that, when aggregated with a number of outstanding BB Common Shares subject
to a Cash Election, would be convertible into the Maximum Cash
Consideration;
(vi) Each outstanding BB Option covered by a Cashout Election and
not fully converted into the right to receive Option Cash Consideration as
set forth in clause (v) shall be converted in the Scheme into the right to
receive the number of MINT Common Shares calculated pursuant to the formula
set forth in subclause (ii) of the second sentence of Section 2.14(a); and
(vii) The distributions of Cash Consideration in respect of
outstanding BB Common Shares and cash in respect of BB Options contemplated
by the preceding clauses (iii) and (v) shall be made pro rata based on the
ratio of the Maximum Cash Consideration to the aggregate amount of Cash
Consideration and cash that would be payable in respect of all outstanding
BB Common Stares for which Cash Election has been made and all BB Options
for which a Cashout Election has been made among all outstanding BB Common
Shares as to which Cash Elections have been made and all BB Options as to
which Cashout Elections have been made.
(d) If Stock Elections are received for a number of BB Common Shares
that is equal to or less than the Maximum Stock Conversion Number, each BB
Common Share covered by
15
a Stock Election shall be converted in the Scheme into a fraction of a share of
Mint Common Shares equal to the BB Exchange Ratio.
(e) If Stock Elections are received for a number of outstanding BB
Common Shares that is in the aggregate in excess of the Maximum Stock Conversion
Number, then:
(i) Each Non-Electing Share and each outstanding BB Common
Share for which a Cash Election has been received shall be converted into
the right to receive the Cash Consideration multiplied by the number of
such BB Common Share;
(ii) Each Non-Electing BB Option and each BB Option for which a
Cashout Election has been received shall be converted into the right to
receive the Option Cash Consideration pursuant to the formula set forth in
subclause (i) of the second sentence of Section 2.14(a);
(iii) Subject to the provisions of clause (vii) below, the
Exchange Agent will distribute a fraction of a share of Mint Common Stock
equal to the BB Exchange Ratio with respect to a number of such outstanding
BB Common Shares equal to the Maximum Stock Conversion Number;
(iv) Each outstanding BB Common Share covered by a Stock
Election and not fully converted into the right to receive Common Stock
Consideration as set forth in clause (iii) above shall be converted in the
Scheme into the right to receive the Cash Consideration multiplied by the
number of such BB Common Shares;
(v) Subject to the provisions of clause (vii) below, the
Exchange Agent will distribute a number of shares of Mint Common Stock
pursuant to a Conversion Election with respect to that number of BB Options
subject to such election that, when aggregated with a number of outstanding
BB Common Shares subject to the Stock Election, would be convertible into
the Maximum Stock Conversion Number; and
(vi) Each outstanding BB Option covered a Conversion Election,
and not fully converted into the right to receive Option Stock
Consideration as set forth in clause (v) shall be converted in the Scheme
into the right to receive Option Cash Consideration calculated pursuant to
the formula set forth in subclause (i) of the second sentence of Section
2.14(a); and
(vii) The distributions of the Common Stock Consideration in
respect of outstanding BB Common Stock and the Option Stock Consideration
in respect to the BB Options contemplated by the preceding clauses (iii)
and (v) shall be
16
made pro rata based on the ratio of the Maximum Stock Consideration to the
aggregate amount of Common Stock Consideration and Option Stock
Consideration that would be distributable in respect of all outstanding BB
Common Shares for which a Stock Election has been made and all BB Options
for which a Conversion Election has been made among all outstanding BB
Common Shares as to which Stock Elections have been made and all BB Options
as to which Conversion Elections have been made.
(f) If Non-Electing Shares or Non-Electing BB Options are not
converted under either Section 2.12(c) or Section 2.12(e), the Exchange Agent
shall distribute with respect to such Non-Electing Shares or Non-Electing BB
Options:
(i) Stock Consideration or Option Stock Consideration with
respect to a number of such Non-Electing Shares and Non-Electing BB
Options, as the case may be, not in excess of that number that will result
in the sum of (A) the number of Non-Electing Shares and Non-Electing
Options converted into MINT Common Shares pursuant to this Section 2.12(f)
and (B) the number of BB Common Shares and BB Options for which Stock
Elections and Option Stock Elections have been received equaling the
Maximum Stock Consideration;
(ii) Non-Electing Shares and Non-Electing BB Options not
converted into the right to receive the Stock Consideration or Option Stock
Consideration as set forth in the preceding sentence shall be converted in
the Scheme into the right to receive the Cash Consideration per BB Common
Share and the Option Cash consideration per BB Option; and
(iii) The distribution of Stock Consideration and Option Stock
Consideration or Cash Consideration and Option Cash Consideration
contemplated by the preceding clauses (i) and (ii) shall be made among all
Non-Electing Shares and Non-Electing BB Options pro rata based on the ratio
of (A) in the case of the Stock Consideration and Option Stock
Consideration, the aggregate Stock Consideration and Option Stock
Consideration available for distribution pursuant to clause (i) above to
the aggregate amount of Scheme Consideration that would be allocable to all
Non-Electing Shares and Non-Electing BB Options if the limitation imposed
by clause (i) above did not apply, among all Non-Electing Shares and Non-
Election BB Options, and (B) in the case of Cash Consideration and Option
Cash Consideration, pro rata among all Non-Electing Shares and Non-Electing
BB Options to be converted pursuant to clause (ii) of Section 2.12(f).
(g) For the purposes of this Section 2.12, outstanding BB Common
Shares as to which an Election is not in effect at the Election Deadline shall
be called "Non-Electing Shares" and outstanding BB Options as to which a Notice
of Exercise is not in effect at the Election Deadline shall be called "Non-
Election BB Options". If the Exchange Agent shall determine that any Election is
not
17
properly made with respect to any outstanding BB Common Shares, such Election
shall be deemed to be not in effect, and the outstanding BB Common Shares
covered by such Election shall, for purposes hereof, be deemed to be Non-
Electing Shares. If VA and BB shall determine that any election of a Cashout
Election or a Conversion Election is not properly made with respect to any BB
Option, such election shall be deemed to be not in effect, and the BB Options
covered by such election shall, for purposes hereof, be deemed Non-Electing BB
Options.
2.13 Exchange of BB Common Share Certificates.
(a) Deposit of Certificates. At the Effective Time, VA and Mint will
-----------------------
deposit in trust with the Exchange Agent, for the benefit of the holders of BB
Common Shares and BB Options, for exchange in accordance with this Article II,
the aggregate Scheme Consideration and Option Scheme Consideration.
(b) Permitted Investments. The cash portion of the aggregate Scheme
---------------------
Consideration and the aggregate Option Scheme Consideration shall be invested by
the Exchange Agent, as directed by and for the benefit of the VA Surviving
Corporation, provided that such investments shall be limited to direct
obligations of the United States of America, obligations for which the full
faith and credit of the United States of America is pledged to provide for the
payment of principal and interest, commercial paper rated of the highest quality
by Moody's Investor Services, Inc. ("Moody's") or Standard & Poor's Ratings
Group, a division of McGraw-Hill, Inc. ("S&P"), and certificates of deposit
issued by a commercial bank whose long-term debt obligations are rated at least
A2 by Moody's or at least A by S&P, in each case having a maturity not in excess
of one year.
(c) Exchange Procedures. Upon delivery of a share certificate (each,
-------------------
a "Certificate") to the Exchange Agent for exchange, together with such other
documents as the Exchange Agent shall require, the holder of such Certificate
shall be entitled to receive in exchange therefor the applicable Scheme
Consideration and the amount of cash in lieu of fractional share interests which
such holder has the right to receive pursuant to the provisions of Section
2.13(e). Upon delivery of a Notice of Exercise or such other documents as the
Exchange Agent shall require, which shall include a written receipt waiving all
of such holder's rights in respect of such BB Option, the BB Option Plans and
the Employee Plan Grantor Trust, the holder of a BB Option shall be entitled to
receive in exchange therefor the applicable Option Scheme Consideration, subject
to reduction for all applicable withholding taxes. In the event of a transfer of
ownership of BB Common Shares which is not registered in the transfer records of
BB, the applicable Scheme Consideration may be paid to a transferee if the
Certificate representing such BB Common Shares is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence satisfactory to the Exchange Agent that any applicable
stock transfer taxes have been paid or that an exception is applicable. Until
delivered as contemplated by this Section 2.13, each Certificate shall be deemed
at any time after the Effective Time to represent only the right to receive upon
such delivery the applicable Scheme Consideration and cash in lieu of any
fractional MINT
18
Common Shares as contemplated by this Section 2.13. No interest shall be paid or
accrued on Scheme Consideration.
(d) Distributions with Respect to Unexchanged Shares. No dividends or
------------------------------------------------
other distributions declared or made after the Effective Time with respect to
MINT Common Shares with a record date after the Effective Time shall be paid to
the holder of any undelivered Certificate with respect to the MINT Common Shares
such holder is entitled to receive and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section 2.13(e), until the
holder of record of such Certificate (or a transferee as described in Section
2.13(c)) shall have delivered such Certificate as contemplated in Section
2.13(c). Subject to the effect of unclaimed property, escheat and other
applicable laws, following delivery of any such Certificate, there shall be paid
to the record holder (or transferee) of the certificates representing whole MINT
Common Shares issued in exchange therefor, without interest, (i) at the time of
such delivery, the amount of any cash payable in lieu of a fractional MINT
Common Share to which such holder (or transferee) is entitled pursuant to
Section 2.13(e) and the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole MINT
Common Shares and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
delivery and a payment date subsequent to delivery payable with respect to such
whole MINT Common Shares, as the case may be.
(e) No Fractional Shares. No certificates or scrip representing a
--------------------
fractional MINT Common Share shall be issued upon the delivery for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a shareholder of MINT. Each holder of BB
Common Shares or BB Options who would otherwise be entitled to receive a
fractional MINT Common Share will be entitled to receive from the Exchange Agent
in accordance with the provisions of this Section 2.13(e), in lieu thereof, an
amount of cash (without interest) equal to the product of such fractional
interest multiplied by the closing trading price for a MINT Common Share on the
day preceding the Closing Date (the aggregate amount of such cash is the
"Aggregate Fractional Amount").
(f) Closing of Transfer Books. From and after the Effective Time, the
-------------------------
stock transfer books of BB with respect to BB Common Shares issued and
outstanding prior to the Effective Time shall be closed and no transfer of any
such shares shall thereafter be made. If, after the Effective Time, Certificates
are presented to BB or the Exchange Agent, as the case may be, they shall be
canceled and exchanged for Scheme Consideration and cash in lieu of fractional
MINT Common Shares as provided in this Article II.
(g) Termination of Exchange Agent. Any certificates representing MINT
-----------------------------
Common Shares deposited with the Exchange Agent pursuant to Section 2.13(a) and
not exchanged within one year after the Effective Time pursuant to this Section
2.13 shall be returned by the Exchange Agent to MINT, which shall thereafter act
as Exchange Agent. All cash and investments thereof pursuant to Section 2.13(b)
held at the end of the one year period after the Effective Time shall be
remitted to MINT, after which time any holder of undelivered Certificates shall
look as a
19
general creditor only to MINT for payment of such funds to which such holder may
be due, subject to applicable law. MINT shall not be liable to any Person for
such shares or funds delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(h) Affiliates. Notwithstanding anything herein to the contrary,
----------
Certificates surrendered for exchange by any "affiliate" (as determined pursuant
to Section 5.14) of BB shall not be exchanged until MINT has received a written
agreement from such Person as provided in Section 5.14 hereof.
2.14 Stock Options.
(a) Each BB Option outstanding as of the Effective Time shall be
treated as fully exercisable in accordance with the terms of the applicable BB
Option Plan and stock option agreement. Each holder of any such BB Option may
exercise any such BB Option by delivering a notice of exercise (a "Notice of
Exercise"), the form of which shall be mutually agreeable to VA and BB and which
shall contain a waiver or acknowledgment of full satisfaction of all rights in
respect of such BB Options, the BB Option Plans and the Employee Plan Grantor
Trust, to the Exchange Agent prior to the Election Deadline and requesting that,
in the Scheme, he or she receive in respect of such BB Option (i) the excess of
the Cash Consideration payable in respect of the BB Common Shares issuable in
connection with the exercise of such BB Option over the exercise price payable
in respect of such BB Option (the "Option Cash Consideration"), (a "Cashout
Election"), and/or (ii) a number of shares of MINT Common Stock (the "Option
Stock Consideration" and, together with the Option Cash Consideration, the
"Option Scheme Consideration"), equal to (x) the quotient of (A) the amount of
such excess divided by (B) the amount of the Cash Consideration (a "Conversion
Election") multiplied by (y) the BB Exchange Ratio of a MINT Common Share, in
each case in full and complete satisfaction of his or her rights in respect of
such BB Option. Subject to Section 2.12, the net amount of the cash payable in
connection with a Cashout Election shall be paid by the Exchange Agent pursuant
to Section 2.13(c) without interest to the holder as soon as reasonably
practicable following the Effective Time, but in no event more than 5 days
following the Effective Time, but subject to reduction for all applicable
withholding taxes. Prior to the Effective Time, BB shall take such actions,
including, without limitation, action by appropriate committee of the Board of
Directors of BB, necessary to permit the application of the provisions of
Section 2.12 with respect to any Non-Electing BB Options.
(b) At the Effective Time, BB shall take such action as may be
necessary to pay to each participant in the BB Directors Unit Plan an amount
equal to the sum of the number of Share Units credited to such participant's
account under the Plan multiplied by the Cash Consideration plus the amount of
any other cash credited to such participant's account in accordance with the
terms of such Plan. BB shall use commercially reasonable efforts to terminate,
immediately prior to the Effective Time, the Directors Plan Grantor Trust,
distribute all of the assets held in the Trust to BB and obtain a waiver or
acknowledgment of full satisfaction of all rights in respect of such Plan and
the Directors Plan Grantor Trust from each participant receiving a distribution
from such Plan.
20
(c) BB shall use commercially reasonable efforts to terminate,
immediately prior to the Effective Time, the Employee Plan Grantor Trust and to
distribute all of the assets held in the Trust to BB.
(d) Prior to the Effective Time, BB and VA shall use commercially
reasonable efforts to procure that (i) the Octavian Plan be terminated in
consideration of the payment of such consideration as the participants in such
Plan and VA shall mutually agree or (ii) if the Octavian Plan is not terminated
pursuant to clause (i), the terms of the Octavian Plan be amended such that (x)
-
the book value of BB for purposes of determining the option grants for the year
2000 be set at the first to occur of (A) December 31, 1999 or (B) the Closing
- -
Date and (y) the participants in such Plan will, from and after the Effective
-
Time, be entitled to receive, in lieu of options with respect to BB Common
Shares, options to purchase a number of Mint Common Shares equal to the product
of the number of BB Common Shares subject to such options multiplied by the BB
Exchange Ratio provided that Mint shall in no event be obligated to issue
options in respect of Mint Common Shares in excess of 600,000 BB Common Shares
multiplied by the BB Exchange Ratio in the aggregate. The exercise price or
prices for such replacement options will be set such that the aggregate exercise
price payable in respect of the options on BB Common Shares will equal the
aggregate exercise price payable in respect of the exercise of such replacement
options.
(e) Each outstanding option in respect of VA Common Shares shall from
and after the Effective Time represent an option in respect of an equal number
of MINT Common Shares on the same terms and conditions.
2.15 Best Efforts To Increase Maximum Cash Consideration. VA shall use
best efforts to increase the Maximum Cash Consideration to an amount equal to
50% of the sum of the Scheme Consideration and Option Scheme Consideration prior
to the mailing of the Proxy Statement/Prospectus in connection with the VA
Shareholders Meeting and to enter into an amendment to this Agreement to effect
such increase. To the extent VA shall so increase the Maximum Cash
Consideration, VA may, at its election, decrease the Maximum Cash Consideration,
but in no event shall the sum of the percentages referred to in Maximum Cash
Consideration and Maximum Stock Consideration, as so increased or decreased, be
less than 100%.
2.16 Closing. On the date which is the third business day after the
satisfaction of the last of the unsatisfied conditions set forth in Articles VI
and VII hereof, but not prior to December 3, 1999 (it being understood that this
limitation is for the benefit of, and may be waived by, VA) (or such other time
as the parties may mutually agree) (the "Scheduled Closing Date"), a closing
(the "Closing") will be held at the offices of Debevoise & Plimpton, 875 Third
Avenue, New York, New York 10022 (or such other place as the parties may agree)
for the purpose of confirming all of the foregoing; provided, that nothing in
--------
this Section 2.16 shall be deemed to affect (i) the conditions to the respective
parties' obligations hereunder contained in Articles VI and VII hereof or (ii)
Article IX hereof. Notwithstanding the foregoing, the date and time at which
such Closing actually occurs are herein referred to as the "Closing Date."
21
2.17 Tax Consequences. It is intended by the parties hereto that the
Merger will qualify as a reorganization within (i) the meaning of Section 368(a)
of the Internal Revenue Code and (ii) the Merger together with the Scheme, when
integrated, will be treated as a transaction described in Section 351 of the
Internal Revenue Code. The parties hereto hereby adopt this Agreement as a "plan
of reorganization" within the meaning of Section 1.368-1(c) of the United States
Treasury Regulations.
2.18 VA Governance.
(a) At the Effective Time, the Articles of Incorporation and By-laws
of MINT shall be in the form of the Articles of Incorporation and By-Laws of VA.
(b) Board of Directors; Committees. VA shall use its best efforts to
cause Nigel Rogers and two other persons to be designated by BB, subject to the
approval of VA, to be elected members of the Board of Directors of MINT
immediately after the Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BB
As an inducement to VA to enter into this Agreement, and except as
otherwise disclosed to VA in a letter delivered to it prior to the execution
hereof (the "BB Disclosure Letter") BB hereby makes, as of the date hereof and
as of the Closing Date, the following representations and warranties to VA:
3.1 Organization, Standing and Corporate Power. Each of BB and its
Subsidiaries is a corporation duly organized, validly existing and, where
relevant under applicable law, is in good standing under the laws of the
respective jurisdiction in which it is incorporated and has the requisite
corporate power and authority to carry on its business as now being conducted.
Each of BB and its Subsidiaries is duly qualified or licensed to do business and
is in good standing in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed, individually or in the aggregate, is not reasonably likely to have
a Material Adverse Effect on BB. BB has made available to VA complete and
correct copies of its Certificate of Incorporation, Memorandum of Association
(or other organizational documents) and Bye-laws and the articles of association
(or other organizational documents) and bylaws of its Subsidiaries, in each case
as amended to the date hereof.
3.2 Subsidiaries. Section 3.2 of the BB Disclosure Letter lists each
subsidiary of BB. All the outstanding shares of capital stock of, or other
ownership interests in, each such Subsidiary have been validly issued and are
fully paid and nonassessable and, except as set forth in Section 3.2 of the BB
Disclosure Letter, are owned directly or indirectly by BB, free and clear of all
liens and free
22
of any other restriction (including any restriction on the right to vote, sell
or otherwise dispose of such capital stock or such other ownership interest).
3.3 Capital Structure. Section 3.3 of the BB Disclosure Letter sets
forth, as of the date hereof, the authorized capital stock of BB, the number of
such shares issued and outstanding, the number of such shares held by BB in its
treasury, the number of such shares subject to options and the BB Option Plans
under which such options were granted, and the number of such shares reserved
for issuance under each such BB Option Plan. There are no outstanding stock
appreciation rights ("SARs") or rights (other than the BB Options listed in
Section 3.3 of the BB Disclosure Letter) to receive shares of the capital stock
of BB on a deferred basis granted under any of BB Option Plans or otherwise.
Section 3.3 of the BB Disclosure Letter sets forth a true and complete list of
all options to acquire shares of BB's capital stock, the number of shares
subject to each such option, the grant dates and the exercise prices thereof.
All outstanding shares of capital stock of BB are, and all shares which may be
issued pursuant to this Agreement or BB Option Plans will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. As of the date of this Agreement, no bonds, debentures, notes
or other indebtedness of BB having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
shareholders of BB may vote are issued or outstanding. Except as set forth
above, as of the date of this Agreement, there are no preemptive or other
outstanding securities, options, warrants, calls, rights, conversion rights,
redemption rights, repurchase rights, commitments, agreements, arrangements or
undertakings of any kind to which BB or any of its Subsidiaries is a party or by
which any of them is bound obligating BB or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of BB or any of its Subsidiaries, or
giving any person a right to subscribe for or acquire, any securities of BB or
any of its Subsidiaries or obligating BB or any of its Subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
conversion right, redemption right, repurchase right, commitment, agreement,
arrangement or undertaking. There are no outstanding contractual obligations of
BB or any of its Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock of BB or any of its Subsidiaries. There are no
outstanding contractual obligations of BB to vote or to dispose of any shares of
the capital stock of any of its Subsidiaries.
3.4 Authority; Noncontravention.
(a) BB has all requisite corporate power and authority to enter into
this Agreement and the Other Agreements to which it is a party and, subject to
receipt of the BB Shareholder Approval, to consummate the transactions
contemplated by this Agreement and the Other Agreements to which it is a party.
The execution and delivery of this Agreement and the Other Agreements to which
it is a party by BB and the consummation of the transactions contemplated by
this Agreement and the Other Agreements to which it is a party have been duly
authorized by all necessary corporate action on the part of BB, subject to
receipt of the BB Shareholder Approval in the case of this Agreement. This
Agreement and the Other Agreements to which it is a party have been duly
executed and delivered by BB and, assuming the due execution and delivery of
each such agreement by the counterparties thereto, each such agreement
constitutes a valid and binding
23
obligation of BB as to BB's obligations therein, enforceable against BB in
accordance with its terms. The execution and delivery of this Agreement and the
Other Agreements to which it is a party do not, and the consummation of the
transactions contemplated by, and compliance with the provisions of this
Agreement and the Other Agreements to which it is a party by BB will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of any lien upon any of the properties or
assets of BB or any of its Subsidiaries under, (A) Memorandum of Association (or
other organizational documents) and By-laws of BB, in each case as amended to
the date hereof or, except as set forth in Section 3.4 of the BB Disclosure
Letter, the memorandum, the comparable organizational documents and bylaws of
any of BB's Subsidiaries, (B) except as set forth in Section 3.4 of the BB
Disclosure Letter, any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to BB or any of its Subsidiaries or their respective
properties or assets or (C) subject to the governmental filings and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to BB or any of its
Subsidiaries or their respective properties or assets, other than, in the case
of clauses (B) and (C), any such conflicts, violations, defaults, obligations,
losses, rights, liens, judgments, orders, decrees, statutes, laws, ordinances,
rules or regulations that, individually or in the aggregate, are not reasonably
likely to have a Material Adverse Effect on BB. No consent, approval, order or
authorization of, or registration, declaration or filing with, any federal,
state or local government or any court, administrative agency or commission or
other governmental authority or agency, domestic or foreign, is required by or
with respect to BB or any of its Subsidiaries in connection with the execution
and delivery of this Agreement and the Other Agreements to which it is a party
by BB or the consummation by BB of any of the transactions contemplated by this
Agreement and the Other Agreements to which it is a party except for (A) the
filing of a premerger notification and report form by BB under the HSR Act; (B)
the filing with the SEC of (1) the Form S-4, (2) a proxy statement relating to
the BB Shareholders Meeting (such proxy statement, together with the proxy
statement relating to the VA Shareholders Meeting and the prospectus relating to
the issuance of the MINT Common Shares, in each case as amended or supplemented
from time to time, the "Proxy Statement/Prospectus") and (3) such reports under
the Exchange Act, as may be required in connection with this Agreement, the
Other Agreements to which it is a party and the transactions contemplated hereby
and thereby; (C) the filing with the applicable Registrars of the application
for registration of the order sanctioning the Scheme and such other documents as
are required by the BCA, and such filings with Governmental or Regulatory
Authorities to satisfy the applicable requirements of state securities or "blue
sky" laws; (D) such filings with and approvals of the NYSE to permit the MINT
Common Shares that are to be issued in the Merger and the Scheme to be listed on
the NYSE; (E) filings in respect of, and approvals and authorizations of, and,
as applicable, the expiration of applicable waiting periods of Lloyd's and of
Governmental and Regulatory Authorities in the U.K. and Canada (the "BB
Designated Insurance Approvals"); and (F) such consents, approvals, orders or
authorizations the failure of which to be made or obtained, individually or in
the aggregate, is not reasonably likely to have a Material Adverse Effect on BB.
24
(b) As of the date hereof, the Board of Directors of BB has approved
and declared advisable and in the best interests of the shareholders of BB this
Agreement and the Scheme, and has approved Other Agreements to which it is a
party and the transactions contemplated by this Agreement and Other Agreements
to which it is a party.
3.5 SEC Documents; Undisclosed Liabilities; SAP Statements.
(a) BB has filed all required reports, schedules, forms, statements
and other documents with the SEC since January 1, 1996 (including all filed
reports, schedules, forms, statements and other documents whether or not
required, the "BB SEC Documents"). As of their respective dates, the BB SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such BB SEC
Documents, and none of the BB SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the extent
that information contained in any BB SEC Document has been revised or superseded
by a later filed BB SEC Document, none of the BB SEC Documents contains any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of BB included in the BB SEC Documents comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or in the BB SEC Documents) and
fairly present the consolidated financial position of BB and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end adjustments). Except for liabilities
and obligations incurred in the ordinary course of business consistent with past
practice since the date of the most recent consolidated balance sheet included
in the BB SEC Documents or disclosed in Section 3.5(a) of the BB Disclosure
Letter, neither BB nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be recognized or disclosed on a consolidated balance sheet
of BB and its consolidated Subsidiaries or in the notes thereto.
(b) BB conducts its material insurance operations through those
companies listed in Section 3.5 of the BB Disclosure Letter (collectively, the
"BB Insurance Subsidiaries"). Each of the BB Insurance Subsidiaries has filed
all annual and quarterly statements, together with all exhibits,
interrogatories, notes, schedules and any actuarial opinions, affirmations or
certifications or other supporting documents in connection therewith, required
to be filed with or submitted to the appropriate regulatory authorities of the
jurisdiction in which it is domiciled or commercially domiciled or as may be
required by any applicable Governmental or Regulatory Authority on forms
prescribed or permitted by such authority (collectively, the "BB SAP
Statements"). BB has delivered or made available to VA all of the BB SAP
Statements for each BB Insurance Subsidiary for the
25
periods beginning January 1, 1996, each in the form (including exhibits, annexes
and any amendments thereto) filed with the applicable insurance regulatory
agencies. Financial statements included in the BB SAP Statements and prepared on
a statutory basis, including the notes thereto, were prepared in conformity with
statutory accounting practices prescribed or permitted by the applicable
insurance regulatory authority consistently applied for the periods covered
thereby and present fairly the statutory financial position of such BB Insurance
Subsidiaries as at the respective dates thereof and the results of operations of
such BB Insurance Subsidiaries for the respective periods then ended. The BB SAP
Statements complied in all material respects with all applicable laws, rules and
regulations when filed, and to the knowledge of BB no material deficiency has
been asserted with respect to any BB SAP Statements by the applicable insurance
regulatory body or any other governmental agency or body. The statutory balance
sheets and income statements included in the BB SAP Statements required to be
audited have been audited, and BB has delivered or made available to VA true and
complete copies of all audit opinions related thereto for periods beginning
January 1, 1996. BB has delivered or made available to VA true and complete
copies of all examination reports of insurance departments and any insurance
regulatory agencies received by BB on or after January 1, 1996, relating to the
BB Insurance Subsidiaries.
3.6 Liabilities and Reserves.
(a) The reserves carried on the BB SAP Statements of each of BB and
its Subsidiaries for the quarter ended March 31, 1999 for losses, claims and
similar purposes (including claims litigation) were, as of such date, in
compliance in all material respects with the requirements for reserves
established by the appropriate regulatory authorities of the jurisdiction in
which it is domiciled or commercially domiciled or as may be required by any
applicable Governmental or Regulatory Authority, were determined in all material
respects in accordance with generally accepted actuarial standards and
principles consistently applied, and were fairly stated in all material respects
in accordance with actuarial and statutory accounting practices.
(b) Except for regular periodic assessments in the ordinary course of
business or assessments based on developments which are publicly known within
the insurance industry, to the knowledge of BB, no claim or assessment is
pending or threatened against any of BB's Subsidiaries which is peculiar or
unique to such Subsidiary by any governmental insurance guaranty associations or
Lloyds in connection with such association's or Lloyds' fund relating to
insolvent insurers which if determined adversely, would, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect.
3.7 Investment Advisory and Investment Company Matters.
(a) Except as set forth in Section 3.7 of the BB Disclosure Letter,
neither BB nor any of its Subsidiaries conducts activities of or is otherwise
deemed under law (1) to control an "investment adviser," as such term is defined
in Section 2(a)(20) of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), whether or not registered under the Investment
Advisers Act of 1940, as amended (the "Investment Advisers Act"), or any person
required to be
26
registered as an investment company under the Investment Company Act. Except as
set forth in Section 3.7 of the BB Disclosure Letter, neither BB nor any of its
Subsidiaries carries on investment business in the United Kingdom as defined in
the Financial Services Act 1986, whether or not authorized under Chapter III, or
being an exempted person under Chapter IV of that Act. Neither BB nor any of its
Subsidiaries is an "investment company" as defined in the Investment Company
Act, and neither BB nor any of its Subsidiaries is a promoter (as such term is
defined in Section 2(a)(30) of the Investment Company Act) of any person that is
such an investment company.
(b) Except as set forth in Section 3.7 of the BB Disclosure Letter,
neither BB nor any of its Subsidiaries conducts activities of, controls, owns
more than a 20% interest in, or is deemed under applicable law to control, any
Person that is an investment adviser as defined in the Investment Advisers Act,
whether or not registered under such Act, other than such an investment adviser
whose only clients are "insurance companies" as defined in Section 2(a)(17) of
the Investment Company Act.
3.8 Information Supplied. None of the information supplied or to be
supplied by BB for inclusion or incorporation by reference in (i) the Form S-4
will, at the time the Form S-4 is filed with the SEC, at any time it is amended
or supplemented or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading or (ii) the Proxy Statement/Prospectus will, at the date the
Proxy Statement/Prospectus is first mailed to the holders of BB Common Shares or
at the time of the BB Shareholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Form S-4 and the
Proxy Statement/Prospectus will comply as to form in all material respects with
the requirements of the Securities Act and the Exchange Act, as applicable, and
the respective rules and regulations promulgated thereunder, except that no
representation or warranty is made by BB with respect to statements made or
incorporated by reference therein based on information supplied by VA
specifically for inclusion or incorporation by reference in the Form S-4 or the
Proxy Statement/Prospectus.
3.9 Absence of Certain Changes or Events. Except as disclosed in the BB
SEC Documents filed and publicly available prior to the date of this Agreement
or in Section 3.9 of the BB Disclosure Letter, since the date of the most recent
audited financial statements included in the BB SEC Documents, BB has conducted
its business only in the ordinary course, and there has not been since such
date, (i) any Material Adverse Change in BB, (ii) any declaration, setting aside
or payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of BB's capital stock (other than regular
quarterly dividends), (iii) any split, combination or reclassification of any of
its capital stock or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, (iv) (A) any granting by BB or any of its Subsidiaries to any
director, executive officer or key employee of BB or any of its Subsidiaries of
any award or incentive payment or increase in compensation or benefits, except
in the ordinary course of business consistent with past practice or as was
required under employment agreements in effect as of September 30, 1998 (copies
of which have been delivered to VA), (B) any
27
granting by BB or any of its Subsidiaries to any such director, executive
officer or key employee of any increase in severance or termination pay, except
as was required under any employment, severance or termination agreements in
effect as of the date of this Agreement (copies of which have been made
delivered to VA) or (C) any entry by BB or any of its Subsidiaries into any
employment, severance or termination agreement with any such director, executive
officer or key employee, (v) any change in accounting methods, principles or
practices by BB materially affecting its assets, liabilities or business, except
insofar as may have been required by a change in GAAP or (vi) any condition,
event or occurrence which would be reasonably likely to prevent, hinder or
materially delay the ability of BB to consummate the transactions contemplated
by this Agreement or the Other Agreements to which it is a party.
3.10 Litigation. There is no suit, action or proceeding pending or, to the
knowledge of BB, threatened against or affecting BB or any of its Subsidiaries
or any of their respective officers or employees that, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on BB nor is
there any judgment, decree, injunction, rule or order of any Governmental or
Regulatory Authority or arbitrator outstanding against BB or any of its
Subsidiaries having, or which is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on BB; provided that for purposes of
--------
this Section 3.10 any such suit, action, proceeding, judgment, decree,
injunction, rule or order arising after the date hereof shall not be deemed to
have a Material Adverse Effect on BB if and to the extent such suit, action,
proceeding, judgment, decree, injunction, rule or order (or any relevant part
thereof) is based on this Agreement, the Other Agreements to which it is a party
or the transactions contemplated hereby or thereby.
3.11 Labor Relations. Except as set forth in Section 3.11 of the BB
Disclosure Letter or the BB SEC Documents, (i) BB and its Subsidiaries have
complied with all Laws relating to the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity and collective bargaining
and there are no controversies pending or, to the knowledge of BB, threatened,
between BB or any of its Subsidiaries and any of their respective employees,
except such non-compliance or controversies which have not had, and would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on BB; (ii) neither BB nor any of its Subsidiaries is a party to
any collective bargaining agreement or other labor union contract applicable to
persons employed by BB or its Subsidiaries, nor does BB know of any activities
or proceedings of any labor union to organize any such employees; and (iii) BB
does not have knowledge of any strikes, slowdowns, work stoppages, lockouts, or
threats thereof, by or with respect to any employees of BB or any of its
Subsidiaries which would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on BB.
3.12 Benefit Plans. Except as described in Section 3.12 of BB Disclosure
Letter and except as would not reasonably be expected to have a Material Adverse
Effect on BB, (i) each Employee Benefit Plan conforms to, and its administration
is in conformity with, all applicable laws, no liability has been or is expected
to be incurred by BB or any of its Subsidiaries with respect to any Employee
Benefit Plan except regular periodic contributions to such plans and full
payment has been made of all amounts that BB or any of its Subsidiaries is
required to have paid as contributions to
28
each Employee Benefit Plan, (ii) to BB's knowledge, the current value of accrued
benefits of each Employee Benefit Plan that is a defined benefit plan does not
exceed the current value of such plan's assets, (iii) BB has made available to
VA a true and correct copy of each of the Employee Benefit Plans, and all
applicable trust agreements and all contracts relating thereto, or to the
funding thereof, (iv) all Employee Benefit Plans intended to satisfy applicable
Tax qualification requirements, or other requirements necessary to secure
favorable Tax or other legal treatment comply in all material respects with such
requirements, and (v) adequate accruals for all obligations under the Employee
Benefit Plans are reflected in the financial statements included in the BB SEC
Documents. Except as set forth in Section 3.12 of the BB Disclosure Letter, no
employee of BB will be entitled to any additional benefits or any acceleration
of the time of payment, funding or vesting of any benefits under any BB Benefit
Plan as a result of the transactions contemplated by this Agreement.
3.13 Tax Matters.
(a) To the knowledge of BB, none of BB and its Subsidiaries has, nor
has it had, any income which is, or has been, subject to the United States
federal income tax as income that is effectively connected with the conduct of a
trade or business within the United States, within the meaning of Section
882(a)(1) of the Code. BB and its Subsidiaries have filed, or caused to be filed
with the appropriate Governmental or Regulatory Authorities, all income Tax
Returns and all other material Tax Returns required to be filed on or prior to
the date hereof which, if not filed, would have a Material Adverse Effect on BB,
and have paid in full all Taxes (including Taxes withheld from employees'
salaries and other withholding Taxes and obligations) shown to be due on such
Tax Returns, and the most recent financial statements of BB included in the BB
SEC Documents reflect an adequate reserve in accordance with GAAP for all Taxes
payable by BB and its Subsidiaries for all taxable periods and portions thereof
accrued through the date of such financial statements, except for inadequately
reserved Taxes that individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect. All written assessments of Taxes due
and payable by or on behalf of BB or any of its Subsidiaries have either been
paid or provided for (in accordance with GAAP) except for assessments that
individually or in the aggregate would not reasonably be expected to have a
Material Adverse Effect.
(b) There are no material audits, administrative proceedings or court
proceedings regarding Taxes pending against BB or any of its Subsidiaries and
wherein an adverse determination or ruling, for any one of, or all such, audits
or proceedings, would reasonably be expected to have a Material Adverse Effect.
No deficiencies for any Tax have been proposed in writing, asserted or assessed,
except for deficiencies that individually or in the aggregate would not
reasonably be expected to have a Material Adverse Effect.
(c) To BB's knowledge, BB and its Subsidiaries did not have for the
year ended December 31, 1998, and BB does not expect BB or any of its
Subsidiaries to have for the period commencing January 1, 1999 and ending at the
earlier of December 31, 1999 and the Effective Time (treating such period as if
it were a taxable year) "related person insurance income" within the meaning of
Section 953(c)(2) of the Code in excess of the exceptions provided in Sections
29
953(c)(3)(B) of the Code or, if such exception is not available for such year or
such period, BB and its Subsidiaries qualified for such year or for such period,
as the case may be, for the exception provided in Section 953(c)(3)(A) of the
Code.
(d) Except as disclosed in Section 3.13(d) of the BB Disclosure
Letter, to BB's knowledge, neither BB nor any of its Subsidiaries is, nor has BB
or any of its Subsidiaries ever been, a "controlled foreign corporation" within
the meaning of Section 957(a) or 957(b) of the Code.
3.14 No Excess Parachute Payments. Except as set forth in Section 3.14 of
the BB Disclosure Letter, no amount that could be received (whether in cash or
property or the vesting of property) as a result of any of the transactions
contemplated by this Agreement, either alone or together with other events, by
any employee, officer or director of BB or any of its affiliates who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employment, severance or termination
agreement, other compensation arrangement or the BB Benefit Plan currently in
effect would be characterized as an "excess parachute payment" (as such term is
defined in Section 280G(b)(1) of the Code).
3.15 Compliance with Applicable Laws. Each of BB and its Subsidiaries and,
where applicable, each of their respective officers and employees, has in effect
all Licenses and Permits necessary for it to own, lease or operate its assets
and to carry on its business as now conducted, and there has occurred no default
under or limitation with respect to any such Licenses and Permits, except for
the lack of Licenses and Permits and for defaults or limitations under Licenses
and Permits which, individually or in the aggregate, are not reasonably likely
to have a Material Adverse Effect on BB. To the knowledge of BB, BB and its
Subsidiaries are, and have been, in compliance with all applicable statutes,
laws, ordinances, rules, orders and regulations of any Governmental or
Regulatory Authority, including Insurance Laws, except for instances of
noncompliance which, individually or in the aggregate, are not reasonably likely
to have a Material Adverse Effect on BB. To the knowledge of BB, the businesses
and operations of each of BB and its Subsidiaries are being and have been
conducted in compliance in all respects with all applicable Insurance Laws,
except for instances of noncompliance which, individually or in the aggregate,
are not reasonably likely to have a Material Adverse Effect on BB. No
investigation, examination or review by any Governmental or Regulatory Authority
with respect to BB or any of its Subsidiaries is pending or, to the knowledge of
BB, threatened, nor has any Governmental or Regulatory Authority indicated an
intention to conduct the same, except for those the outcome of which,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect on BB. Any of BB and its Subsidiaries which is registered as
either a Managing Agent at Lloyds or a Corporate Member at Lloyds has not, since
its first registration, had such registration withdrawn, and no notice has been
given by Lloyds to the effect that (and, to the knowledge of BB, no
circumstances exist such that) such registration will or is likely to be
withdrawn or reviewed and no conditions, obligations or undertakings have been
imposed on such registration, other than those applicable to managing agents or
corporate members at Lloyd's generally.
30
3.16 Properties. Except as disclosed in the BB SEC Documents, each of BB
and its Subsidiaries (i) has good, clear and marketable title to all the
properties and assets reflected in the latest audited balance sheet included in
the most recent BB SEC Document as being owned by BB or one of its Subsidiaries
or acquired after the date thereof which are, individually or in the aggregate,
material to BB's business on a consolidated basis (except properties and assets
sold or otherwise disposed of since the date thereof in the ordinary course of
business), free and clear of (A) all Encumbrances except (1) statutory liens
securing payments not yet due and (2) such imperfections or irregularities of
title or other Encumbrances (other than real property mortgages or deeds of
trust) as do not materially affect the use of the properties or assets subject
thereto or affected thereby or otherwise materially impair business operations
at such properties, and (B) all real property mortgages and deeds of trust and
(ii) is the lessee of all leasehold estates reflected in the latest audited
financial statements included in the most recent BB SEC Document or acquired
after the date thereof which are material to its business on a consolidated
basis and is in possession of the properties purported to be leased thereunder,
and each such lease is valid without material default thereunder by the lessee
or, to the BB's knowledge, the lessor.
3.17 Voting Requirements. The affirmative vote at the BB Shareholders
Meeting (the "BB Shareholder Approval") of the holders of a majority in number
representing at least 75 percent of the voting power of all outstanding BB
Common Shares present and voting at the BB Shareholders Meeting to adopt this
Agreement is the only vote of the holders of any class or series of BB's capital
stock necessary to approve and adopt this Agreement, the Other Agreements to
which it is a party, and the transactions contemplated hereby and thereby.
3.18 Takeover Statutes. To the knowledge of BB, no takeover statute, and
no anti-takeover provision in BB's Memorandum of Association (or other
organizational documents) and Bye-laws, is applicable to the Scheme or the other
transactions contemplated by this Agreement or the Other Agreements to which it
is a party.
3.19 Brokers. No broker, investment banker, financial adviser or other
person, other than DLJ, the fees and expenses of which will be paid by BB, is
entitled to any broker's, finder's, financial adviser's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of BB. BB has delivered to VA true
and complete copies of all agreements under which any such fees or expenses are
payable and all indemnification and other agreements related to the engagement
of the persons to whom such fees are payable.
3.20 Related Party Transactions. Except for the transactions described in
the BB SEC Reports or Section 3.20 of the BB Disclosure Letter, all transactions
involving BB or any of the Subsidiaries that are required to be disclosed in the
BB SEC Reports in accordance with Item 404 of Regulation S-K have been so
disclosed, and to the knowledge of BB, since December 31, 1998, neither BB nor
any of its Subsidiaries has entered into any transactions that would be required
to be disclosed in future public filings under the Exchange Act pursuant to such
Item which have not already been disclosed in the BB SEC Reports filed prior to
the date hereof.
31
3.21 Material Contracts. Other than Contracts or amendments thereto that
are required to be filed and have been filed as an exhibit to the latest Form
10-K filed by BB with the SEC, and except as set forth in Section 3.21 of the BB
Disclosure Letter, there are no Contracts that are material to the business,
financial position or results of operations of BB, including (i) any employment,
severance, termination, consulting or retirement contract providing for
aggregate payments to any individual in any calendar year in excess of $500,000,
(ii) any contract relating to the borrowing of money or the guarantee of any
such obligation (other than contracts evidencing fully secured repurchase
agreements, trade payables, and contracts relating to borrowings or guarantees
made in the ordinary course of business), (iii) any material agency, third party
administrator, management or other service contracts and (iv) any material
contract or agreement between or among BB and its Subsidiaries.
3.22 Intellectual Property. Except as, individually or in the aggregate,
is not reasonably likely to have a Material Adverse Effect on BB, BB does not
have knowledge of any valid grounds for any bona fide claims (i) to the effect
that the manufacture, sale, licensing or use of any product or service as now
used, sold or licensed or proposed for use, sale or license by BB or any of its
Subsidiaries, infringes on any copyright, patent, trademark, trade name, service
mark or trade secret; (ii) against the use by BB or any of its Subsidiaries, of
any copyrights, patents, trademarks, trade names, service marks, trade secrets,
technology, know-how or computer software programs and applications used in the
business of BB or any of its Subsidiaries as currently conducted or as proposed
to be conducted; (iii) challenging the ownership, validity or effectiveness of
any BB Intellectual Property Rights or other trade secret material to BB; or
(iv) challenging the license or legally enforceable right to use of the Third-
Party Intellectual Rights by BB or any of its Subsidiaries.
3.23 No Regulatory Disqualifications. To the knowledge of BB, no event has
occurred or condition exists or, to the extent it is within the reasonable
control of BB, will occur or exist with respect to BB that, in connection with
obtaining any approval of any Governmental or Regulatory Authority required for
the Scheme, would cause BB to fail to satisfy any applicable statute or written
regulation of any applicable insurance regulatory authority that, individually
or in the aggregate, is reasonably likely to have a Material Adverse Effect on
BB.
3.24 Insurance Ratings. As of the date hereof, BB has no reason to believe
that any rating presently held by BB or any of its Subsidiaries is likely to be
modified, qualified, lowered or placed under surveillance for a possible
downgrade for any reason other than as a result of the transactions contemplated
hereby.
3.25 Reinsurance, etc. BB has no reason to believe that any material
amount recoverable pursuant to any material Reinsurance Agreement applicable to
the BB Insurance Subsidiaries or their properties or assets reflected in the BB,
SAP Statements is not fully collectible in due course. Each BB Insurance
Subsidiary is entitled to take full credit in its SAP Statements pursuant to
Insurance Laws, rules and regulations for such reinsurance, coinsurance or
excess insurance ceded pursuant to any such Reinsurance Agreement. Except as set
forth in Section 3.25 of the BB Disclosure Letter,
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there are no assumption reinsurance contracts or arrangements entered into by
any BB Insurance Subsidiary in which such BB Insurance Subsidiary has ceded risk
to any other Person which are material individually or in the aggregate to BB
and its Subsidiaries taken as a whole.
3.26 Derivatives. As of December 31, 1998, none of BB and the BB
Subsidiaries was subject to any material exposure, individually or in the
aggregate, under any futures or option contracts, swaps, hedges or similar
instruments ("Derivatives") to which BB or any of BB Subsidiaries is a party.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF VA
As an inducement to BB to enter into this Agreement, and except as
otherwise disclosed to BB in a letter delivered to it prior to the execution
hereof (the "VA Disclosure Letter") VA hereby makes, as of the date hereof and
as of the Closing Date, the following representations and warranties to BB:
4.1 Organization, Standing and Corporate Power. Each of VA and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the respective jurisdiction in which it is
incorporated and has the requisite corporate power and authority to carry on its
business as now being conducted. Each of VA and its Subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed,
individually or in the aggregate, is not reasonably likely to have a Material
Adverse Effect on VA. VA has made available to BB complete and correct copies of
its articles of incorporation (or other organizational documents) and bylaws and
the articles of incorporation (or other organizational documents) and bylaws of
its Subsidiaries, in each case as amended to the date hereof.
4.2 Subsidiaries. Except for directors' qualifying shares, all the
outstanding shares of capital stock of, or other ownership interests in, each
such Subsidiary have been validly issued and are fully paid and nonassessable
and are owned directly or indirectly by VA, free and clear of all liens and free
of any other restriction (including any restriction on the right to vote, sell
or otherwise dispose of such capital stock or such other ownership interest).
4.3 Capital Structure. Section 4.3 of the VA Disclosure Letter sets
forth, as of the date hereof, the authorized capital stock of VA, the number of
such shares issued and outstanding, the number of such shares subject to options
and the VA Option Plans under which such options were granted and the number of
such shares reserved for issuance under each such VA Option Plan. There are no
outstanding SARs or rights (other than the stock options listed in Section 4.3
of the VA Disclosure Letter) to receive shares of the capital stock of VA on a
deferred basis granted under any of VA Stock Option Plans or otherwise. All
outstanding shares of capital stock of VA are, and all
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shares which may be issued pursuant to this Agreement or VA Stock Option Plans
will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. As of the date of this
Agreement, no bonds, debentures, notes or other indebtedness of VA having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of VA may vote are issued or
outstanding. Except as set forth above, as of the date of this Agreement, there
are no preemptive or other outstanding securities, options, warrants, calls,
rights, conversion rights, redemption rights, repurchase rights, commitments,
agreements, arrangements or undertakings of any kind to which VA or any of its
Subsidiaries is a party or by which any of them is bound obligating VA or any of
its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other voting securities of VA or any
of its Subsidiaries, or giving any person a right to subscribe for or acquire,
any securities of VA or any of its Subsidiaries or obligating VA or any of its
Subsidiaries to issue, grant, extend or enter into any such security, option,
warrant, call, right, conversion right, redemption right, repurchase right,
commitment, agreement, arrangement or undertaking. There are no outstanding
contractual obligations of VA or any of its Subsidiaries to repurchase, redeem
or otherwise acquire any shares of capital stock of VA or any of its
Subsidiaries. There are no outstanding contractual obligations of VA to vote or
to dispose of any shares of the capital stock of any of its Subsidiaries.
4.4 Authority; Noncontravention.
(a) VA has all requisite corporate power and authority to enter into
this Agreement and Other Agreements to which it is a party and, subject to
receipt of the VA Shareholder Approval, to consummate the transactions
contemplated by this Agreement and the Other Agreements to which it is a party.
The execution and delivery of this Agreement and the Other Agreements to which
it is a party by VA and the consummation of the transactions contemplated by
this Agreement and the Other Agreements to which it is a party have been duly
authorized by all necessary corporate action on the part of VA, subject to
receipt of the VA Shareholder Approval in the case of this Agreement. This
Agreement and the Other Agreements to which it is a party have been duly
executed and delivered by VA and, assuming the due execution and delivery of
each such agreement by the counterparties thereto, each such agreement
constitutes a valid and binding obligation of VA as to VA's obligations therein,
enforceable against VA in accordance with its terms. The execution and delivery
of this Agreement and the Other Agreements to which it is a party do not, and
the consummation of the transactions contemplated by this Agreement, the Other
Agreements to which it is a party and compliance with the provisions of this
Agreement and the Other Agreements to which it is a party by VA will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of any lien upon any of the properties or
assets of VA or any of its Subsidiaries under, (A) the articles of incorporation
(or other organizational documents) and bylaws of VA, in each case as amended to
the date hereof or the comparable charter or organizational documents and bylaws
of any of VA's Subsidiaries, (B) except as set forth in Section 4.4 of the VA
Disclosure Letter, any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit,
34
concession, franchise or license applicable to VA or any of its Subsidiaries or
their respective properties or assets or (C) subject to the governmental filings
and other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to VA or any of
its Subsidiaries or their respective properties or assets, other than, in the
case of clauses (B) and (C), any such conflicts, violations, defaults,
obligations, losses, rights, liens, judgments, orders, decrees, statutes, laws,
ordinances, rules or regulations that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on VA. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
federal, state or local government or any court, administrative agency or
commission or other governmental authority or agency, domestic or foreign, is
required by or with respect to VA or any of its Subsidiaries in connection with
the execution and delivery of this Agreement and the Other Agreements to which
it is a party by VA or the consummation by VA of any of the transactions
contemplated by this Agreement and the Other Agreements to which it is a party,
except for (A) the filing of a premerger notification and report form by VA
under the HSR Act; (B) the filing with the SEC of (1) the Form S-4, (2) the
Proxy Statement/Prospectus relating to the VA Shareholders Meeting and (3) such
reports under the Exchange Act, as may be required in connection with this
Agreement, the Other Agreements to which it is a party and the transactions
contemplated hereby and thereby; (C) the filing of appropriate documents with
the relevant authorities of other states and jurisdictions in which VA is
qualified to do business and such filings with Governmental or Regulatory
Authorities to satisfy the applicable requirements of state securities or "blue
sky" laws; (D) such filings with and approvals of the NYSE to permit the MINT
Common Shares that are to be issued in the Merger to be listed on the NYSE; (E)
filings in respect of, and approvals and authorizations of, and, as applicable,
the expiration of applicable waiting periods of, the respective Commissioners of
Insurance of the states of California, Delaware, Illinois, New Jersey and
Virginia (the "VA Designated Insurance Approvals"); and (F) such consents,
approvals, orders or authorizations the failure of which to be made or obtained,
individually or in the aggregate, is not reasonably likely to have a Material
Adverse Effect on VA.
(b) As of the date hereof, the Board of Directors of VA has approved
and declared advisable and in the best interest of the shareholders of VA this
Agreement and the Merger, and has approved Other Agreements to which it is a
party and the other transactions contemplated by this Agreement and Other
Agreements to which it is a party.
4.5 SEC Documents; Undisclosed Liabilities; SAP Statements.
(a) VA has filed all required reports, schedules, forms, statements
and other documents with the SEC since January 1, 1996 (including all filed
reports, schedules, forms, statements and other documents whether or not
required, the "VA SEC Documents"). As of their respective dates, the VA SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such VA SEC
Documents, and none of the VA SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
35
circumstances under which they were made, not misleading. Except to the extent
that information contained in any VA SEC Document has been revised or superseded
by a later filed VA SEC Document, none of the VA SEC Documents contains any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of VA included in the VA SEC Documents comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or in the VA SEC Documents) and
fairly present the consolidated financial position of VA and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end adjustments). Except for liabilities
and obligations incurred in the ordinary course of business consistent with past
practice since the date of the most recent consolidated balance sheet included
in the VA SEC Documents, neither VA nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) required by U.S. generally accepted accounting principles to be
recognized or disclosed on a consolidated balance sheet of VA and its
consolidated Subsidiaries or in the notes thereto.
(b) VA conducts its material insurance operations through those
companies listed in Section 4.5 of the VA Disclosure Letter (collectively, the
"VA Insurance Subsidiaries"). Each of the VA Insurance Subsidiaries has filed
all annual and quarterly statements, together with all exhibits,
interrogatories, notes, schedules and any actuarial opinions, affirmations or
certifications or other supporting documents in connection therewith, required
to be filed with or submitted to the appropriate regulatory authorities of the
jurisdiction in which it is domiciled or commercially domiciled or as may be
required by any Governmental or Regulatory Authority on forms prescribed or
permitted by such authority (collectively, the "VA SAP Statements"). VA has
delivered or made available to BB all of the VA SAP Statements for each VA
Insurance Subsidiary for the periods beginning January 1, 1996, each in the form
(including exhibits, annexes and any amendments thereto) filed with the
applicable state insurance regulatory agency. Financial statements included in
the VA SAP Statements and prepared on a statutory basis, including the notes
thereto, were prepared in conformity with statutory accounting practices
prescribed or permitted by the applicable insurance regulatory authority
consistently applied for the periods covered thereby and present fairly the
statutory financial position of such VA Insurance Subsidiaries as at the
respective dates thereof and the results of operations of such VA Insurance
Subsidiaries for the respective periods then ended. The VA SAP Statements
complied in all material respects with all applicable laws, rules and
regulations when filed, and no material deficiency has been asserted with
respect to any VA SAP Statements by the applicable insurance regulatory body or
any other governmental agency or body. The statutory balance sheets and income
statements included in the VA SAP Statements required to be audited have been
audited, and VA has delivered or made available to BB true and complete copies
of all audit opinions related thereto for periods beginning January 1, 1996. VA
has delivered or made available to BB true and complete copies of all
examination reports of insurance departments
36
and any insurance regulatory agencies received by VA on or after January 1, 1996
relating to the VA Insurance Subsidiaries.
4.6 Liabilities and Reserves.
(a) The reserves carried on the VA SAP Statements of each of VA and
its Subsidiaries for the quarter ended March 31, 1999 for losses, claims and
similar purposes (including claims litigation) were, as of such date, in
compliance in all material respects with the requirements for reserves
established by the jurisdiction in which it is domiciled or commercially
domiciled, were determined in all material respects in accordance with generally
accepted actuarial standards and principles consistently applied, and were
fairly stated in all material respects in accordance with actuarial and
statutory accounting practices.
(b) Except for regular periodic assessments in the ordinary course of
business or assessments based on developments which are publicly known within
the insurance industry, to the knowledge of VA, no claim or assessment is
pending or threatened against any of VA's Subsidiaries which is peculiar or
unique to such Subsidiary by any state insurance guaranty associations in
connection with such association's fund relating to insolvent insurers which if
determined adversely, would, individually or in the aggregate, be reasonably
likely to have a Material Adverse Effect.
4.7 Investment Advisory and Investment Company Matters.
(a) Except as set forth in Section 4.7 of the VA Disclosure Letter,
neither VA nor any of its Subsidiaries conducts activities of or is otherwise
deemed under law to control an "investment adviser," as such term is defined in
Section 2(a)(20) of the Investment Company Act, whether or not registered under
the Investment Advisers Act, or any person required to be registered as an
investment company under the Investment Company Act. Neither VA nor any of its
Subsidiaries is an "investment company" as defined in the Investment Company
Act, and neither VA nor any of its Subsidiaries is a promoter (as such term is
defined in Section 2(a)(30) of the Investment Company Act) of any person that is
such an investment company.
(b) Except as set forth in Section 4.7 of the VA Disclosure Letter,
neither VA nor any of its Subsidiaries conduct activities of, controls, owns
more than a 20% interest in, or is deemed under applicable law to control, any
person that is an investment adviser as defined in the Investment Advisers Act,
whether or not registered under such Act, other than such an investment adviser
whose only clients are "insurance companies" as defined in Section 2(a)(17) of
the Investment Company Act.
4.8 Information Supplied. None of the information supplied or to be
supplied by VA for inclusion or incorporation by reference in (i) the Form S-4
will, at the time the Form S-4 is filed with the SEC, at any time it is amended
or supplemented or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading or (ii) the Proxy Statement/Prospectus will, at the date the
Proxy Statement/Prospectus is first mailed to the
37
holders of VA Common Shares or at the time of the VA Shareholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Form S-4 and the Proxy Statement/Prospectus will comply as to
form in all material respects with the requirements of the Securities Act and
the Exchange Act, as applicable, and the respective rules and regulations
promulgated thereunder, except that no representation or warranty is made by VA
with respect to statements made or incorporated by reference therein based on
information supplied by BB specifically for inclusion or incorporation by
reference in the Form S-4 or the Proxy Statement/Prospectus.
4.9 Absence of Certain Changes or Events. Except as disclosed in the VA SEC
Documents filed and publicly available prior to the date of this Agreement or in
Section 4.9 of the VA Disclosure Letter, since the date of the most recent
audited financial statements included in the VA SEC Documents, VA has conducted
its business only in the ordinary course, and there has not been since such
date, (i) any Material Adverse Change in VA, (ii) any declaration, setting aside
or payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of VA's capital stock, ) (iii) any split,
combination or reclassification of any of its capital stock or any issuance or
the authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, (iv) any change in
accounting methods, principles or practices by VA materially affecting its
assets, liabilities or business, except insofar as may have been required by a
change in U.S. generally accepted accounting principles or (v) any condition,
event or occurrence which would be reasonably likely to prevent, hinder or
materially delay the ability of VA to consummate the transactions contemplated
by this Agreement or the Other Agreements to which it is a party.
4.10 Litigation. There is no suit, action or proceeding pending or, to the
knowledge of VA, threatened against or affecting VA or any of its Subsidiaries
that, individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on VA nor is there any judgment, decree, injunction, rule or
order of any Governmental or Regulatory Authority or arbitrator outstanding
against VA or any of its Subsidiaries having, or which is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on VA;
provided, that for purposes of this paragraph any such suit, action, proceeding,
judgment, decree, injunction, rule or order arising after the date hereof shall
not be deemed to have a Material Adverse Effect on VA if and to the extent such
suit, action, proceeding, judgment, decree, injunction, rule or order (or any
relevant part thereof) is based on this Agreement, the Other Agreements to which
it is a party or the transactions contemplated hereby or thereby.
4.11 Labor Relations. Except as set forth in Section 4.11 of the VA
Disclosure Letter or the VA SEC Documents, (i) VA and its Subsidiaries have
complied with all Laws relating to the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity and collective bargaining
and there are no controversies pending or, to the knowledge of VA, threatened,
between VA or any of its Subsidiaries and any of their respective employees,
except such non-compliance or controversies which have not had, and would not
reasonably be expected, individually
38
or in the aggregate, to have a Material Adverse Effect on VA; (ii) neither VA
nor any of its Subsidiaries is a party to any collective bargaining agreement or
other labor union contract applicable to persons employed by VA or its
Subsidiaries, nor does VA know of any activities or proceedings of any labor
union to organize any such employees; and (iii) VA does not have knowledge of
any strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with
respect to any employees of VA or any of its Subsidiaries which would reasonably
be expected, individually or in the aggregate, to have a Material Adverse Effect
on VA.
4.12 Benefit Plans. Except as described in Section 4.12 of the VA
Disclosure Letter and except as would not reasonably be expected to have a
Material Adverse Effect on VA, (i) each Employee Benefit Plan conforms to, and
its administration is in conformity with, all applicable laws, no liability has
been or is expected to be incurred by VA or any of its Subsidiaries with respect
to any Employee Benefit Plan except regular periodic contributions to such plans
and full payment has been made of all amounts that VA or any of its Subsidiaries
is required to have paid as contributions to each Employee Benefit Plan, (ii) to
VA's knowledge, the current value of accrued benefits of each Employee Benefit
Plan that is a defined benefit plan does not exceed the current value of such
plan's assets, (iii) VA has made available to VA a true and correct copy of each
of the Employee Benefit Plans, and all applicable trust agreements and all
contracts relating thereto, or to the funding thereof, (iv) all Employee Benefit
Plans intended to satisfy applicable Tax qualification requirements, or other
requirements necessary to secure favorable Tax or other legal treatment comply
in all material respects with such requirements, and (v) adequate accruals for
all obligations under the Employee Benefit Plans are reflected in the financial
statements included in the VA SEC Documents. Except as set forth in Section 4.12
of the VA Disclosure Letter, no employee of VA will be entitled to any
additional benefits or any acceleration of the time of payment, funding or
vesting of any benefits under any VA Benefit Plan as a result of the
transactions contemplated by this Agreement.
4.13 Tax Matters.
(a) VA and its Subsidiaries have filed or caused to be filed with the
appropriate United States federal, state, local, foreign and other Governmental
or Regulatory Authorities, all income Tax Returns and all other material Tax
Returns, required to be filed on or prior to the date hereof which, if not
filed, would have a Material Adverse Effect on VA, and have paid in full all
Taxes (including Taxes withheld from employees' salaries and other withholding
Taxes and obligations) shown to be due on such Tax Returns, and the most recent
financial statements of VA included in the VA SEC Documents reflect an adequate
reserve in accordance with GAAP for all Taxes payable by VA and its Subsidiaries
for all taxable periods and portions thereof accrued through the date of such
financial statements, except for inadequately reserved Taxes that individually
or in the aggregate would not reasonably be expected to have a Material Adverse
Effect. All written assessments of Taxes due and payable by or on behalf of VA
or any of its Subsidiaries have either been paid or provided for (in accordance
with GAAP), except for assessments that individually or in the aggregate would
not reasonably be expected to have a Material Adverse Effect.
39
(b) There are no material audits, administrative proceedings or court
proceedings regarding Taxes pending against VA or any of its Subsidiaries
wherein an adverse determination or ruling, for any one of, or all such, audits
or proceedings, would reasonably be expected to have a Material Adverse Effect.
No deficiencies for any Tax have been proposed in writing, asserted or assessed,
except for deficiencies that individually or in the aggregate would not
reasonably be expected to have a Material Adverse Effect.
4.14 No Excess Parachute Payments. No amount that could be received
(whether in cash or property or the vesting of property) as a result of any of
the transactions contemplated by this Agreement, either alone or together with
other events, by any employee, officer or director of VA or any of its
affiliates who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any employment, severance
or termination agreement, other compensation arrangement or the VA Benefit Plan
currently in effect would be characterized as an "excess parachute payment" (as
such term is defined in Section 280G(b)(1) of the Code).
4.15 Compliance with Applicable Laws. Each of VA and its Subsidiaries has
in effect all Licenses and Permits necessary for it to own, lease or operate its
assets and to carry on its business as now conducted, and there has occurred no
default under or limitation with respect to any such Licenses and Permits,
except for the lack of Licenses and Permits and for defaults or limitations
under Licenses and Permits which, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on VA. To the knowledge of
VA, VA and its Subsidiaries are, and have been, in compliance with all
applicable statutes, laws, ordinances, rules, orders and regulations of any
Governmental or Regulatory Authority, including Insurance Laws, except for
instances of noncompliance which, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on VA. To the knowledge of
VA, the businesses and operations of each of VA and its Subsidiaries are being
and have been conducted in compliance in all respects with all applicable
Insurance Laws, except for instances of noncompliance which, individually or in
the aggregate, are not reasonably likely to have a Material Adverse Effect on
VA. No investigation, examination or review by any Governmental or Regulatory
Authority with respect to VA or any of its Subsidiaries is pending or, to the
knowledge of VA, threatened, nor has any Governmental or Regulatory Authority
indicated an intention to conduct the same, except for those the outcome of
which, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect on VA.
4.16 Properties. Except as disclosed in the VA SEC Documents, each of VA
and its Subsidiaries (i) has good, clear and marketable title to all the
properties and assets reflected in the latest audited balance sheet included in
the most recent VA SEC Document as being owned by VA or one of its Subsidiaries
or acquired after the date thereof which are, individually or in the aggregate,
material to VA's business on a consolidated basis (except properties and assets
sold or otherwise disposed of since the date thereof in the ordinary course of
business), free and clear of (A) all Encumbrances except (1) statutory liens
securing payments not yet due and (2) such imperfections or irregularities of
title or other Encumbrances (other than real property mortgages or deeds of
trust) as do not materially affect the use of the properties or assets subject
thereto or affected thereby or otherwise materially impair business operations
at such properties, and (B) all real property
40
mortgages and deeds of trust and (ii) is the lessee of all leasehold estates
reflected in the latest audited financial statements included in the most
recent VA SEC Document or acquired after the date thereof which are material to
its business on a consolidated basis and is in possession of the properties
purported to be leased thereunder, and each such lease is valid without material
default thereunder by the lessee or, to the VA's knowledge, the lessor.
4.17 Voting Requirements. The affirmative vote at the VA Shareholders
Meeting (the "VA Shareholder Approval") of the holders of more than two-thirds
of the voting power of all outstanding shares of VA's capital stock at the VA
Shareholders Meeting to adopt this Agreement is the only vote of the holders of
any class or series of VA's capital stock necessary to approve and adopt this
Agreement, the Other Agreements to which it is a party, and the transactions
contemplated hereby and thereby.
4.18 Takeover Statutes. To the knowledge of VA, no takeover statute, and
no anti-takeover provision in VA's articles of incorporation (or other
organizational documents) and bylaws, is applicable to the Merger or the other
transactions contemplated by this Agreement and the Other Agreements to which it
is a party.
4.19 Brokers. No broker, investment banker, financial adviser or other
person, other than SSB, the fees and expenses of which will be paid by VA, is
entitled to any broker's, finder's, financial adviser's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of VA.
4.20 Related Party Transactions. Except for the transactions described in
the VA SEC Reports or Section 4.20 of the VA Disclosure Letter, all transactions
involving VA or any of its Subsidiaries that are required to be disclosed in the
VA SEC Reports in accordance with Item 404 of Regulation S-K have been so
disclosed, and to the knowledge of VA, since December 31, 1998, neither VA nor
any of its Subsidiaries has entered into any transactions that would be required
to be disclosed in future public filings under the Exchange Act pursuant to such
Item which have not already been disclosed in the VA SEC Reports filed prior to
the date hereof.
4.21 Material Contracts. Other than Contracts or amendments thereto that
are required to be filed and have been filed as an exhibit to the latest Form
10-K filed by VA with the SEC, there are no Contracts that are material to the
business, financial position or results of operations of VA, including (i) any
employment, severance, termination, consulting or retirement contract providing
for aggregate payments to any individual in any calendar year in excess of
$500,000, (ii) any contract relating to the borrowing of money or the guarantee
of any such obligation (other than contracts evidencing fully secured repurchase
agreements, trade payables, and contracts relating to borrowings or guarantees
made in the ordinary course of business), (iii) any material agency, third party
administrator, management or other service contracts and (iv) any material
contract or agreement between or among VA and its Subsidiaries.
41
4.22 Intellectual Property. Except as, individually or in the aggregate, is
not reasonably likely to have a Material Adverse Effect on VA, VA does not have
knowledge of any valid grounds for any bona fide claims (i) to the effect that
the manufacture, sale, licensing or use of any product or service as now used,
sold or licensed or proposed for use, sale or license by VA or any of its
Subsidiaries, infringes on any copyright, patent, trademark, trade name, service
mark or trade secret; (ii) against the use by VA or any of its Subsidiaries, of
any copyrights, patents, trademarks, trade names, service marks, trade secrets,
technology, know-how or computer software programs and applications used in the
business of VA or any of its Subsidiaries as currently conducted or as proposed
to be conducted; (iii) challenging the ownership, validity or effectiveness of
any VA Intellectual Property Rights or other trade secret material to VA; or
(iv) challenging the license or legally enforceable right to use of the Third-
Party Intellectual Rights by VA or any of its Subsidiaries.
4.23 No Regulatory Disqualifications. To the knowledge of VA, no event
has occurred or condition exists or, to the extent it is within the reasonable
control of VA, will occur or exist with respect to VA that, in connection with
obtaining any approval or any Governmental or Regulatory Authority required for
the Merger, would cause VA to fail to satisfy any applicable statute or written
regulation of any applicable insurance regulatory authority that, individually
or in the aggregate, is reasonably likely to have a Material Adverse Effect on
VA.
4.24 Insurance Ratings. As of the date hereof, VA has no reason to
believe that any rating presently held by VA or any of its Subsidiaries is
likely to be modified, qualified, lowered or placed under surveillance for a
possible downgrade for any reason other than as a result of the transactions
contemplated hereby.
4.25 Reinsurance, etc. VA has no reason to believe that any material
amount recoverable pursuant to any material Reinsurance Agreement applicable to
the VA Insurance Subsidiaries or their properties or assets reflected in the VA
SAP Statements is not fully collectible in due course. Each VA Insurance
Subsidiary is entitled to take full credit in its SAP Statements pursuant to
Insurance Laws, rules and regulations for such reinsurance, coinsurance or
excess insurance ceded pursuant to any such Reinsurance Agreement. There are no
assumption reinsurance contracts or arrangements entered into by any VA
Insurance Subsidiary in which such VA Insurance Subsidiary has ceded risk to any
other Person which are material individually or in the aggregate to VA and its
Subsidiaries taken as a whole.
4.26 Derivatives. As of December 31, 1998, none of VA and the VA
Subsidiaries was subject to any material exposure, individually or in the
aggregate under any Derivatives to which VA or any of VA Subsidiaries is a
party.
42
ARTICLE V
ADDITIONAL AGREEMENTS
43
5.1 Conduct of Business. From the date hereof and until the Closing,
each of VA and BB will, and will cause each of their respective Subsidiaries to,
conduct their respective businesses and operations only in the ordinary and
usual course and in a manner consistent with past practices and to the extent
consistent therewith, use their commercially reasonable efforts to preserve
intact their current business organizations, keep available the services of
their current officers and employees and preserve their relationships with
insureds, reinsurers, customers, suppliers, insurance brokers and agents, and
others having business dealings with them to the end that their goodwill and
ongoing businesses shall not be impaired in any material respect at the
Effective Time. Without limiting the generality of the foregoing, from the date
hereof until Closing except as otherwise expressly contemplated by this
Agreement or as set forth in Section 5.1 of the VA Disclosure Letter or Section
5.1 of the BB Disclosure Letter, as the case may be, VA and BB shall not, and
shall not permit any of their Subsidiaries to, without the prior written consent
of the other:
(i) (A) declare, set aside or pay any dividends on, or
make any other distributions in respect of, any of their capital
stock, other (x) than dividends and distributions by their direct
-
or indirect wholly owned Subsidiaries to them and (y) regular
-
quarterly dividends payable by BB in an amount not to exceed $.06
per share, (B) split, combine or reclassify any of their capital
stock or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for shares of their
capital stock, or (C) purchase, redeem or otherwise acquire any
shares of their respective capital stock or any of their
Subsidiaries or any other securities thereof or any rights,
warrants or options to acquire any such shares or other
securities, except, in the case of clause (C), for the
acquisition of shares of capital stock from holders of options in
full or partial payment of the exercise price payable by such
holder or tax liability arising in connection therewith
(including by way of exercise of cash settlement rights pursuant
to the terms of any stock option), upon exercise of stock options
outstanding on the date of this Agreement in accordance with
their present terms;
(ii) authorize for issuance, issue, deliver, sell,
pledge or otherwise encumber any shares of their capital stock or
the capital stock of any of their Subsidiaries, any other voting
securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting
securities or convertible securities or any other securities or
equity equivalents (including without limitation stock
appreciation rights), or contractual obligation valued or
measured by the value or market price of such capital stock
(other than the issuance of capital stock upon the exercise of
stock options outstanding on the date of this Agreement and in
accordance with their present terms, such issuance, together with
the acquisitions of shares of shares of capital stock permitted
under clause (i) above, being referred to herein as "Permitted
Changes");
(iii) amend their respective Articles of Incorporation,
Articles of Association, Bylaws or other comparable charter or
organizational documents;
44
(iv) except in the ordinary course of business, consistent with
past practice, acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the stock or assets of, or by any other
manner, any business or any corporation, partnership, joint venture, association
or other business organization;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Encumbrance or otherwise dispose of any of their respective
properties or assets that are material, individually or in the aggregate, to
each of them and their Subsidiaries taken as a whole, except in the ordinary
course of business consistent with past practice;
(vi) except in the ordinary course of business, consistent with
past practice (A) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another Person (other than its parent or another Subsidiary
of its parent), issue or sell any debt securities or warrants or other rights to
acquire any debt securities of itself, its parent or any other Subsidiary of its
parent, guarantee any debt securities of another Person (other than its parent
or another Subsidiary of its parent), enter into any "keep well" or other
agreement to maintain any financial statement condition of another Person (other
than its parent or another Subsidiary of its parent) or enter into any
arrangement having the economic effect of any of the foregoing, except for
short-term borrowings incurred in the ordinary course of business consistent
with past practice, or (B) make any loans, advances or capital contributions to,
or investments in, any other Person (other than its parent or another Subsidiary
of its parent);
(vii) (A) acquire or agree to acquire any assets that are
material, individually or in the aggregate, to VA or BB and their respective
Subsidiaries taken as a whole, other than acquisitions of portfolio investments
of insurance Subsidiaries in the ordinary course of business consistent with
past practice, or (B) make or agree to make any capital expenditures, except in
the ordinary course of business consistent with past practice;
(viii) pay, discharge or satisfy any claims (including claims of
shareholders), liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), except for the payment, discharge or
satisfaction, of (i) liabilities or obligations in the ordinary course of
business consistent with past practice or in accordance with their terms as in
effect on the date hereof, or (ii) liabilities reflected or reserved against in,
or contemplated by, their most recent consolidated audited financial statements
(or the notes thereof) included in the VA or BB SEC Documents filed prior to the
date hereof, or waive, release, grant, or transfer any rights of material value
or modify or change in any material respect any existing
45
license, lease, contract or other document, other than in the ordinary course of
business consistent with past practice;
(ix) adopt or amend in any material respect (except as may be
required by law or by this Agreement) any bonus, profit sharing, compensation,
stock option, pension, retirement, deferred compensation, employment or other
employee benefit plan, agreement, trust, fund or other arrangement (including
any Benefit Plan) for the benefit or welfare of any employee, director or former
director or employee or, other than increases for individuals (other than
executive officers of BB) in the ordinary course of business consistent with
past practice, increase the compensation or fringe benefits of any director,
employee or former director or employee; pay any benefit not required by any
existing plan, arrangement or agreement, grant any new or modified severance or
termination arrangement or increase or accelerate any benefits payable under
their severance or termination pay policies in effect on the date hereof, other
than any such increase or acceleration provided for under such policies as in
effect on the date of this Agreement;
(x) change any material accounting principle used by them,
except for such changes as may be required to be implemented following the date
of this Agreement pursuant to generally accepted accounting principles or rules
and regulations of the SEC promulgated following the date hereof;
(xi) take any action that would, or is reasonably likely to,
result in any of their respective representations and warranties in this
Agreement becoming untrue in any material respect, or in any of the conditions
to the Scheme and Merger set forth in Article 6 or Article 7 not being
satisfied;
(xii) except in the ordinary course of business and consistent
with past practice, make or change any material tax election, file any material
amendment to any material Tax Return or settle or compromise any material
federal, state, local or foreign tax liability;
(xiii) take any action that would reasonably be expected to cause
the Merger to fail to qualify as a reorganization within the meaning of Section
368 of the Internal Revenue Code or that would reasonably be expected to cause
the Merger together with the Scheme, when integrated, to fail to qualify as a
transaction described in Section 351 of the Internal Revenue Code; and
(xiv) authorize any of, or commit or agree to take any of, the
foregoing actions.
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5.2 Additional Financial Statements.
(a) From the date hereof to the Closing Date, each of VA and BB
shall promptly deliver to the other all periodic management reports prepared for
their respective senior management in the ordinary course of business.
(b) Promptly after they become available, each of VA and BB shall
furnish to the other all statutory statements of their respective Insurance
Subsidiaries for any calendar years or quarters ending after December 31, 1998,
but prior to the Closing Date. Such statutory statements shall have been
prepared on a basis consistent with past practice and, with respect to the
financial statements included therein, in accordance with Statutory Accounting
Practices.
5.3 No Solicitation; Notification.
(a) Both VA and BB shall, and shall cause their respective officers,
directors, employees, representatives and agents to, immediately cease any
discussions or negotiations with any parties that may be ongoing with respect to
an Acquisition Proposal (as hereinafter defined). From and after the date hereof
until the termination of this Agreement, neither VA nor BB shall, nor shall it
permit any of its Subsidiaries to, authorize or permit any of its officers,
directors or employees or any investment banker, financial advisor, attorney,
accountant or other representative retained by them or any of their Subsidiaries
to, directly or indirectly, (i) solicit, initiate or knowingly encourage
(including by way of furnishing non-public information or assistance), or
knowingly take any other action to facilitate, any inquiries or the making of
any proposal which constitutes, or would reasonably be expected to lead to, any
Acquisition Proposal or (ii) participate in any discussions or negotiations
regarding any Acquisition Proposal; provided that if, at any time the Board of
--------
Directors of either VA and BB determines in good faith, after consultation with
and taking into account the advice of independent legal counsel (who may be such
company's regularly engaged independent counsel), that it is necessary to do so
in order to act in a manner consistent with such Board's fiduciary duties to
such company's shareholders under applicable Law, VA or BB, as the case may be,
may, in response to an unsolicited Acquisition Proposal, and subject to
compliance with Section 5.3(c), (A) furnish information with respect to VA or BB
as the case may be to any person pursuant to a confidentiality agreement in
reasonably customary form and (B) participate in discussions or negotiations
regarding such Acquisition Proposal. For purposes of this Agreement,
"Acquisition Proposal" means any inquiry, proposal or offer (or any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in the foregoing) from any person relating to any direct or
indirect acquisition or purchase of 20% or more of the assets of VA or BB as the
case may be and their respective Subsidiaries, taken as a whole, or 20% or more
of any class of equity securities of VA or BB as the case may be, any tender
offer or exchange offer that if consummated would result in any person
beneficially owning 20% or more of any class of equity securities of VA or BB as
the case may be, any merger, consolidation, business combination, sale of all or
substantially all the assets, recapitalization, liquidation, dissolution or
similar transaction involving VA or BB or any of their Subsidiaries whose
business constitutes 20% or more of the assets of VA or BB and their respective
Subsidiaries, as the case may be, taken as a whole (other than the
47
transactions contemplated by this Agreement) or any other transaction the
consummation of which would reasonably be expected to impede, interfere with,
prevent or materially delay the Merger or which would reasonably be expected to
dilute materially the benefits to the other of the transactions contemplated
hereby.
(b) Except as set forth in this Section 5.3, neither the Board of
Directors of VA or BB nor any committee thereof shall (i) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to the other company, the
approval or recommendation by such Board of Directors or such committee of this
Agreement or the transactions contemplated hereby, (ii) approve or recommend, or
propose to approve or recommend, any Acquisition Proposal or (iii) cause VA or
BB as the case may be to enter into any agreement with respect to any
Acquisition Proposal. Notwithstanding the foregoing, in the event that the
Board of Directors of VA or BB determines in good faith, after consultation with
and taking into account the advice of independent legal counsel (who may be such
company's regularly engaged independent counsel), that it is necessary to do so
in order to act in a manner consistent with its fiduciary duties to such
company's shareholders under applicable law, such Board of Directors may
(subject to the other provisions of this Section 5.3) withdraw or modify its
approval or recommendation of this Agreement and the transactions contemplated
hereby, approve or recommend a Superior Proposal (as defined below), cause VA or
BB as the case may be to enter into an agreement with respect to a Superior
Proposal or terminate this Agreement, but in any case involving an Acquisition
Proposal only at a time that is after the third business day following the other
company's receipt of written notice (a "Notice of Superior Proposal") advising
such company that the Board of Directors of the other has received a Superior
Proposal, specifying the material terms and conditions of such Superior Proposal
and identifying the person making such Superior Proposal. In addition, if VA or
BB proposes to enter into an agreement with respect to any Acquisition Proposal,
it shall concurrently with entering into such agreement pay, or cause to be
paid, to the other the Termination Fee and the Expense Payment (as such terms
are defined in Section 5.9(b)). For purposes of this Agreement, a "Superior
Proposal" means any bona fide proposal made by a third party to acquire,
directly or indirectly, for consideration consisting of cash and/or securities,
more than 20% of the shares of capital stock then outstanding or all or
substantially all the assets of VA on the one hand and BB on the other hand and
otherwise on terms which the Board of Directors of VA or BB as the case may be
determines in its good faith judgment (after consultation with and taking into
account the advice of a financial advisor of nationally recognized reputation)
to be more favorable to such company's shareholders than the Merger.
(c) In addition to the obligations of VA and BB set forth in
paragraphs (a) and (b) of this Section 5.3, each of VA and BB shall promptly
advise the other orally and in writing of any request for information or of any
Acquisition Proposal, the material terms and conditions of such request or
Acquisition Proposal and the identity of the person making such request or
Acquisition Proposal.
(d) Nothing contained in this Section 5.3 shall prohibit VA or BB
from taking and disclosing to its shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to
such company's shareholders if, in the good faith
48
judgment of the Board of Directors of such company, after consultation with
independent legal counsel (who may be such company's regularly engaged
independent counsel), failure so to disclose would be inconsistent with its
fiduciary duties to such company's shareholders under applicable law; provided
--------
neither VA or BB nor their respective Boards of Directors nor any committee
thereof shall, except as permitted by Section 5.3(b), withdraw or modify, or
propose to withdraw or modify, its position with respect to this Agreement or
the transactions contemplated hereby or approve or recommend, or propose to
approve or recommend, an Acquisition Proposal.
5.4 Investigation of Business and Properties. From the date hereof until
the earlier of (i) the Effective Time and (ii) termination under Article IX,
each of VA and BB will, and will cause their respective Subsidiaries to, afford
the other, any financial institution providing financing to the other, and their
respective attorneys, accountants, financial advisors and other representatives,
reasonable access during regular business hours upon reasonable notice, to make
such reasonable inspection of the Assets, business and operations of such
company and its Subsidiaries and to inspect and make copies of Contracts, Books
and Records and all other documents and information reasonably requested by the
other and related to the operations and business of such company and its
Subsidiaries, including historical financial information concerning the business
of such company and its Subsidiaries and to meet with designated Personnel of
such company and its Subsidiaries and/or their respective representatives;
provided that any such access shall be conducted in such a manner as not to
- --------
interfere unreasonably with the conduct of such company's operations and
business; provided further, that no disclosure to the other, its counsel,
-------- -------
accountants or other representatives after the date hereof shall be deemed to be
a reduction of, or otherwise affect, the representations and warranties of such
company set forth in this Agreement. Each of VA and BB shall furnish to the
other promptly upon request (i) all additional documents and information with
respect to the affairs of such company and its Subsidiaries and (ii) access
during regular business hours to its Personnel and to such company's accountants
and counsel as the other, or its counsel or accountants, may from time to time
reasonably request and VA and BB shall instruct their respective Personnel,
accountants and counsel to cooperate with the other, and to provide such
documents and information as the other and its representatives may reasonably
request; provided that each of VA and BB shall execute and deliver to such
--------
counsel and accountants such consents and waivers as are customary in connection
in providing such documents and information. Notwithstanding any right of VA
or BB to investigate and examine the affairs of the other and its Subsidiaries
and notwithstanding any knowledge of facts determined or determinable by VA or
BB pursuant to such investigation or examination, VA and BB have the right to
rely fully upon the representations, warranties, covenants and agreements of the
other contained in this Agreement.
5.5 Regulatory Matters.
(a) From the date hereof through the Closing Date, VA and BB shall
cooperate with each other and use their respective commercially reasonable
efforts promptly to prepare and file all necessary documentation with, and to
obtain as promptly as practicable all Licenses and Permits of, all third parties
and Governmental or Regulatory Authorities which are necessary or advisable to
consummate the transactions contemplated by this Agreement, including any
filings under the HSR
49
Act. VA and BB shall have the right to review in advance, and shall consult with
the other on, in each case subject to any laws relating to the exchange of
information, all the information relating to each other and any of their
respective Subsidiaries, as the case may be, and any of their respective
Affiliates, which appear in any filing made with, or written materials submitted
to, any third party or any Governmental or Regulatory Authority in connection
with the transactions contemplated by this Agreement. The parties hereto agree
that they will consult with each other with respect to the obtaining of all
Licenses and Permits of all third parties and Governmental or Regulatory
Authorities necessary or advisable to consummate the transactions contemplated
by this Agreement, and each party shall keep the other apprised of the status of
matters relating to completion of the transactions contemplated herein. The
party responsible for any such filing shall promptly deliver to the other party
evidence of the filing of all applications, filings, registrations and
notifications relating thereto, and the filing of any supplement, amendment or
item of additional information in connection therewith. The party responsible
for a filing shall also promptly deliver to the other party a copy of each
material notice, order, opinion and other item of correspondence received by
such filing party from any Governmental or Regulatory Authority in respect of
any such application. In exercising the foregoing rights and obligations, VA and
BB shall act reasonably and as promptly as practicable.
(b) From the date hereof through the Closing Date, VA and BB shall,
upon request, furnish each other with all information concerning themselves and
their Subsidiaries, directors, officers and shareholders and such other matters
as may be reasonably necessary in connection with any statement, filing, notice
or application made by or on behalf VA or BB, as the case may be, or any of its
respective Affiliates, to any Governmental or Regulatory Authority in connection
with the transactions contemplated by this Agreement.
(c) From the date hereof through the Closing Date, VA and BB shall
promptly advise each other upon receiving any communication from any
Governmental or Regulatory Authority whose consent or approval is required for
consummation of the transactions contemplated by this Agreement, which causes
such party to believe that there is a reasonable likelihood that the requisite
consent or approval will not be obtained or that the receipt of such consent or
approval will be materially delayed.
5.6 Investment Portfolio. From the date hereof through the Closing Date,
VA and BB shall cause each of their respective Subsidiaries not to change its
investment managers or alter its investment guidelines or criteria (accurate and
complete copies of which have been provided by each of VA and BB to the other)
without the prior written approval of the other and shall cause each of their
respective Subsidiaries to make such changes in its investment managers and to
alter its investment guidelines and criteria as VA and BB may mutually agree.
5.7 Confidentiality. Unless and until the Closing has been consummated,
VA and BB shall continue to be subject to the confidentiality provisions of the
Confidentiality Agreement, dated as of January 6, 1999, between VA and BB.
50
5.8 Books and Records. Through the Closing, each of VA and BB and their
respective Subsidiaries shall maintain their respective Books and Records in all
material respects in the same manner and with the same care that such Books and
Records have been maintained prior to the execution of this Agreement.
5.9 Fees and Expenses.
(a) Except as otherwise provided in this Agreement, all costs, fees
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby will be paid by the party incurring such costs, fees and
expenses, whether or not the Merger is consummated.
(b) In the event that (i) an Acquisition Proposal shall have been
made to BB or any of its Subsidiaries or any of its stockholders (a "BB
Acquisition Proposal") or any Person shall have publicly announced an intention
(whether or not conditional) to make an Acquisition Proposal with respect to BB
or any of its Subsidiaries and (ii) thereafter this Agreement is terminated
pursuant to the provisions of clause (iv) or (v) of Section 9.1, then BB shall
promptly, but in no event later than two days after the date VA makes a written
request for payment, pay VA an amount in dollars equal to $27,000,000 as a
termination fee (the "Termination Fee") and shall promptly, but in no event
later than two days after being notified of such by VA, pay to VA an amount
equal to all of the charges and expenses incurred by VA in connection with this
Agreement and the Other Agreements to which it is a party and the transactions
contemplated by this Agreement and the Other Agreements to which it is a party
up to a maximum amount of $3 million (the "Expense Payment"), in each case
payable by wire transfer of same day funds against presentation of invoices or
other documentation evidencing the incurrence of such expenses.
(c) In the event that (i) a BB Acquisition Proposal shall have been
made or any Person shall have publicly announced an intention (whether or not
conditional) to make a BB Acquisition Proposal, (ii) thereafter this Agreement
is terminated pursuant to clause (ix) of Section 9.1, and (iii), within a twelve
month period after termination of this Agreement pursuant to clause (ix) of
Section 9.1, the transaction contemplated in such BB Acquisition Proposal is
consummated or the parties enter into a definitive agreement with regard to the
transaction contemplated in such BB Acquisition Proposal and the transaction is
thereafter consummated, then BB shall promptly, but in no event later than two
days, after consummation of the transaction contemplated in such BB Acquisition
Proposal, pay VA the Termination Fee and shall promptly, but in no event later
than two days, after such date, pay to VA the Expense Payment in an amount equal
to all of the charges and expenses incurred by VA in connection with this
Agreement and the Other Agreements to which it is a party and the transactions
contemplated by this Agreement and the Other Agreements to which it is a party
up to a maximum amount of $3 million, in each case payable by wire transfer of
same day funds against presentation of invoices or other documentation
evidencing the incurrence of such expenses.
(d) In the event that (i) an Acquisition Proposal shall have been
made to VA or any of its Subsidiaries or any of its Shareholders (a "VA
Acquisition Proposal") or any Person shall
51
have publicly announced an intention (whether or not conditional) to make an
Acquisition Proposal with respect to VA or any of its Subsidiaries and (ii)
thereafter this Agreement is terminated pursuant to the provisions of clause
(vi) or (vii) of Section 9.1, then VA shall promptly, but in no event later than
two days after the date BB makes a written request for payment, pay BB the
Termination Fee and shall promptly, but in no event later than two days after
being notified of such by BB, pay to BB the Expense Payment in an amount equal
to all of the charges and expenses incurred by BB in connection with this
Agreement and the Other Agreements to which it is a party and the transactions
contemplated by this Agreement and the Other Agreements to which it is a party
up to a maximum amount of $3 million, in each case payable by wire transfer of
same day funds against presentation of invoices or other documentation
evidencing the incurrence of such expenses.
(e) In the event that (i) a VA Acquisition Proposal shall have been
made or any Person shall have publicly announced an intention (whether or not
conditional) to make a VA Acquisition Proposal, (ii) thereafter this Agreement
is terminated pursuant to the provisions of clause (viii) of Section 9.1, and
(iii) within a twelve month period after termination of this Agreement pursuant
to clause (viii) of Section 9.1, the transaction contemplated in such VA
Acquisition Proposal is consummated or the parties enter into a definitive
agreement with regard to the transaction contemplated in such VA Acquisition
Proposal and the transaction is thereafter consummated, then VA shall promptly,
but in no event later than two days, after consummation of the transaction
contemplated in such VA Acquisition Proposal, pay BB the Termination Fee and
shall promptly, but in no event later than two days, after such date, pay to BB
the Expense Payment in an amount equal to all of the charges and expenses
incurred by BB in connection with this Agreement and the Other Agreements to
which it is a party and the transactions contemplated by this Agreement and the
Other Agreements to which it is a party up to a maximum amount of $3 million, in
each case payable by wire transfer of same day funds against presentation of
invoices or other documentation evidencing the incurrence of such expenses.
(f) BB and VA acknowledge that its agreement to pay to the other the
Termination Fee and the Expense Payment as set forth in paragraphs (b), (c), (d)
and (e) of this Section 5.9 are an integral part of the transactions
contemplated by this Agreement, and that, without such agreement, VA, on the one
hand and BB, on the other hand, would not enter into this Agreement.
Accordingly, if BB or VA, as applicable, fails promptly to pay the Termination
Fee or the Expense Payment pursuant to paragraph (b), (c), (d) or (e), as
applicable, of this Section 5.9 and, in order to obtain such payments, VA or BB,
as applicable, commences a suit which results in a judgment against the other
(the "Defaulting Party") for the Termination Fee and the Expense Payment set
forth in paragraph (b), (c), (d) or (e) of this Section 5.9, the Defaulting
Party shall pay to the other party the costs and expenses (including reasonable
attorneys' fees) incurred by such party in connection with such suit, together
with interest from the date of termination of this Agreement to the date of
payment on the amounts owed at the prime rate of First Union National Bank in
effect from time to time during such period plus two percent.
5.10 Preparation of the Form S-4 and the Proxy Statement/Prospectus;
Shareholders Meetings.
52
(a) As soon as practicable following the date of this Agreement, VA
and BB shall prepare and file with the SEC a preliminary Proxy
Statement/Prospectus relating to the Merger and use all commercially reasonable
efforts to obtain and furnish the information required to be included by the SEC
in the Proxy Statement/Prospectus and to respond promptly to any comments made
by the SEC with respect to the preliminary Proxy Statement/Prospectus. VA shall
prepare and file with the SEC the Form S-4, in which the Proxy
Statement/Prospectus will be included as a prospectus of VA with respect to the
MINT Common Shares to be issued in the Merger and the Scheme. Each of VA and BB
shall use commercially reasonable efforts to have the Form S-4 declared
effective under the Securities Act as promptly as practicable after such filing.
VA will use all reasonable efforts to cause the Proxy Statement/Prospectus to be
mailed to VA's shareholders, and BB will use all commercially reasonable efforts
to cause the Proxy Statement/Prospectus to be mailed to BB's shareholders, in
each case as promptly as practicable after the Form S-4 is declared effective
under the Securities Act. MINT shall also take any action (other than qualifying
to do business in any jurisdiction in which it is not now so qualified or filing
a general consent to service of process) required to be taken under any
applicable state securities laws in connection with the issuance of MINT Common
Shares in the Merger and the Scheme, VA shall furnish all information concerning
VA and the holders of VA Common Shares as may be reasonably requested in
connection with any such action and BB shall furnish all information concerning
BB and the holders of BB Common Shares as may be reasonably requested in
connection with any such action. No filing of, or amendment or supplement to,
the Form S-4 or the Proxy Statement/Prospectus, or response to any comments made
by the SEC with respect thereto, will be made by either party without providing
the other party the opportunity to review and comment thereon. VA will advise
BB, promptly after it receives notice thereof, of the time when the Form S-4 has
become effective or any supplement or amendment has been filed, the issuance of
any stop order, the suspension of the qualification of the MINT Common Shares
issuable in connection with the Merger and the Scheme for offering or sale in
any jurisdiction, or any request by the SEC for amendment of the Proxy
Statement/Prospectus or the Form S-4 or comments thereon and responses thereto
or requests by the SEC for additional information. If at any time prior to the
Effective Time any information relating to VA or BB, or any of their respective
affiliates, officers or directors, should be discovered by VA or BB which should
be set forth in an amendment or supplement to either the Form S-4 or the Proxy
Statement/Prospectus, so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the party which discovers such information shall promptly
notify the other party hereto and an appropriate amendment or supplement
describing such information shall be promptly filed with the SEC and, to the
extent required by law, disseminated to the shareholders of VA and BB.
(b) VA (i) shall, as soon as practicable following the Form S-4
being declared effective by the SEC, duly call, give notice of, convene and hold
a meeting of its shareholders (the "VA Shareholders Meeting") for the purpose of
obtaining the VA Shareholder Approval and (ii) shall, through its Board of
Directors, recommend to its shareholders the approval and adoption of this
Agreement, the issuance of MINT Common Shares in the Merger and the Scheme and
the other
53
transactions contemplated hereby unless, in the case of this clause (ii), in the
good faith judgment of the Board of Directors of VA, after consultation with
outside counsel, the failure to take the foregoing action would be inconsistent
with its obligations under applicable law. Without limiting the generality of
the foregoing but subject to its rights to terminate this Agreement pursuant to
clause (vii) of Section 9.1, VA agrees that its obligations pursuant to clause
(i) of this Section 5.10(b) shall not be affected by the commencement, public
proposal, public disclosure or communication to VA of any Acquisition Proposal
applicable to VA or by the withdrawal or modification by the Board of Directors
of VA, in accordance with clause (ii) above, of its recommendation to the
shareholders of VA that such shareholders approve and adopt this Agreement, the
Merger and the other transactions contemplated hereby.
(c) BB (i) shall, as soon as practicable following the Form S-4
being declared effective by the SEC, duly call, give notice of, convene and hold
a meeting of its shareholders (the "BB Shareholders Meeting") for the purpose of
obtaining the BB Shareholder Approval and (ii) shall, through its Board of
Directors, recommend to its shareholders the approval and adoption of this
Agreement, the Scheme and the other transactions contemplated hereby unless, in
the case of this clause (ii), in the good faith judgment of the Board of
Directors of BB, after consultation with outside counsel, the failure to take
the foregoing action would be inconsistent with its obligations under applicable
law. Without limiting the generality of the foregoing but subject to its rights
to terminate this Agreement pursuant to clause (v) of Section 9.1, BB agrees
that its obligations pursuant to clause (i) of this Section 5.10(c) shall not be
affected by the commencement, public proposal, public disclosure or
communication to BB of any Acquisition Proposal applicable to BB or by the
withdrawal or modification by the Board of Directors of BB, in accordance with
clause (ii) above, of its recommendation to the shareholders of BB that such
shareholders approve and adopt this Agreement, the Scheme and the other
transactions contemplated hereby.
(d) BB and VA will use all reasonable efforts to hold the VA
Shareholders Meeting and the BB Shareholders Meeting on the same date and as
soon as practicable after the date hereof.
5.11 Public Announcements. The initial press release with respect to this
Agreement and the transactions contemplated hereby shall be a joint press
release and thereafter BB and VA shall obtain the written consent of the other
prior to issuing press releases or otherwise making public announcements with
respect to this Agreement and the transactions contemplated hereby and prior to
making any filings with any third party or any Governmental or Regulatory
Authority (including the NYSE) with respect thereto, except to the extent
required by law or by obligations pursuant to the listing agreement with or
rules of the NYSE.
5.12 Efforts to Consummate. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its commercially reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable to consummate, as promptly as
practicable, the transactions contemplated hereby, including the obtaining of
all necessary consents, waivers, authorizations, orders and approvals of third
parties, whether private
54
or governmental, required of it to enable it to comply with the conditions
precedent to consummating the transactions contemplated by this Agreement. Each
party agrees to cooperate fully with the other party in assisting it to comply
with this Section 5.12. Without limiting the generality of the foregoing, each
party hereto shall defend and cooperate with each other party in any defending
legal proceedings, whether judicial or administrative and whether brought
derivatively or on behalf of third parties, challenging this Agreement or the
consummation of the transactions contemplated hereby. No consideration, whether
such consideration shall consist of the payment of money or shall take any other
form, for any such consent, waiver or agreement necessary to the consummation of
the transactions contemplated hereby shall be given or promised by VA or BB
without the prior written consent of the other. Notwithstanding the foregoing,
nothing contained herein shall require (i) any party hereto or any of their
respective Affiliates to sell, transfer, divest or otherwise dispose of any of
its respective material lines of business, material assets or material
properties in connection with this Agreement or any of the transactions
contemplated hereby, or (iii) any party hereto to initiate any litigation, make
any substantial payment or incur any material economic burden (including as a
result of any divestiture), except for payments a party presently is
contractually obligated to make, to obtain any consent, waiver, authorization,
order or approval.
5.13 Employee Benefits. Until the second anniversary of the Closing, VA
shall maintain or caused to be maintained for the benefit of the employees of VA
or any of its subsidiaries who were BB employees immediately prior to the
Closing employee benefit plans and programs that provide such employee with
benefits, rights and entitlements which, in the aggregate, are substantially
comparable to the benefits, rights and entitlements provided to such employee
under the employee benefit plans and programs in which the employee participated
immediately prior to the Closing (other than the BB Option Plans or any other
stock plans). Following the Effective Time, VA shall honor in accordance with
their terms all employment, severance and other compensation agreements and
arrangements existing on or prior to the execution of this Agreement which are
between BB and any of its respective Subsidiaries and any officer, director or
employee thereof.
5.14 Agreements With Respect to Affiliates.
(a) At least five days prior to the Closing Date, BB shall deliver
to VA and MINT a list of names and addresses of those Persons who will be, in
the opinion of the BB, as of the time of the BB Shareholders Meeting,
"affiliates" of BB within the meaning of Rule 145 under the Securities Act. BB
shall use reasonable best efforts to cause each Person who is identified as an
"affiliate" in such letter to deliver to VA and MINT, prior to the Closing Date,
a written agreement in connection with restrictions on affiliates under Rule
145, in customary form mutually agreeable to BB and VA.
(b) VA shall not be required to maintain the effectiveness of the
Form S-4 or any other registration statement under the Securities Act for the
purposes of resale of VA Common Shares by such affiliates received in the Scheme
and the certificates representing MINT Common Shares received by such affiliates
shall bear a customary legend regarding applicable Securities Act restrictions
and the provisions of this Section 5.14.
55
5.15 Indemnification, Exculpation and Insurance.
(a) From and after the Effective Time VA shall, to the extent
permitted by applicable law, indemnify, defend, protect and hold harmless each
person who is now, or has been at any time prior to the date of this Agreement
or who becomes such prior to the Effective Time, an officer or director of BB or
any of its respective Subsidiaries (the "Indemnified Parties") against (i) all
losses, claims, damages, costs, expenses, liabilities or judgments or amounts
that are paid in settlement with the approval of the indemnifying party (which
approval shall not be unreasonably withheld) of or in connection with any claim,
action, suit, proceeding or investigation based in whole or in part on or
arising in whole or in part out of the fact that such person is or was a
director or officer of BB or any of its Subsidiaries whether pertaining to any
matter existing or occurring at or prior to the Effective Time and whether
asserted or claimed prior to, or at or after, the Effective Time ("Indemnified
Liabilities"), and (ii) all Indemnified Liabilities based in whole or in part
on, or arising in whole or in part out of, or pertaining to this Agreement,
Other Agreements to which it is a party or the transactions contemplated hereby
and thereby. VA will pay all expenses of each Indemnified Party in advance of
the final disposition of any such action or proceeding, to the fullest extent
permitted by law, provided, that such Indemnified Party delivers to VA his or
--------
her undertaking to reimburse such advanced expenses in the event it is finally
determined by a court of competent jurisdiction that such Indemnified Party is
not entitled to be indemnified hereunder. Promptly after receipt by an
Indemnified Party of actual notice of any claim, suit, action, proceeding or
investigation (collectively, a "Claim") for which indemnification hereunder may
be sought, the Indemnified Party shall give notice thereof to VA, and the
Indemnified Party shall permit VA (at the expense of VA) to assume the defense
of such Claim, provided, that (i) counsel for VA who shall conduct the defense
-------- -
of such Claim shall be reasonably satisfactory to the Indemnified Party, and the
Indemnified Party may participate in such defense at such Indemnified Party's
expense, and (ii) the failure of any Indemnified Party to give notice as
--
provided herein shall not relieve VA of its indemnification obligation hereunder
except to the extent that such failure results in a lack of actual notice to VA
and VA is prejudiced as a result of such failure to give notice. Except with
the prior written consent of the Indemnified Party, VA, in the defense of any
such claim or litigation, shall not consent to entry of any judgment or enter
into any settlement that provides for injunctive or other nonmonetary relief
affecting the Indemnified Party or that does not include as an unconditional
term thereof the giving by each claimant or plaintiff to such Indemnified Party
of a release from all liability with respect to such Claim. In the event that
the Indemnified Party shall in good faith determine that VA and the Indemnified
Party have differing interests or the Indemnified Party may have available to it
one or more defenses or counterclaims that are inconsistent with one or more of
those that may be available to VA in respect of such Claim, the Indemnified
Party shall have the right at all times to take over and assume control over the
defense, settlement, negotiations or litigation relating to any such Claim with
counsel of its choice at the sole cost of VA, provided, that if the Indemnified
---------
Party does so take over and assume control, the Indemnified Party shall not
settle such claim or litigation without the written consent of VA, such consent
not to be unreasonably withheld. In the event that VA does not accept the
defense of any matter as above provided, the Indemnified Party shall have the
full right to defend against any such claim or demand, and shall be entitled to
settle or agree to pay in full such claim or demand and be
56
indemnified hereunder. In any event, VA and the Indemnified Party shall
cooperate in the defense of any Claim.
(b) Without limiting the foregoing, VA and BB agree that all rights
to indemnification and exculpation from liabilities for acts or omissions
occurring at or prior to the Effective Time now existing in favor of the current
or former directors or officers of BB and its Subsidiaries as provided in their
respective articles of incorporation or by-laws (or comparable organizational
documents) and any indemnification agreements of BB (other than any entered into
in violation of Section 5.1 hereof), shall survive the Merger and shall continue
in full force and effect in accordance with their respective terms.
(c) For seven years after the Effective Time, VA shall maintain in
effect BB's respective current directors' and officers' liability insurance
covering acts or omissions occurring prior to the Effective Time with respect to
those persons who are currently covered by BB's respective directors' and
officers' liability insurance policy on terms with respect to such coverage and
amount no less favorable than those of such policy in effect on the date hereof;
provided that VA may substitute therefor policies of VA or its subsidiaries
- --------
containing terms with respect to coverage and amount no less favorable to such
directors or officers; provided further, that if the existing or substituted
-------- -------
directors' and officers' liability insurance expires, is terminated or canceled
during such seven-year period, VA will obtain as much directors' and officers'
liability insurance as can be obtained for the remainder of such period for a
premium not in excess of 300% of the aggregate premiums paid by BB in 1998 on an
annualized basis for such purpose.
(d) The provisions of this Section 5.15 are intended to be for the
benefit of, and will be enforceable by, each Indemnified Party, his or her heirs
and his or her representatives and are in addition to, and not in substitution
for, any other rights to indemnification or contribution that any such person
may have by contract or otherwise.
5.16 NYSE Listing and Delisting. VA shall use its commercially reasonable
efforts to cause the MINT Common Shares to be approved for listing on the NYSE
subject to official notice of issuance. VA and BB shall use their respective
reasonable efforts to cause the VA Common Shares and the BB Common Shares,
respectively to be delisted from the NYSE and de-registered under the Exchange
Act as soon as practicable after the Effective Time.
5.17 Formation of MINT and Sub.
(a) As soon as practicable following the date of this Agreement,
(i) VA shall cause MINT to be formed as a Virginia corporation, and shall cause
MINT to adopt its Articles of Incorporation and its Bylaws in accordance with
the VSCA and the terms hereof, which Articles and By-Laws shall be substantially
identical to the Articles and By-Laws of VA, MINT shall cause Sub to be formed
as Virginia corporation and shall cause Sub to adopt its Articles of
Incorporation and its Bylaws in accordance with the VSCA and the terms hereof,
which Articles of Incorporation and By-Laws shall be reasonably satisfactory to
BB and VA.
57
(b) Immediately after the formation of MINT and Sub, respectively,
(i) VA shall cause (1) MINT and Sub to adopt and become parties to this
Agreement, (2) the respective Boards of Directors of MINT and Sub to approve the
Merger and this Agreement (and to recommend approval of the Merger and this
Agreement to their respective shareholders) and (3) immediately following the
taking of the actions contemplated by subclauses (1) and (2) above, MINT to
approve the Merger in its capacity as sole shareholder of Sub, and (ii)
immediately following the taking of the actions contemplated by clause (i)
above, VA shall approve the Merger in its capacity as sole shareholder of MINT.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF VA
The obligation of VA to consummate the transactions contemplated by this
Agreement shall be subject, in the sole discretion of VA, to the satisfaction,
on or prior to the Closing Date, of each of the following conditions, any of
which may be waived by VA in accordance with Section 10.8:
6.1 Representations and Warranties. The representations and warranties of
BB contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement, and the representations and
warranties of BB in this Agreement shall be true and correct as of the Closing
Date as though made on and as of the Closing Date (except to the extent any such
representation or warranty expressly speaks as of an earlier specified date)
except where the failure of such representations and warranties to be so true
and correct (without giving effect to any qualification as to "Material Adverse
Effect," "material" or similar qualifications) are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on BB.
6.2 Material Adverse Change. There shall not have been any material
adverse change in the assets, liabilities, condition (financial or otherwise),
results of operations or business of BB and its Subsidiaries taken as a whole
since June 30, 1999, nor any occurrence or circumstance that with the passage of
time would result in such material adverse change; provided that a material
--------
adverse change shall not include (i) changes solely in the market price of VA
Common Shares or BB Common Shares or (ii) any change resulting from (x) changes
in general economic conditions, (y) changes in the market level of investment
portfolios, or (z) changes affecting the property-casualty insurance industry
generally.
6.3 Performance of this Agreement. BB shall have, in all material
respects, performed all covenants and agreements and complied with all
conditions required by this Agreement to be performed or complied with by BB
prior to or on the Closing Date.
6.4 Injunction. No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the Merger or the
Scheme shall be in effect; provided, however, that
58
the parties hereto shall use their commercially reasonable efforts to have any
such injunction, order, restraint or prohibition vacated.
6.5 Shareholder Approval. Each of the BB Shareholder Approval and the VA
Shareholder Approval shall have been obtained.
6.6 Governmental Approvals. All of the BB Designated Insurance Approvals
and the VA Designated Insurance Approvals shall have been obtained. The Court
shall have sanctioned the Scheme on the terms contemplated by this Agreement.
6.7 NYSE Listing. The MINT Common Shares to be issued in conjunction with
the transactions contemplated hereby and to be received by the holders of BB
Common Shares and VA Common Shares in connection with the Merger and the Scheme
shall have been approved for listing on the NYSE, subject to notice of issuance,
effective as of the Effective Time.
6.8 HSR Act. The waiting period, and any extension of time thereof,
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
6.9 Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order, and any material "blue sky" and other state securities
laws applicable to the issuance of the VA Common Shares to be issued in
connection with the Merger and the Scheme shall have been complied with.
6.10 Tax Opinion. The Board of Directors of VA shall have received from
McGuire, Woods, Battle & Boothe LLP on the Closing Date a legal opinion that the
Merger will be treated for United States federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, and that VA and MINT will each be a party to that reorganization within
the meaning of Section 368(b) of the Internal Revenue Code. In rendering such
opinion, counsel may require and rely upon representations of VA and BB and
certificates of shareholders that beneficially own five percent or more of any
class of stock of VA or BB, in each case reasonably satisfactory to such
counsel.
6.11 Frustration of Closing Conditions. VA may not rely on the failure of
any condition set forth in this Article VI to be satisfied if such failure was
caused by VA's failure to use reasonable efforts to consummate the Scheme, the
Merger and the other transactions contemplated by this Agreement and the Other
Agreements to which it is a party.
59
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BB
The obligation of BB to consummate the transactions contemplated by this
Agreement shall be subject, in the sole discretion of BB, to the satisfaction,
on or prior to the Closing Date, of each of the following conditions, any of
which may be waived by BB in accordance with Section 10.8.
7.1 Representations and Warranties. The representations and warranties of
VA contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement, and the representations and
warranties of VA in this Agreements shall be true and correct as of the Closing
Date as though made on and as of the Closing Date (except to the extent any such
representation or warranty expressly speaks as of an earlier specified date)
except where the failure of such representations and warranties to be so true
and correct (without giving effect to any qualification as to "Material Adverse
Effect," "material" or similar qualifications) are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on VA.
7.2 Material Adverse Change. There shall not have been any material
adverse change in the assets, liabilities, condition (financial or otherwise),
results of operations or business of VA and its Subsidiaries taken as a whole
since June 30, 1999, nor any occurrence or circumstance that with the passage of
time would result in such material adverse change; provided that a material
--------
adverse change shall not include (i) changes solely in the market price of VA
Common Shares or BB Common Shares or (ii) any change resulting from (x) changes
in general economic conditions, (y) changes in the market level of investment
portfolios, or (iii) changes affecting the property-casualty insurance industry
generally.
7.3 Performance of this Agreement. VA shall have, in all material
respects, performed all covenants and agreements and complied with all
conditions required by this Agreement to be performed or complied with by VA
prior to or on the Closing Date.
7.4 Injunction. No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the Scheme and the
Merger shall be in effect; provided, however, that the parties hereto shall use
their commercially reasonable efforts to have any such injunction, their best
order, restraint or prohibition vacated.
7.5 Shareholder Approval. Each of the VA Shareholder Approval and the BB
Shareholder Approval shall have been obtained.
7.6 Governmental Approvals. All of the BB Designated Insurance Approvals
and the VA Designated Insurance Approvals shall have been obtained. The Court
shall have sanctioned the Scheme on the terms contemplated by this Agreement.
60
7.7 NYSE Listing. The MINT Common Shares to be issued in conjunction with
the transactions contemplated hereby and to be received by the holders of BB
Common Shares and VA Common Shares in connection with the Merger and the Scheme
shall have been approved for listing on the NYSE, subject to notice of issuance,
effective as of the Effective Time.
7.8 HSR Act. The waiting period, and any extension of time thereof,
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
7.9 Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order, and any material "blue sky" and other state securities
laws applicable to the issuance of the MINT Common Shares to be issued in
connection with the Merger and the Scheme shall have been complied with.
7.10 Tax Opinion. The Board of Directors of BB shall have received from
Debevoise & Plimpton on the Closing Date a legal opinion that the Merger,
together with the Scheme, when integrated, will be treated for United States
federal income tax purposes as a transaction described in Section 351 of the
Code. In rendering such opinion, counsel may require and rely upon
representations of VA and BB, opinions of local counsel, and certificates of
shareholders that beneficially own five percent or more of any class of stock of
VA or BB, in each case reasonably satisfactory to such counsel.
7.11 Frustration of Closing Conditions. BB may not rely on the failure of
any condition set forth in this Article VII to be satisfied if such failure was
caused by BB's failure to use reasonable efforts to consummate the Merger and
the Scheme and the other transactions contemplated by this Agreement
and the Other Agreements to which it is a party.
ARTICLE VIII
NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES
8.1 Non-Survival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated at any time prior to the
Closing whether before or after approval by the shareholders of the Company and
without further shareholder action:
(i) by the mutual written consent of the Boards of Directors of
BB and VA;
61
(ii) by VA, if any event occurs which renders impossible
compliance with one or more of the conditions set forth in Article VI hereof,
which condition or conditions are not waived by VA;
(iii) by BB, if any event occurs which renders impossible
compliance with one or more of the conditions set forth in Article VII hereof,
which condition or conditions are not waived by BB;
(iv) by VA, if (A) the Board of Directors of BB shall have
failed to approve and recommend or shall have withdrawn or modified in a manner
adverse to VA its approval or recommendation of the Scheme or this Agreement, or
approved or recommended any Acquisition Proposal, (B) BB shall have entered into
any agreement with respect to any Superior Proposal in accordance with Section
5.3(b) of this Agreement or (C) the Board of Directors of BB shall have resolved
to take any of the foregoing actions;
(v) by BB in connection with entering into a definitive
agreement in accordance with Section 5.3(b), provided that it has complied with
--------
all provisions thereof, including the notice provisions therein and the payment
of the Termination Fee and Expense Payment (if applicable), and provided that BB
--------
shall not have breached in any material respect any other provision of Section
5.3;
(vi) by BB, if (A) the Board of Directors of VA shall have
failed to approve and recommend or shall have withdrawn or modified in a manner
adverse to BB its approval or recommendation of the Merger or this Agreement, or
approved or recommended any Acquisition Proposal, (B) VA shall have entered into
any agreement with respect to any Superior Proposal in accordance with Section
5.3(b) of this Agreement or (C) the Board of Directors of VA shall have resolved
to take any of the foregoing actions;
(vii) by VA in connection with entering into a definitive
agreement in accordance with Section 5.3(b), provided that it has complied with
--------
all provisions thereof, including the notice provisions therein and the payment
of the Termination Fee and Expense Payment (if applicable), and provided that VA
--------
shall not have breached in any material respect any other provision of Section
5.3;
(viii) by either BB or VA if any required approval of the
stockholders of VA shall not have been obtained by reason of the failure to
obtain the required vote upon a vote held at a duly held meeting of stockholders
or at any adjournment thereof;
62
(ix) by either VA or BB if any required approval of the
stockholders of BB shall not have been obtained by reason of the failure to
obtain the required vote upon a vote held at a duly held meeting of stockholders
or at any adjournment thereof; or
(x) by either BB or VA if the Closing has not occurred by 11:59
p.m., June 30, 2000.
9.2 Restructuring. Prior to any termination of this Agreement (a) by BB
pursuant to clause (iii) of Section 9.1 resulting from the failure to receive
the opinion referred to in Section 7.9 or (b) by VA pursuant to clause (ii) of
Section 9.1 resulting from the failure to receive the opinion referred to in
Section 6.9, the parties hereto will negotiate in good faith to restructure the
transactions contemplated hereby so as to permit the delivery of such opinions
or letters without adversely effecting the economic or business benefits of the
transactions contemplated hereby to VA, BB and their respective shareholders.
9.3 Procedure: Effect of Termination. If this Agreement is terminated as
provided in Section 9.1, written notice thereof shall forthwith be given by the
terminating party to the other party, and this Agreement shall thereupon
terminate and become void and of no further force and effect and there shall be
no further liability or obligation on the part of either party hereto except for
the obligations under Sections 5.7, 5.9 and 9.1; provided that termination of
--------
this Agreement by VA or BB pursuant to clause (ii), (iii), (viii) or (ix) of
Section 9.1, respectively, shall not relieve a defaulting or breaching party
(the "Breaching Party"), whether or not it is the terminating party, of
liability for damages actually incurred by the other party as a result of
intentional breach of this Agreement by the Breaching Party.
ARTICLE X
GENERAL PROVISIONS
10.1 Notices. All notices required to be given hereunder shall be in
writing and shall be deemed to have been given if (i) delivered personally or by
documented courier or delivery service, (ii) transmitted by facsimile during
normal business hours or (iii) mailed by registered or certified mail (return
receipt requested and postage prepaid) to the following listed persons at the
addresses and facsimile numbers specified below, or to such other persons,
addresses or facsimile numbers as a party entitled to notice shall give, in the
manner hereinabove described, to the others entitled to notice:
63
(a) If to VA, to:
Markel Corporation
4551 Cox Road
Glen Allen, Virginia 23059
Attention: Steven A. Markel
Facsimile No.: 804-527-3810
and
Gregory B. Nevers, Esq.
and to:
McGuire, Woods, Battle & Boothe LLP
One James Center
901 E. Cary Street
Richmond, Virginia 23219
Attention: Leslie A. Grandis, Esq.
Facsimile No.: 804-775-1061
(b) If to BB, to:
Terra Nova (Bermuda) Holdings Ltd.
Richmond House
2nd Floor
12 Par-la-ville Road
Hamilton HM 8, Bermuda
Facsimile No.: (44-1) 296-6645
Attention: John J. Dwyer and
Jean M. Waggett, Esq.
and to:
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Edward A. Perell, Esq.
Facsimile No.: 212-909-6836
If given personally or by documented courier or delivery service, or transmitted
by facsimile, a notice shall be deemed to have been given when it is received.
If given by mail, it shall be deemed to have been given on the third business
day following the day on which it was posted.
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10.2 Interpretation. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement. For purposes of this Agreement, the words
"includes" and "including" shall mean "including without limitation." All
accounting terms not defined in this Agreement shall have the meaning determined
by GAAP. All capitalized terms defined herein are equally applicable to both the
singular and plural forms. This Agreement has been jointly prepared by the
parties hereto and the terms hereof shall not be construed in favor of or
against any party on account of its participation in such preparation.
10.3 Entire Agreement. This Agreement, the Disclosure Letters and the
Annexes and Exhibits hereto, contain the entire agreement among the parties with
respect to the subject matter hereof and there are no agreements,
understandings, representations or warranties between the parties other than
those set forth or referred to herein; provided that the forms of agreements
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attached hereto as Exhibits shall be superseded by the copies of such agreements
and opinions executed and delivered by the respective parties thereto, the
execution and delivery of such agreements and opinions by the parties thereto to
be conclusive evidence of such parties' approval of any change or modification
therein.
10.4 No Third Party Beneficiaries. Except as otherwise provided in Section
5.15, nothing in this Agreement (whether expressed or implied) is intended to
confer upon any person other than the parties hereto and their respective
permitted successors and assigns, any rights or remedies under or by reason of
this Agreement nor is anything in this Agreement intended to relieve or
discharge the liability of any party hereto, nor shall any provision hereof give
any person any right of subrogation against, or action over against any party.
10.5 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided that no party hereto will assign its rights or delegate its
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obligations under this Agreement without the express prior written consent of
each other party hereto
10.6 Severability. In the event that this Agreement or any other
instrument referred to herein, or any of their respective provisions, or the
performance of any such provision, is found to be invalid, illegal or
unenforceable under applicable law now or hereafter in effect, the parties shall
be excused from performance of such portions of this Agreement as shall be found
to be invalid, illegal or unenforceable under the applicable laws or regulations
without, to the maximum extent permitted by law, affecting the validity of the
remaining provisions of the Agreement. Should any method of termination of this
Agreement or a portion thereof be found to be invalid, illegal or unenforceable,
such method shall be reformed to comply with the requirements of applicable law
so as, to the greatest extent possible, to allow termination by that method.
Nothing herein shall be construed as a waiver of any party's right to challenge
the validity of such law.
10.7 Amendment. This Agreement may be amended, modified or supplemented at
any time by the parties hereto, provided, however, that after receipt of the VA
Shareholder Approval or the BB Shareholder Approval, there shall be made no
amendment that by law requires further
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approval by such shareholders without the further approval of such shareholders.
This Agreement may be amended only by an instrument in writing signed by each of
the parties hereto.
10.8 Extension; Waiver. At any time prior to the Closing either party to
this Agreement may (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive a breach of a representation
or warranty of the other party hereto, or (iii) waive compliance by the other
party hereto with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid if set forth in a written instrument signed
by the party giving the extension or waiver. No waiver of any of the provisions
of this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
10.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.10 Governing Law. Except for Article II in so far as it relates to the
Merger, including issuance of the MINT Common Shares to holders of VA Common
Shares and the issuance of Mint Common Shares to holders of BB Common Shares,
which shall be governed by the laws of Virginia, or the Scheme, which shall be
governed by the laws of Bermuda, this Agreement shall be governed in all
respects by the laws of the State of New York without regard to any laws or
regulations relating to choice of laws (whether of the State of New York or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
10.11 Disclosure Letter. The parties acknowledge that the Disclosure
Letters (i) relate to certain matters concerning the disclosures required and
transactions contemplated by this Agreement, (ii) are qualified in their
entirety by reference to specific provisions of this Agreement, (iii) are not
intended to constitute and shall not be construed as indicating that such matter
is required to be disclosed, nor shall such disclosure be construed as an
admission that such information is material with respect to the BB or VA, as the
case may be, except to the extent required by this Agreement, and (iv)
disclosure of the information contained in one section or part of the BB
Disclosure Letter or the VA Disclosure Letter shall be deemed as proper
disclosure for all sections or parts of the BB Disclosure Letter or the VA
Disclosure Letter, as the case may be, only if appropriately cross-referenced or
if the relevance thereof is reasonably apparent from the context in which it
appears.
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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed and their corporate seals to be hereto affixed and attested by their
duly authorized officers.
MARKEL CORPORATION
By:/s/ Steven A Markel
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Title:Vice Chairman
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TERRA NOVA (BERMUDA) HOLDINGS LTD.
By:/s/ John J. Dwyer
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Title:Chairman
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