EXHIBIT 2
======================================================================
AGREEMENT AND PLAN OF MERGER
Among
BERKSHIRE HATHAWAY INC.,
HPKF INC.
and
GEICO CORPORATION
Dated as of August 25, 1995
======================================================================
TABLE OF CONTENTS
Page
ARTICLE I
The Merger
SECTION 1.01. Effective Time of the Merger ...................... 2
SECTION 1.02. Closing ........................................... 2
SECTION 1.03. Effect of the Merger .............................. 2
SECTION 1.04. Certificate of Incorporation and
By-laws ......................................... 3
SECTION 1.05. Directors ......................................... 3
SECTION 1.06. Officers .......................................... 3
ARTICLE II
Conversion of Securities
SECTION 2.01. Conversion of Capital Stock ....................... 3
SECTION 2.02. Exchange of Certificates .......................... 5
ARTICLE III
Representations and Warranties of the Company
SECTION 3.01. Organization ...................................... 7
SECTION 3.02. Capitalization .................................... 8
SECTION 3.03. Authority ......................................... 9
SECTION 3.04. Consents and Approvals; No Violations ............. 9
SECTION 3.05. SEC Reports and Financial Statements .............. 10
SECTION 3.06. Absence of Certain Changes ........................ 11
SECTION 3.07. No Undisclosed Liabilities ........................ 11
SECTION 3.08. Benefit Plans ..................................... 11
SECTION 3.09. Other Benefit Plans ............................... 12
SECTION 3.10. Litigation ........................................ 13
SECTION 3.11. Compliance with Applicable Law .................... 13
SECTION 3.12. Opinion of Financial Advisor ...................... 14
SECTION 3.13. Vote Required ..................................... 14
i
Page
ARTICLE IV
Representations and Warranties
of Parent and Sub
SECTION 4.01. Organization ...................................... 14
SECTION 4.02. Authority ......................................... 15
SECTION 4.03. Consents and Approvals; No Violations ............. 15
SECTION 4.04. Information in Proxy Statement .................... 16
SECTION 4.05. Interim Operations of Sub ......................... 16
ARTICLE V
Covenants
SECTION 5.01. Covenants of the Company .......................... 16
SECTION 5.02. No Solicitation; Fiduciary Out .................... 18
ARTICLE VI
Additional Agreements
SECTION 6.01. Preparation of the Proxy Statement ................ 20
SECTION 6.02. Access to Information ............................. 21
SECTION 6.03. Stockholders Meeting .............................. 21
SECTION 6.04. Legal Conditions to Merger ........................ 21
SECTION 6.05. Employee Benefit Plans ............................ 22
SECTION 6.06. Expenses .......................................... 23
SECTION 6.07. Brokers or Finders ................................ 23
SECTION 6.08. Indemnification; Insurance ........................ 23
SECTION 6.09. Additional Agreements; Best Efforts ............... 25
ARTICLE VII
Conditions
SECTION 7.01. Conditions to Each Party's Obligation
To Effect the Merger ............................ 26
SECTION 7.02. Conditions of Obligations of Parent
and Sub ......................................... 27
SECTION 7.03. Conditions of Obligations of the
Company ......................................... 27
ii
Page
ARTICLE VIII
Termination and Amendment
SECTION 8.01. Termination ....................................... 28
SECTION 8.02. Effect of Termination ............................. 29
SECTION 8.03. Amendment ......................................... 29
SECTION 8.04. Extension; Waiver ................................. 29
ARTICLE IX
Miscellaneous
SECTION 9.01. Nonsurvival of Representations,
Warranties and Agreements ....................... 30
SECTION 9.02. Notices ........................................... 30
SECTION 9.03. Entire Agreement; No Third Party
Beneficiaries; Rights of Ownership .............. 31
SECTION 9.04. Governing Law ..................................... 31
SECTION 9.05. Publicity ......................................... 31
SECTION 9.06. Assignment ........................................ 32
iii
AGREEMENT AND PLAN OF MERGER dated as of
August 25, 1995, by and among BERKSHIRE
HATHAWAY INC., a Delaware corporation
("Parent"), HPKF INC., a Delaware corporation
and an indirect subsidiary of Parent ("Sub"),
and GEICO CORPORATION, a Delaware corporation
(the "Company").
WHEREAS the Board of Directors of each of Parent,
Sub and the Company deem it advisable and in the best
interests of their respective stockholders to consummate, and
have approved, the transaction provided for herein in which
Sub would merge with and into the Company and the Company
would become an indirect subsidiary of Parent;
WHEREAS the Board of Directors of the Company has
(i) determined that the consideration to be paid to the
Independent Stockholders (as defined below) of the Company
for each share of Common Stock of the Company in the Merger
(as defined below) held by them is fair to and in the best
interests of such Independent Stockholders, (ii) approved
this Agreement and the transactions contemplated hereby and
(iii) resolved, subject to Section 5.02(b), to recommend to
such stockholders their approval of the Merger and this
Agreement;
WHEREAS the parties hereto intend and acknowledge
that, assuming the Merger takes place as contemplated
hereunder, (i) the Merger will be treated for Federal income
tax purposes as a taxable stock acquisition, and (ii)
immediately after the Merger, the aggregate tax basis of the
Company Common Stock (as defined below) owned by Parent and
its Subsidiaries (as defined below) will be equal to the sum
of (A) the aggregate tax basis of the Company Common Stock
owned by Parent and its Subsidiaries immediately before the
Merger, (B) the aggregate Merger Consideration (as defined
below) paid in the Merger pursuant to Section 2.01(c), (C)
the aggregate amount paid to Dissenting Stockholders (as
defined below), if any, in respect of such Dissenting
Stockholders' Company Common Stock pursuant to Section
2.01(d), and (D) any other amounts paid or costs incurred by
Parent and its Subsidiaries that are properly capitalized
into the tax basis of the Company Common Stock owned by
Parent and its Subsidiaries immediately after the Merger;
WHEREAS the Board of Directors of each of Parent
and Sub have each approved the merger (the "Merger") of Sub
into the Company in accordance with the General Corporation
Law of the State of Delaware (the "DGCL") upon the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing
and the respective representations, warranties, covenants and
agreements set forth herein the parties hereto agree as
follows:
ARTICLE I
The Merger
SECTION 1.01. Effective Time of the Merger. Subject
to the provisions of this Agreement, a certificate of merger
(the "Certificate of Merger") shall be duly pre- pared,
executed and acknowledged by the Company and there- after
delivered to the Secretary of State of the State of Delaware
for filing, as provided in the DGCL, as soon as practicable
on or after the Closing Date (as defined in Section 1.02).
The Merger shall become effective upon the filing of the
Certificate of Merger with the Secretary of State of the
State of Delaware or at such time thereafter as is agreed to
between Parent and the Company and provided in the
Certificate of Merger (the "Effective Time").
SECTION 1.02. Closing. The closing of the Merger
(the "Closing") will take place at 9:00 a.m., Washington,
D.C. time, on a date to be specified by the parties, which
shall be the later of (i) January 2, 1996, and (ii) the
second business day after satisfaction of the latest to occur
of the conditions set forth in Section 7.01 (provided that
the other closing conditions set forth in Article VII have
been met or waived as provided in Article VII at or prior to
the Closing) (the "Closing Date"), at the offices of the
Company, unless another date or place is agreed to in writing
by the parties hereto.
SECTION 1.03. Effect of the Merger. At the
Effective Time Sub shall be merged with and into the Company
which shall continue as the surviving corporation (the
Company is sometimes referred to herein as the "Surviving
Corporation").
SECTION 1.04. Certificate of Incorporation and
By-laws. (a) The certificate of incorporation of the Company,
as in effect immediately prior to the Effective Time, shall
be the certificate of incorporation of the Surviving
Corporation until thereafter changed or amended as provided
therein or by applicable law.
(b) The by-laws of the Company as in effect at the
Effective Time shall be the by-laws of the Surviving
Corporation until thereafter changed or amended as provided
therein or by applicable law.
SECTION 1.05. Directors. The directors of Sub
immediately prior to the Effective Time shall be the
directors of the Surviving Corporation until the earlier of
their resignation or removal or until their respective
successors are duly elected and qualified, as the case may
be.
SECTION 1.06. Officers. The officers of the Company
immediately prior to the Effective Time shall be the officers
of the Surviving Corporation until the earlier of their
resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
ARTICLE II
Conversion of Securities
SECTION 2.01. Conversion of Capital Stock. As of
the Effective Time, by virtue of the Merger and without any
action on the part of the holder of any shares of Common
Stock, par value $1 per share, of the Company (the "Company
Common Stock") or capital stock of Sub:
(a) Capital Stock of Sub. Each issued and out-
standing share of the capital stock of Sub shall be con-
verted into and become that number of shares of fully paid
and nonassessable shares of Company Common Stock equivalent
to the quotient obtained by dividing (i) the difference
between (A) the total number of outstanding shares of Company
Common Stock immediately prior to the Effective Time and (B)
the total number of shares of Company Common Stock owned by
Parent and its Subsidiaries immediately prior to the
Effective Time by (ii) 10,000.
(b) Cancelation of Treasury Stock; Parent-Owned
Stock to Remain Outstanding. All shares of Company Common
Stock that are owned by the Company as treasury stock shall
be canceled and retired and shall cease to exist and no
consideration shall be delivered in exchange therefor. All
shares of Company Common Stock owned by Parent or any
Subsidiary of Parent shall remain outstanding without change.
As used in this Agreement, the word "Subsidiary" means, with
respect to any party, any corporation or other organization,
whether incorporated or unincorporated, of which (i) such
party or any other Subsidiary of such party is a general
partner (excluding partnerships, the general partnership
interests of which held by such party or any Subsidiary of
such party do not have a majority of the voting interest in
such partnership) or (ii) at least a majority of the
securities or other interests having by their terms ordinary
voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such
corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of
its Subsidiaries, or by such party and one or more of its
Subsidiaries.
(c) Conversion of Company Common Stock. Subject to
Section 2.01(d), each share of Company Common Stock issued
and outstanding (other than shares to be canceled or to
remain outstanding in accordance with Section 2.01(b)) shall
be converted into the right to receive $70.00 in cash without
interest (the "Merger Consideration"). As of the Effective
Time, all such shares shall no longer be outstanding and
shall automatically be canceled and shall cease to exist, and
each holder of a certificate representing any such shares
shall cease to have any rights with respect thereto, except
the right to receive the Merger Consideration without
interest. At the Effective Time, each holder of a then
outstanding option to purchase shares of Company Common Stock
under the Company Stock Plans (as defined below) shall, in
settlement thereof, receive from the Company for each share
of Company Common Stock subject to such option an amount
(subject to any applicable withholding tax) in cash equal to
the excess of the Merger Consideration over the per share
exercise price of such option (such amount being hereinafter
referred to as the "Option Consideration"); provided,
however, that with respect to any person subject to Section
16(a) of the Exchange Act, any such amount shall be paid as
soon as practicable after the first date payment can be made
without liability to such person under Section 16(b) of the
Exchange
Act. Upon receipt of the Option Consideration, the option
shall be cancelled. The surrender of an option shall be
deemed a release of any and all rights the holder had or may
have had in respect of such option.
(d) Shares of Dissenting Stockholders. Notwith-
standing anything in this Agreement to the contrary, any
issued and outstanding shares of Company Common Stock held by
a person (a "Dissenting Stockholder") who duly demands
appraisal of his shares of Company Common Stock pursuant to
the DGCL and complies with all the provisions of the DGCL
concerning the right of holders of Company Common Stock to
demand appraisal of their shares in connection with the
Merger ("Dissenting Shares") shall not be converted as
described in Section 2.01(c) but shall become the right to
receive such cash consideration as may be determined to be
due to such Dissenting Stockholder as provided in the DGCL.
If, however, such Dissenting Stockholder withdraws his demand
for appraisal or fails to perfect or otherwise loses his
right of appraisal, in any case pursuant to the DGCL, his
shares shall be deemed to be converted as of the Effective
Time into the right to receive the Merger Consideration
without interest. The Company shall give Parent (i) prompt
notice of any demands for appraisal of shares received by the
Company and (ii) the opportunity to participate in and direct
all negotiations and proceedings with respect to any such
demands. The Company shall not, without the prior written
consent of Parent, make any pay- ment with respect to, or
settle, offer to settle or other- wise negotiate, any such
demands.
(e) Withholding Tax. The right of any stock- holder
to receive the Merger Consideration shall be subject to and
reduced by the amount of any required tax withholding
obligation.
SECTION 2.02. Exchange of Certificates. (a) Paying
Agent. Prior to the Effective Time, Parent shall designate a
bank or trust company to act as paying agent in the Merger
(the "Paying Agent"), and, from time to time on and after the
Effective Time, Parent shall make available, or cause its
Subsidiaries (other than the Surviving Corporation) to make
available, to the Paying Agent funds in amounts and at the
times necessary for the payment of the Merger Consideration
pursuant to Section 2.01(c), and any payments to Dissenting
Stockholders pursuant to Section 2.01(d), it being understood
that any and all interest earned on funds made available to
the
Paying Agent pursuant to this Agreement shall be turned over
to Parent or the Subsidiary providing such funds, as
applicable.
(b) Exchange Procedure. As soon as reasonably
practicable after the Effective Time, the Paying Agent shall
mail to each holder of record (other than Parent or any of
its Subsidiaries) of a certificate or certificates which
immediately prior to the Effective Time represented shares of
Company Common Stock (the "Certificates") (i) a letter of
transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the
Paying Agent and shall be in a form and have such other
provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate for cancelation to the Paying
Agent or to such other agent or agents as may be appointed by
Parent, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be
required by the Paying Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor the amount
of cash into which the shares theretofore represented by such
Certificate shall have been converted pursuant to Section
2.01, and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of shares
that is not registered in the transfer records of the
Company, payment may be made to a person other than the
person in whose name the Certificate so surrendered is
registered, if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the person
requesting such payment shall pay any transfer or other taxes
required by reason of the payment to a person other than the
registered holder of such Certificate or establish to the
satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered as
contemplated by this Section 2.02, each Certificate shall be
deemed at any time after the Effective Time to represent only
the right to receive upon such surrender the amount of cash,
without interest, into which the shares theretofore
represented by such Certificate shall have been converted
pursuant to Section 2.01. No interest will be paid or will
accrue on the cash payable upon the surrender of any
Certificate.
(c) No Further Ownership Rights in Company Common
Stock. All cash paid upon the surrender of Certificates in
accordance with the terms of this Article II shall be deemed
to have been paid in full satisfaction of all rights per-
taining to the shares of Company Common Stock theretofore
represented by such Certificates. At the Effective Time, the
stock transfer books of the Company shall be closed, and
there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the
shares that were outstanding immediately prior to the
Effective Time, except for shares owned by Parent or its
Subsidiaries. If, after the Effective Time, Certificates are
presented to the Surviving Corporation or the Paying Agent
for any reason, they shall be canceled and exchanged as
provided in this Article II.
(d) No Liability. None of Parent, Sub, the Company
or the Paying Agent shall be liable to any person in respect
of any cash delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
ARTICLE III
Representations and Warranties of the Company
The Company represents and warrants to Parent and
Sub as follows:
SECTION 3.01. Organization. Each of the Company and
its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite
corporate power and corporate authority and all necessary
governmental approvals to own, lease and operate its prop-
erties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in
good standing or to have such power, authority and govern-
mental approvals would not have a material adverse effect on
the Company and its Subsidiaries taken as a whole. As used in
this Agreement, any reference to any event, change or effect
being material or having a material adverse effect on or with
respect to an entity (or group of entities taken as a whole)
means such event, change or effect is materially adverse to
the consolidated condition (financial or other- wise),
properties, assets (including intangible assets), liabilities
(including contingent liabilities), businesses or results of
operations of such entity (or, if with respect thereto, of
such group of entities taken as a whole). The
Company and each of its Subsidiaries is duly qualified or
licensed to do business and in good standing in each juris-
diction in which the property owned, leased or operated by it
or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the
failure to be so duly qualified or licensed and in good
standing would not in the aggregate have a material adverse
effect on the Company and its Subsidiaries taken as a whole.
SECTION 3.02. Capitalization. As of the date
hereof, the authorized capital stock of the Company consists
of (i) 150,000,000 shares of Company Common Stock of which,
as of June 30, 1995, 67,835,260 shares were issued and out-
standing and 3,801,249 shares were held in treasury, (ii)
10,000,000 shares of Cumulative Senior Preferred Stock, par
value $1 per share, no shares of which are issued and
outstanding and (iii) 15,000,000 shares of Cumulative Junior
Preferred Stock, par value $1 per share, no shares of which
are issued and outstanding. As of the date hereof, 1,958,002
shares of Company Common Stock are reserved for issuance upon
exercise of outstanding options pursuant to the Company's
1985 and 1992 Stock Option Plans and payment of outstanding
awards under its Performance Share Plan (the "Company Stock
Plans"). All the outstanding shares of Company Common Stock
are, and all shares which may be issued pursuant to Company
Stock Plans will be, when issued in accordance with the terms
thereof, duly authorized, validly issued, fully paid and
nonassessable and free of any pre- emptive rights in respect
thereto. As of the date hereof, no bonds, debentures, notes
or other indebtedness convertible into securities having the
right to vote ("Convertible Debt") of the Company are issued
or outstanding. Except as set forth above, as of the date
hereof, there are no existing options, warrants, calls,
subscriptions or other rights or other agreements or commit-
ments of any character relating to the issued or unissued
capital stock or Convertible Debt of the Company or any of
its Subsidiaries or obligating the Company or any of its
Subsidiaries to issue, transfer or sell or cause to be
issued, transferred or sold any shares of capital stock or
Convertible Debt of, or other equity interests in, the
Company or of any of its Subsidiaries or securities con-
vertible into or exchangeable for such shares or equity
interests or obligating the Company or any of its
Subsidiaries to grant, extend or enter into any such option,
warrant, call, subscription or other right, agreement or
commitment. As of the date hereof, there are no outstanding
contractual obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its
Subsidiaries.
SECTION 3.03. Authority. The Company has the
requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby (subject to, with respect to the Merger,
the approval and adoption of this Agreement by the holders of
80% of the outstanding shares of Company Common Stock which
shall include, pursuant to the terms of this Agreement, the
holders of a majority of the outstanding shares of Company
Common Stock not owned by Parent and its Subsidiaries (the
"Independent Stockholders")). The execution, delivery and
performance of this Agreement and the consummation of the
Merger and of the other transactions contemplated hereby have
been duly authorized by all necessary corporate action on the
part of the Company and no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement
or to consummate the transactions so contemplated (other than
as aforesaid). This Agreement has been duly executed and
delivered by the Company and, assuming this Agreement
constitutes a valid and binding obligation of Parent and Sub,
as the case may be, constitutes a valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms.
SECTION 3.04. Consents and Approvals; No
Violations. Except for filings, permits, authorizations,
consents and approvals as may be required under, and other
applicable requirements of, the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), state insurance laws and the DGCL, neither the
execution, delivery or performance of this Agreement by the
Company nor the consummation by the Company of the
transactions contemplated hereby nor compliance by the
Company with any of the provisions hereof will (i) conflict
with or result in any breach of any provision of the charter
or by-laws of the Company or of any of its Subsidiaries, (ii)
require any filing with, or permit, authorization, consent or
approval of, any court, arbitral tribunal, administrative
agency or commission or other governmental or other
regulatory authority or agency (a "Governmental Entity")
(except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings
would not have a material adverse effect on the
Company and its Subsidiaries taken as a whole), (iii) result
in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise
to any right of termination, amendment, cancelation or
acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or
obligation to which the Company or any of its Subsidiaries is
a party or by which any of them or any of their properties or
assets may be bound or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to
the Company, any of its Subsidiaries or any of their
properties or assets, except in the case of (iii) or (iv) for
violations, breaches or defaults which would not,
individually or in the aggregate, have a material adverse
effect on the Company and its Subsidiaries taken as a whole.
SECTION 3.05. SEC Reports and Financial Statements.
Each of the Company and its Subsidiaries has filed with the
Securities and Exchange Commission (the "SEC") and has
heretofore made available to Parent true and complete copies
of, all forms, reports, schedules, state- ments and other
documents required to be filed by it since January 1, 1994,
under the Exchange Act or the Securities Act of 1933, as
amended (the "Securities Act") (as such documents have been
amended since the time of their filing, collectively, the
"Company SEC Documents"). The Company SEC Documents,
including without limitation any financial statements or
schedules included therein, at the time filed, (a) did not
contain any untrue statement of a material fact or omit 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 and (b) complied in all material respects with the
applicable requirements of the Exchange Act and the
Securities Act, as the case may be, and the applicable rules
and regulations of the SEC thereunder. The financial
statements of the Company included in the Company SEC
Documents comply as to form in all material respects with
applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have
been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during
the periods involved (except as may be indicated in the notes
thereto or, in the case of the unaudited statements, as
permitted by Form 10-Q of the SEC) and fairly present
(subject, in the case of the unaudited statements, to normal,
recurring audit adjustments) the consolidated
financial position of the Company and its consolidated
Subsidiaries as at the dates thereof and the consolidated
results of their operations and cash flows for the periods
then ended.
SECTION 3.06. Absence of Certain Changes. Except as
disclosed in the Company SEC Documents filed with the SEC
prior to the date hereof, since December 31, 1994, there have
been no events, changes or effects having, individually or in
the aggregate, a material adverse effect on the Company and
its Subsidiaries taken as a whole.
SECTION 3.07. No Undisclosed Liabilities. Except as
and to the extent set forth in the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, as of
December 31, 1994, neither the Company nor any of its
Subsidiaries had any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that
would be required by generally accepted accounting principles
to be reflected on a consolidated balance sheet of the
Company and its Subsidiaries (including the notes thereto).
Since December 31, 1994, neither the Company nor any of its
Subsidiaries has incurred any liabilities of any nature,
whether or not accrued, contingent or otherwise, which would
have, individually or in the aggregate, a material adverse
effect on the Company and its Subsidiaries taken as a whole.
SECTION 3.08. Benefit Plans. (a) With respect to
each employee benefit plan (including, without limitation,
any "employee benefit plan", as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), and any material bonus, profit sharing,
deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock,
vacation, severance, death benefit, insurance or other plan,
arrangement or understanding (whether or not legally
binding), in each case maintained or contributed to for the
benefit of employees of the Company or any of its
Subsidiaries (all the foregoing being herein called the
"Company Benefit Plans"), individually and in the aggregate,
no event has occurred, and to the knowledge of the Company or
any of its Subsidiaries, there exists no condition or set of
circumstances, in connection with which the Company or any of
its Subsidiaries could be subject to any liability that is
reasonably likely to have a material adverse effect on the
Company and its Subsidiaries, taken as a whole (except
liability for benefits claims and funding
obligations payable in the ordinary course), under ERISA,
the Internal Revenue Code of 1986, as amended (the "Code")
or any other applicable law.
(b) With respect to the Company Benefit Plans,
individually and in the aggregate, there are no funded
benefit obligations for which contributions have not been
made or properly accrued and there are no unfunded benefit
obligations which have not been accounted for by reserves,
established in accordance with generally accepted accounting
principles, or otherwise properly footnoted in accordance
with generally accepted accounting principles, on the
financial statements of the Company or any of its
Subsidiaries, which obligations are reasonably likely to have
a material adverse effect on the Company and its
Subsidiaries, taken as a whole.
SECTION 3.09. Other Benefit Plans. Neither the
Company nor any of its Subsidiaries is a party to any oral or
written (i) consulting agreement not terminable on 60 days'
or less notice involving the payment of more than $200,000
per annum or union or collective bargaining agreement which
covers more than 1,000 employees, (ii) agreement with any
executive officer or other key employee of the Company or any
of its Subsidiaries, the benefits of which are contingent, or
the terms of which are materially altered, upon the
occurrence of a transaction involving the Company of the
nature contemplated by this Agreement or agreement with
respect to any executive officer of the Company providing any
term of employment or compensation guarantee extending for a
period longer than one year and for the payment of in excess
of $200,000 per annum, or (iii) agreement or plan, any of the
benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on
the basis of any of the transactions contemplated by this
Agreement, provided that (A) the employee stock options
outstanding on the date hereof under the 1992 Company Stock
Plan will, as provided in such Plan, be accelerated as to
vesting, (B) pursuant to the terms of the Pension Plan for
Retired Non- Employee Directors, participants who have not
attained age 65 shall be deemed to be age 65 and all
participants shall be entitled to a lump sum payment of the
benefits thereunder and (C) all deferred bonus awards under
the Equity Cash Bonus Plan will, as provided in such Plan, be
vested and paid out in full.
SECTION 3.10. Litigation. There is no suit, claim,
action, proceeding or investigation pending or, to the best
knowledge of the Company, threatened against, the Company or
any of its Subsidiaries before any Governmental Entity which,
individually or in the aggregate, is reasonably likely to
have a material adverse effect on the Company and its
Subsidiaries taken as a whole or a material adverse effect on
the ability of the Company to consummate the transactions
contemplated by this Agreement. Except as disclosed in the
Company SEC Documents filed prior to the date of this
Agreement, neither the Company nor any of its Subsidiaries is
subject to any outstanding order, writ, injunction or decree
which, insofar as can be reasonably foreseen, individually or
in the aggregate, in the future would have a material adverse
effect on the Company and its Subsidiaries taken as a whole
or a material adverse effect on the ability of the Company to
consummate the transactions contemplated hereby.
SECTION 3.11. Compliance with Applicable Law. The
Company and its Subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of
their respective businesses (the "Company Permits"), except
for failures to hold such permits, licenses, variances,
exemptions, orders and approvals which would not, individu-
ally or in the aggregate, have a material adverse effect on
the Company and its Subsidiaries taken as a whole. The
Company and its Subsidiaries are in compliance with the terms
of the Company Permits, except where the failure so to comply
would not have a material adverse effect on the Company and
its Subsidiaries taken as a whole. Except as disclosed in the
Company SEC Documents filed prior to the date of this
Agreement, to the best knowledge of the Company, the
businesses of the Company and its Subsidiaries are not being
conducted in violation of any law, ordinance or regulation of
any Governmental Entity, except for possible violations which
individually or in the aggregate do not, and, insofar as
reasonably can be foreseen, in the future will not, have a
material adverse effect on the Company and its Subsidiaries
taken as a whole. No investigation or review by any
Governmental Entity with respect to the Company or any of its
Subsidiaries is pending or, to the best knowledge of the
Company, threatened, nor has any Governmental Entity
indicated an intention to conduct the same, other than, in
each case, those the outcome of which, as far as reasonably
can be foreseen, in
the future will not have a material adverse effect on the
Company and its Subsidiaries taken as a whole.
SECTION 3.12. Opinion of Financial Advisor. The
Company has received the opinion of Morgan Stanley & Co.
Incorporated, dated the date hereof, to the effect that, as
of such date, the consideration to be received in the Merger
by the Independent Stockholders is fair to such Stockholders
from a financial point of view, a copy of which opinion has
been delivered to Parent.
SECTION 3.13. Vote Required. The affirmative vote
of the holders of 80% of the outstanding shares of Company
Common Stock, including Independent Stockholders holding a
majority of the outstanding shares of Company Common Stock
not owned by Parent and its Subsidiaries, is the only vote of
the holders of any class or series of the Company's capital
stock necessary to approve this Agreement and the
transactions contemplated hereby.
ARTICLE IV
Representations and Warranties
of Parent and Sub
Parent and Sub represent and warrant to the Company
as follows:
SECTION 4.01. Organization. Each of Parent and Sub
and Parent's Subsidiaries which own shares of Company Common
Stock is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and
corporate authority and all necessary governmental approvals
to own, lease and operate its properties and to carry on its
business as now being conducted except where the failure to
be so organized, existing and in good standing or to have
such power, author- ity, and governmental approvals would not
have a material adverse effect on Parent and its Subsidiaries
taken as a whole. Parent and each of its Subsidiaries which
owns shares of Company Common Stock is duly qualified or
licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except where the
failure to be so duly qualified or licensed and in good
standing would not in the aggregate have a material adverse
effect on Parent and its Subsidiaries taken as a whole.
SECTION 4.02. Authority. Parent and Sub have
requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and per-
formance of this Agreement and the consummation of the Merger
and of the other transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part
of Parent, and no other corporate proceedings on the part of
Parent and Sub are necessary to authorize this Agreement or
to consummate the transactions so contemplated. This
Agreement has been duly executed and delivered by Parent and
Sub, as the case may be, and, assuming this Agreement
constitutes a valid and binding obligation of the Company,
constitutes a valid and binding obligation of each of Parent
and Sub, as the case may be, enforceable against Parent and
Sub in accordance with its respective terms.
SECTION 4.03. Consents and Approvals; No
Violations. Except for filings, permits, authorizations,
consents and approvals as may be required under, and other
applicable requirements of, the Exchange Act, the HSR Act,
state insurance laws and the DGCL, neither the execution,
delivery or performance of this Agreement by Parent and Sub
nor the consummation by Parent and Sub of the transactions
contemplated hereby nor compliance by Parent and Sub with any
of the provisions hereof will (i) conflict with or result in
any breach of any provision of the respective certificate of
incorporation or by-laws of Parent and Sub, (ii) require any
filing with, or permit, authorization, consent or approval
of, any Governmental Entity (except where the failure to
obtain such permits, authorizations, consents or approvals or
to make such filings would not have a material adverse effect
on Parent and its Subsidiaries taken as a whole), (iii)
result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancelation or
acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license,
lease, contract, agreement or other instrument or obligation
to which Parent or any of its Subsidiaries is a party or by
which any of them or any of their properties or assets may be
bound or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Parent, any of its
Subsidiaries or any of their properties or assets, except in
the case of (iii) and
(iv) for violations, breach or defaults which would not,
individually or in the aggregate, have a material adverse
effect on Parent and its Subsidiaries taken as a whole.
SECTION 4.04. Information in Proxy Statement. None
of the information supplied by Parent or Sub in writing
specifically for inclusion or incorporation by reference in
the Company's Proxy Statement for the special meeting of its
stockholders to be called to consider the Merger (the "Proxy
Statement") will, at the date mailed to stockholders and at
the time of the meeting of the Company's stockholders to be
held in connection with the Merger, 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.
SECTION 4.05. Interim Operations of Sub. Sub was
formed solely for the purpose of engaging in the trans-
actions contemplated hereby, has engaged in no other busi-
ness activities and has conducted its operations only as
contemplated hereby.
ARTICLE V
Covenants
SECTION 5.01. Covenants of the Company. During the
period from the date of this Agreement and continuing until
the Effective Time, the Company agrees as to itself and its
Subsidiaries that (except as expressly contemplated or
permitted by this Agreement, or to the extent that Parent
shall otherwise consent in writing):
(a) Ordinary Course. The Company and its
Subsidiaries shall carry on their respective businesses in
the usual, regular and ordinary course in substantially the
same manner as heretofore conducted and use all reasonable
efforts to preserve intact their present business organiza-
tions, keep available the services of their present officers
and employees and preserve their relationships with cus-
tomers, suppliers and others having business dealings with
them to the end that their goodwill and ongoing business
shall not be impaired in any material respect at the
Effective Time.
(b) Dividends; Changes in Stock. The Company shall
not, nor shall it permit any of its Subsidiaries to, nor
shall it propose to, (i) declare or pay any dividends on or
make other distributions in respect of any of its capital
stock, except that it may continue the declaration and
payment of regular quarterly cash dividends in an amount not
in excess of $0.27 per share, with usual record and payment
dates for such dividends in accordance with the Company's
past dividend practice, and except for dividends by any
Subsidiary to the Company or to another Subsidiary, (ii)
split, combine or reclassify its capital stock or issue or
authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its
capital stock or (iii) repurchase, redeem or otherwise
acquire, or permit any Subsidiary to repurchase, redeem or
otherwise acquire, any shares of capital stock of the Company
or any of its Subsidiaries.
(c) Issuance of Securities. The Company shall not,
nor shall it permit any of its Subsidiaries to, issue,
deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock of any
class or any securities convertible into, or any rights,
warrants, calls, subscriptions or options to acquire, any
such shares or convertible securities, other than (i) the
issuance of shares of Company Common Stock upon the exercise
of employee stock options outstanding on the date hereof
under the Company Stock Plans and (ii) issuance by a wholly
owned Subsidiary of its capital stock to its parent.
(d) Governing Documents. The Company shall not
amend or propose to amend its Certificate of Incorporation or
By-laws.
(e) Advice of Changes; Filings. The Company shall
confer on a regular and frequent basis with Parent, report on
operational matters and promptly advise Parent orally and in
writing of any change or event having, or which, insofar as
can reasonably be foreseen, could have, a material adverse
effect on the Company and its Subsidiaries taken as a whole.
The Company and Parent shall promptly provide the other
copies of all filings made by such party with any Federal,
state or foreign Governmental Entity in connection with this
Agreement and the transactions contemplated hereby, other
than the portions of such filings that include confidential
information not directly related to the transactions
contemplated by this Agreement.
(f) The Company shall not (i) enter into, adopt,
amend in any material respect (except as may be required by
law) or terminate any Company Benefit Plan or other employee
benefit plan or any agreement, arrangement, plan or policy
between the Company and one or more of its directors or
officers or (ii) except for normal increases in the ordinary
course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits
or compensation expense to the Company, increase in any
manner the compensation or fringe benefits of any director,
officer or key employee or pay any benefit not required by
any plan and arrangement as in effect as of the date hereof
(including, without limitation, the granting of stock options
or Performance Share awards) or enter into any contract,
agreement, commitment or arrangement to do any of the
foregoing, except as provided in Section 6.05(d).
SECTION 5.02. No Solicitation; Fiduciary Out. (a)
The Company shall not authorize or permit any of its
executive officers or directors or any investment banker,
financial advisor, attorney, accountant or other
representative retained by it or any of its Subsidiaries to
(i) solicit, initiate or encourage (including by way of
furnishing information), or take any other action to
facilitate, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any
Takeover Proposal (as defined below) or (ii) participate in
any discussions or negotiations regarding any Takeover
Proposal; provided, however, that, if at any time prior to
the Effective Time the Board of Directors of the Company
determines in good faith, after consultation with counsel,
that it is necessary to do so in order to comply with its
fiduciary duties to the Company's stockholders, the Company
may, in response to an unsolicited Takeover Proposal, and
subject to compliance with Section 5.02(c), (x) furnish
information with respect to the Company to any person
pursuant to a confidentiality agreement and (y) participate
in negotiations regarding such Takeover Proposal. Without
limiting the foregoing, it is understood that any violation
of the restrictions set forth in the preceding sentence by
any director or executive officer of the Company or any of
its Subsidiaries or any investment banker, financial advisor,
attorney, accountant or other representative of the Company
or any of its Subsidiaries shall be deemed to be a breach of
this Section 5.02(a) by the Company. For purposes of this
Agreement, "Takeover Proposal" means any inquiry, proposal or
offer from any person (other than Parent or any of its
Subsidiaries) relating to any direct or indirect
acquisition or purchase of a substantial amount of assets of
the Company or any of its Subsidiaries or of 50% or more of
the shares of Company Common Stock, any tender offer or
exchange offer that if consummated would result in any person
beneficially owning 50% or more of the shares of Company
Common Stock, any merger, consolidation, business
combination, sale of substantially all the assets,
recapitalization, liquidation, dissolution or similar
transaction involving the Company, other than the Merger, or
any other transaction the consummation of which could
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 Parent of the
transactions contemplated hereby.
(b) Except as set forth in this Section 5.02(b),
neither the Board of Directors of the Company nor any
committee thereof shall (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent, the
approval or recommendation by such Board of Directors of this
Agreement or the Merger, (ii) approve or recommend, or
propose to approve or recommend, any Takeover Proposal or
(iii) cause the Company to enter into any agreement with
respect to any Takeover Proposal. Notwithstanding the fore-
going, in the event that prior to the Effective Time the
Board of Directors of the Company determines in good faith,
after consultation with counsel, that it is necessary to do
so in order to comply with its fiduciary duties to the
Company's stockholders, the Board of Directors of the Company
may withdraw or modify its approval or recom- mendation of
this Agreement and the Merger, approve or recommend a
Takeover Proposal or cause the Company to enter into an
agreement with respect to a Takeover Proposal. While the fact
that any Takeover Proposal may be conditioned on Parent's
agreeing to it may be considered by the Company's Board of
Directors, such fact shall not prevent the Company's Board of
Directors from taking any action pursuant to this Section
5.02(b) even if Parent has stated or indicated in any way
that it will not agree to such Takeover Proposal.
(c) In addition to the obligations of the Company
set forth in Section 5.02(a), the Company shall immediately
advise Parent orally and in writing of any request for
information or of any Takeover Proposal, or any inquiry with
respect to or which could lead to any Takeover Proposal, and
shall describe the material terms and conditions of such
request, Takeover Proposal or inquiry and the identity of
the person making such request, Takeover Proposal or inquiry.
The Company will keep Parent fully informed of the status and
details (including amendments or proposed amendments) of any
such request, Takeover Proposal or inquiry.
(d) Nothing contained in this Section 5.02 shall
prohibit the Company from taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any
disclosure to the Company's stockholders if, in the opinion
of the Board of Directors of the Company, after consultation
with counsel, failure so to disclose would be inconsistent
with its fiduciary duties to the Company's stockholders;
provided, however, that neither the Company nor its Board of
Directors nor any committee thereof shall, except as
permitted by Section 5.02(b), withdraw or modify, or propose
to withdraw or modify, its position with respect to the
Merger or approve or recommend, or propose to approve or
recommend, a Takeover Proposal.
ARTICLE VI
Additional Agreements
SECTION 6.01. Preparation of the Proxy Statement.
The Company shall promptly prepare and file with the SEC
preliminary and final versions of the Proxy Statement and a
Schedule 13E-3. The Company shall use its best efforts to
have the Proxy Statement cleared by the SEC and mailed to its
stockholders at the earliest practicable date. The Company
shall cooperate and consult with Parent with respect to the
Proxy Statement and the Schedule 13E-3 and any related SEC
comments. The Company covenants that (i) the Proxy Statement
and the Schedule 13E-3 will comply in all material respects
as to form with the requirements of the Exchange Act and the
rules and regulations thereunder and (ii) as of the date of
mailing of the Proxy Statement and at the time of the meeting
of the Company's stockholders to be held in connection with
the Merger, the Proxy Statement and the Schedule 13E-3 will
not contain any untrue statement of 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, provided that no representation is made by the
Company with respect to any information included in the Proxy
Statement and the
Schedule 13E-3 regarding Parent or its Subsidiaries supplied
by Parent in writing specifically for inclusion in the Proxy
Statement and the Schedule 13E-3.
SECTION 6.02. Access to Information. Upon
reasonable notice and subject to restrictions contained in
confidentiality agreements to which such party is subject
(from which such party shall use reasonable efforts to be
released), the Company shall (and shall cause each of its
Subsidiaries to) afford to the officers, employees,
accountants, counsel and other representatives of Parent,
access, during normal business hours during the period prior
to the Effective Time, to all its properties, books, con-
tracts, commitments and records and, during such period, the
Company shall (and shall cause each of its Subsidiaries to)
furnish promptly to Parent (a) a copy of each report,
schedule, registration statement and other document filed or
received by it during such period pursuant to the require-
ments of Federal securities laws and (b) all other informa-
tion concerning its business, properties and personnel as
Parent may reasonably request. Unless otherwise required by
law, Parent will hold any such information which is non-
public in confidence until such time as such information
otherwise becomes publicly available through no wrongful act
of either party, and in the event of termination of this
Agreement for any reason Parent shall promptly upon request
return all nonpublic documents obtained from the Company, and
any copies made of such documents, to the Company.
SECTION 6.03. Stockholders Meeting. The Company
shall call a meeting of its stockholders to be held as
promptly as practicable for the purpose of voting upon this
Agreement and the Merger. Subject to Section 5.02(b), the
Company will, through its Board of Directors, recommend to
its stockholders approval of this Agreement and the Merger
and shall use its best efforts to hold such meeting as soon
as reasonably practicable after the date hereof.
SECTION 6.04. Legal Conditions to Merger. Each of
the Company, Parent and Sub will take all reasonable actions
necessary to comply promptly with all legal requirements
which may be imposed on itself with respect to the Merger
(which actions shall include, without limitation, furnishing
all information required under the HSR Act and in connection
with approvals of or filings with state insurance authorities
and any other Governmental Entity) and will promptly
cooperate with and furnish information to each other in
connection with any such requirements imposed upon
any of them or any of their Subsidiaries in connection with
the Merger. Each of the Company, Parent and Sub will, and
will cause its Subsidiaries to, take all reasonable actions
necessary to obtain (and will cooperate with each other in
obtaining) any consent, authorization, order or approval of,
or any exemption by, any Governmental Entity or other public
or private third party, required to be obtained or made by
Parent, the Company or any of their Subsidiaries in connec-
tion with the Merger or the taking of any action contem-
plated thereby or by this Agreement.
SECTION 6.05. Employee Benefit Plans. (a) Parent
and the Company agree that the benefit plans of the Company
and its Subsidiaries in effect at the date of this Agreement
(other than the Company Stock Plans and the Company's
Employee Stock Ownership Plan (the "ESOP")) shall, to the
extent practicable, remain in effect without amendment until
the Effective Time and that thereafter the Surviving
Corporation will maintain, subject to such changes and
modifications as may be necessary or desirable to facilitate
compliance by Parent and its Subsidiaries (including the
Surviving Corporation) with applicable statutory and
regulatory requirements, for a period of three years after
the Effective Time, benefit plans (other than the Company
Stock Plans and the ESOP) which are no less favorable, in the
aggregate, to the employees covered by such plans as the
benefit plans in effect at the Effective Time (other than the
Company Stock Plans and the ESOP).
(b) Parent will, and will cause the Surviving
Corporation to, honor without modification for a period of
three years after the Effective Time all employee severance
plans (or policies) and employment and severance agreements
of the Company or any of its Subsidiaries in existence on the
date hereof as such plans, policies and agreements shall be
in effect in accordance with the terms of this Agreement at
the Effective Time.
(c) Parent and the Company will use their best
efforts to agree on compensation plans for the officers and
employees of the Company after the Effective Time to provide
them incentive compensation that in the aggregate is
reasonably comparable (without giving effect to the payments
to them resulting from the Merger) to that historically
provided by the Company Stock Plans and the ESOP, except that
Parent shall not be required to issue any shares of its
equity securities in connection with such compensation plans.
(d) The Company agrees that (i) all the outstanding
borrowings by the ESOP will be paid in full from the
unallocated assets of the ESOP, any remaining unallocated
assets of the ESOP will be allocated among ESOP participants,
the interests of all participants in the ESOP will be vested
and distributed and, pursuant to resolutions adopted by the
Company's Board of Directors prior to the execution of this
Agreement, the ESOP will be terminated and (ii) in accordance
with amendments to the Performance Share Plan effected prior
to the execution of this Agreement, all Performance Share
awards outstanding on the date hereof will remain in effect
in accordance with the terms of such awards on such date
except that any payments after the Effective Time will be
made on the basis of the Merger Consideration and no Company
Common Stock shall be issued after the Effective Time. The
Company represents and warrants to Parent that, following the
Effective Time, the unallocated assets of the ESOP will
substantially exceed the amount required to prepay in full
the borrowings of the ESOP.
SECTION 6.06. Expenses. Whether or not the Merger
is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such expense.
SECTION 6.07. Brokers or Finders. Each of Parent
and the Company represents, as to itself, its Subsidiaries
and its affiliates, that no agent, broker, investment banker,
financial advisor or other firm or person is or will be
entitled to any brokers' or finder's fee or any other
commission or similar fee in connection with any of the
transactions contemplated by this Agreement except Morgan
Stanley & Co. Incorporated, whose fees and expenses will be
paid by the Company in accordance with the Company's agree-
ment with such firm (copies of which have been delivered by
the Company to Parent prior to the date of this Agreement),
and each of Parent and the Company agree to indemnify and
hold the other harmless from and against any and all claims,
liabilities or obligations with respect to any other fees,
commissions or expenses asserted by any person on the basis
of any act or statement alleged to have been made by such
party or its affiliate.
SECTION 6.08. Indemnification; Insurance. (a) The
Company shall, and from and after the Effective Time Parent
and the Surviving Corporation shall, indemnify, defend and
hold harmless each person who is now, or has been
at any time prior to the date of this Agreement or who
becomes such prior to the Effective Time, an officer,
director or employee of the Company or any of its
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, officer or employee of
the Company or any of its Subsidiaries, whether pertaining to
any matter existing or occurring at or prior to the Effective
Time and whether asserted or claimed prior to, or at or
after, the Effective Time ("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 or the transactions contemplated hereby;
provided, however, in the case of the Company and the
Surviving Corporation such indemnification shall only be to
the fullest extent a corporation is permitted under the DGCL
to indemnify its own directors, officers and employees; in
the case of Parent, such indemnification shall not be limited
by the DGCL but such indemnification shall not be applicable
to any claims made against the Indemnified Parties (A)
arising out of, based upon or attributable to the gaining in
fact of any personal profit or advantage to which they were
not legally entitled or (B) arising out of, based upon or
attributable to the committing in fact of any criminal or
deliberate fraudulent act; and the Company, Parent and the
Surviving Corporation, as the case may be, will pay all
expenses in advance of the final disposition of any such
action or proceeding to each Indemnified Party, in the case
of the Company and the Surviving Corporation only to the
fullest extent permitted by law upon receipt of any
undertaking contemplated by Section 145(e) of the DGCL.
Without limiting the foregoing, in the event any such claim,
action, suit, proceeding or investigation is brought against
any Indemnified Party (whether arising before or after the
Effective Time), (i) the Indemnified Parties may retain
counsel satisfactory to them and the Company (or them and
Parent and the Surviving Corporation after the Effective
Time), (ii) the Company (or after the Effective Time, the
Surviving Corporation) shall pay all reasonable fees and
expenses of such counsel for the Indemnified Parties promptly
as statements therefor are received, and (iii) the Company
(or after the Effective Time, Parent and the Surviving
Corporation) will use all reasonable efforts to assist in the
vigorous defense of any such matter, provided that none of
the Company, Parent or the Surviving Corporation shall be
liable for any settlement of any claim effected without its
written consent, which consent, however, shall not be
unreasonably withheld. Any Indemnified Party wishing to claim
indemnification under this Section 6.08, upon learning of any
such claim, action, suit, proceeding or investigation, shall
notify the Company, Parent or the Surviving Corporation (but
the failure so to notify an Indemnifying Party shall not
relieve it from any liability which it may have under this
Section 6.08 except to the extent such failure prejudices
such party), and shall deliver to the Company (or after the
Effective Time, the Surviving Corporation (but not Parent))
the undertaking contemplated by Section 145(e) of the DGCL.
The Indemnified Parties as a group may retain only one law
firm to represent them with respect to each such matter
unless there is, under applicable standards of professional
conduct, a conflict on any significant issue between the
positions of any two or more Indemnified Parties.
(b) The provisions of this Section 6.08 are
intended to be for the benefit of, and shall be enforceable
by, each Indemnified Party, his or her heirs and representa-
tives.
SECTION 6.09. (a) Additional Agreements; Best
Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use best
efforts to take, or cause to be taken, all action and to do,
or cause to be done, all things necessary, proper or advis-
able under applicable laws and regulations to consummate and
make effective the transactions contemplated by this
Agreement, including cooperating fully with the other party,
including by provision of information and making of all
necessary filings under the HSR Act and state insurance laws.
In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of
this Agreement or to vest the Surviving Corporation with full
title to all properties, assets, rights, approvals,
immunities and franchises of either the Company or Sub, the
proper officers and directors of each party to this Agreement
shall take all such necessary action.
(b) Parent agrees that it will not, as permitted by
Section 2(b)(ii) of the Proxy Agreement to which it is a
party with NationsBank of Maryland, instruct the proxy named
therein (i) not to vote the shares of Company Common Stock
owned by its Subsidiaries on the Merger or (ii) to vote such
shares on the Merger in the same proportion as the votes cast
by the Independent Stockholders, so long as this Agreement
has not been terminated pursuant to Article VIII.
(c) Parent or Surviving Corporation agrees, subject
to consummation of the Merger, to pay, without deduction or
withholding from any amount payable to the holders of Company
Common Stock, any New York State Tax on Gains Derived from
Certain Real Property Transfers and any other similar taxes
that become payable by the Company or the Surviving
Corporation on transfers of the Company's tangible assets.
The Company and Parent shall cooperate in the preparation,
execution and filing of any returns, questionnaires,
applications and other documents related to such taxes
required or permitted to be filed on or before the Effective
Time.
ARTICLE VII
Conditions
SECTION 7.01. Conditions to Each Party's Obligation
To Effect the Merger. The respective obligation of each party
to effect the Merger shall be subject to the satisfaction
prior to the Closing Date of the following conditions:
(a) Stockholder Approval. This Agreement and the
Merger shall have been approved and adopted by the
affirmative vote of the holders of 80% of the outstanding
shares of Company Common Stock, including the affirmative
vote of Independent Stockholders holding a majority of the
outstanding shares of Company Common Stock not owned by
Parent and its Subsidiaries.
(b) Other Approvals. Other than the filing pro-
vided for by Section 1.01, all authorizations, consents,
orders or approvals of, or declarations or filings with, or
expirations of waiting periods imposed by, any Governmental
Entity the failure to obtain which would have a material
adverse effect on Parent and its Subsidiaries or the
Surviving Corporation and its Subsidiaries, in each case
taken as a whole, shall have been filed, occurred or been
obtained.
(c) No Injunctions or Restraints. 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 consum-
mation of the Merger shall be in effect.
SECTION 7.02. Conditions of Obligations of Parent
and Sub. The obligations of Parent and Sub to effect the
Merger are subject to the satisfaction of the following
conditions unless waived by Parent and Sub:
(a) Representations and Warranties. The
representations and warranties of the Company set forth in
this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as
of the Closing Date, except as otherwise contemplated by this
Agreement.
(b) Performance of Obligations of the Company. The
Company shall have performed in all material respects all
obligations required to be performed by it under this
Agreement at or prior to the Closing Date.
(c) Opinion of Counsel to the Company. Parent and
Sub shall have received, on and as of the Closing Date, an
opinion of Cravath, Swaine & Moore, counsel to the Company,
in usual and customary form reasonably acceptable to Parent
and Sub, substantially as to the matters set forth in
Sections 3.01 (only with respect to the first sentence
thereof), 3.03 (subject to customary exceptions regarding
insolvency and equitable remedies), and 3.04 (only with
respect to clause (i) thereof).
SECTION 7.03. Conditions of Obligations of the
Company. The obligation of the Company to effect the Merger
is subject to the satisfaction of the following conditions
unless waived by the Company:
(a) Representations and Warranties. The repre-
sentations and warranties of Parent and Sub set forth in this
Agreement shall be true and correct in all material respects
as of the date of this Agreement and (except to the extent
such representations speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date,
except as otherwise contemplated by this Agreement.
(b) Performance of Obligations of Parent and Sub.
Parent and Sub shall have performed in all material respects
all obligations required to be performed by them under this
Agreement at or prior to the Closing Date.
(c) Opinion of Counsel to Parent and Sub. The
Company shall have received, on and as of the Closing Date,
an opinion of Munger, Tolles & Olson, counsel to Parent and
Sub, in usual and customary form reasonably acceptable to the
Company, substantially as to the matters set forth in
Sections 4.01 (only with respect to the first sentence
thereof), 4.02 (subject to customary exceptions regarding
insolvency and equitable remedies), and 4.03 (only with
respect to clause (i) thereof).
ARTICLE VIII
Termination and Amendment
SECTION 8.01. Termination. This Agreement may be
terminated at any time prior to the Effective Time, whether
before or after approval of the matters presented in
connection with the Merger by the stockholders of the
Company:
(a) by mutual consent of Parent and the Company;
(b) (i) by either Parent or the Company if there
shall have been a material breach of any representa-
tion, warranty, covenant or agreement on the part of the
other set forth in this Agreement which breach shall not
have been cured within two business days following
receipt by the breaching party of notice of such breach,
or (ii) by either Parent or the Company if any permanent
injunction or other order of a court or other competent
authority preventing the consummation of the Merger
shall have become final and non- appealable;
(c) by either Parent or the Company if the
Company's Board of Directors takes any of the actions
permitted by Section 5.02(b); provided the Company may
so terminate only if it has complied with all the
provisions of Section 5.02(c);
(d) by either Parent or the Company if the Merger
shall not have been consummated on or before March 31,
1996; or
(e) by either party if the required approval of the
stockholders of the Company shall not have been obtained
by reason of the failure to obtain the required vote at
a duly held meeting of stockholders or at any
adjournment thereof.
SECTION 8.02. Effect of Termination. In the event
of a termination of this Agreement by either the Company or
Parent as provided in Section 8.01, this Agreement shall
forthwith become void and there shall be no liability or
obligation on the part of Parent, Sub or the Company or their
respective officers or directors, except with respect to any
breach of any provision of this Agreement prior to such
termination and except that the last sentence of Section 6.02
and all of Sections 6.06 and 6.07 shall continue in effect.
SECTION 8.03. Amendment. This Agreement may be
amended by the parties hereto, by action taken or authorized
by their respective Boards of Directors, at any time before
or after approval of the matters presented in connection with
the Merger by the stockholders of the Company, but, after any
such approval, no amendment shall be made which by law
requires further approval by such stockholders without such
further approval in accordance with Section 7.01(a). This
Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
SECTION 8.04. Extension; Waiver. At any time prior
to the Effective Time, the parties hereto, by action taken or
authorized by their respective Boards of Directors, may, to
the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the
other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive com-
pliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in
a written instrument signed on behalf of such party.
ARTICLE IX
Miscellaneous
SECTION 9.01. Nonsurvival of Representations,
Warranties and Agreements. None of the representations,
warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall sur-
vive the Effective Time, except for the agreements contained
in Sections 2.01, 2.02, 6.05, 6.06, 6.07, 6.08 and 6.09 and
this Section 9.01.
SECTION 9.02. Notices. All notices and other
communications hereunder shall be in writing and shall be
deemed given if delivered personally, telecopied (which is
confirmed) or mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses
(or at such other address for a party as shall be specified
by like notice):
(a) if to Parent or Sub, to
Berkshire Hathaway Inc.
1440 Kiewit Plaza
Omaha, Nebraska 68131
Attention: Marc D. Hamburg
Vice President, Treasurer
Telecopy No.: (402) 346-0476
with a copy to
John B. Frank, Esq.
Munger, Tolles & Olson
355 South Grand Avenue, 35th floor
Los Angeles, California 90071-1560
Telecopy No.: (213) 687-3702
and
(b) if to the Company, to
GEICO Corporation
5260 Western Avenue
Washington, D.C. 20076
Attention: Rosalind A. Phillips
Secretary
Telecopy No.: (301) 986-3054
with a copy to
Samuel C. Butler, Esq.
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019-7475
Telecopy No.: (212) 474-3700
SECTION 9.03. Entire Agreement; No Third Party
Beneficiaries; Rights of Ownership. This Agreement (including
the documents and the instruments referred to herein) (a)
constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof and (b)
except as provided in Sections 6.05 and 6.08, are not
intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
SECTION 9.04. Governing Law. This Agreement shall
be governed and construed in accordance with the laws of the
State of Delaware without regard to any applicable conflicts
of law.
SECTION 9.05. Publicity. Except as otherwise
required by law or the rules of the New York Stock Exchange,
for so long as this Agreement is in effect, neither the
Company nor Parent shall, or shall permit any of its
Subsidiaries to, issue or cause the publication of any press
release or other public announcement with respect to the
transactions contemplated by this Agreement without the
consent of the other party, which consent shall not be
unreasonably withheld.
SECTION 9.06. Assignment. Neither this Agreement
nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written
consent of the other parties, except that Sub may assign, in
its sole discretion, any or all of its rights, interests and
obligations hereunder to Parent or to any direct or indirect
wholly owned Subsidiary of Parent. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their
respective successors and assigns.
IN WITNESS WHEREOF, Parent, Sub and the Company
have caused this Agreement to be signed by their respective
officers thereunto duly authorized as of the date first
written above.
BERKSHIRE HATHAWAY INC.,
by
--------------------------
Name: Warren E. Buffett
Title: Chairman and Chief
Executive Officer
HPKF INC.,
by
-------------------------
Name: Warren E. Buffett
Title: Chairman and Chief
Executive Officer
GEICO CORPORATION,
by
--------------------------
Name: Olza M. Nicely
Title: President and Chief
Executive Officer
by
--------------------------
Name: Louis A. Simpson
Title: President and Chief
Executive Officer